Session #56

1. Session #56 Emerging Oversight Issues Merecedes Zajicek Jerry Wallace

2. Oversight Objectives • Promote program compliance • Reduce improper payments • Ensure program integrity

3. Emerging Oversight Issues • Lender Inducements • Loan Verification Certificate • Loan Consolidations • GA and Collection Agencies • 9.5% Audit Requirements • Personally Identifiable Information (PII) • Guaranty Agency Stability

4. Lender Inducements • Department guidance • Dear Colleague, FP-07-04, 3/30/2007 • Borrower’s right to choose lender • Electronic Announcement, 9/14/07 • Letter from the Secretary August 9, 2007 regarding proposed regulations • DCL: 95-L-178 March 1995, school lenders to observe prohibitions and limitations • DCL: 89-L-129 February 1989, guidance on prohibited and permissible activities

5. Loan Verification Certificate • Department Guidance • DCL: FP-07-07/Gen-07-03, 5/22/07 • Completing LVC’s Timely • Facilitates consolidating all loans • Reduces capitalized interest • Lessens likelihood of interest rate changes

6. Loan Verification Certificate con’t The LVC reviewed by Lenders could disclose • Errors in setting up loans • Loans made to ineligible borrowers • Loans made by or loans sold to ineligible lenders

7. Loan Consolidations • Marketing of Consolidation loans • Oversight by ELT to ensure that activities of the beneficiary are in compliance with FFEL program rules and regulations

8. . § 682 203   Responsible parties… • § 682.203   Responsible parties… (b) Trustee responsibility. A lender that holds a loan in its capacity as a trustee assumes responsibility for complying with all statutory and regulatory requirements imposed on any other holders of a loan.

9. GA and Collection Agencies • Conflict of interest • Examine Pre-claim & post default collection agency relationships • Collection Agency Contracts • Must comply with ED rules and regulations • GA must maintain sufficient oversight to protect integrity of student loan program

10. § 682 203   Responsible parties… Delegation of functions. • A school, lender, or guaranty agency may contract or otherwise delegate… • This contracting or other delegation of functions does not relieve the school, lender, or guaranty agency of its duty to comply with the requirements of the Act and this part.

11. § 682.416 Requirements • 682.416 Requirements for third-party servicers • Standards for administrative capability • Examine the servicer's compliance with the Act and applicable regulations

12. § 682.416 Requirements (Con’t) • Standards of financial responsibility • Examine the servicer's financial management of its FFEL program activities

13. 9.5% Audit Requirements • Department Guidance • DCL: FP 07-01, 1/23/07 • Applicable requirements of the HEA and regulations that control loans acquired with tax exempt funding • DCL: FP-07-06, 4/27/07 • Audit Requirements for 9.5 Percent Minimum Special Allowance Payment Rate

14. Personally Identifiable Information (PII) • Department Guidance • DCL: GEN-07-05, 9/7/07 • Title IV participants are not subject to Federal FOIA • Consult with legal counsel to ensure compliance with FERPA • NSLDS Access

15. Guaranty Agency Stability • Agency Reserve levels • Factors: • Recall • Higher risk sharing % • Lower GA fees • GA activities and system changes

16. Questions and Comments We appreciate your feedback Thank You

17. Email/Websites • Inducement@ED.gov or Telephone: 646-428-3813 • Loan Verification Certificates LVC.Referral@ed.gov FERPA:http://www.ed.gov/policy/gen/guid/fpco/index.html

18. Contact Information Contact information: Merecedes Zajicek Phone:312-730-1512 Email: Merecedes.Zajicek@ed.gov Jerry Wallace Phone: 214-661-9515 Email: Jerry.Wallace@ed.gov