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AGENDA. Review Negotiated Rulemaking Why Was Neg Reg Needed?Lender Lists InducementsDefine RegulationsCurrent IssuesDeveloping Your Own ProcessUnderstanding the Current Environment Best PracticesQuestions. NEGOTIATED RULEMAKINGWhat is Negotiated Rulemaking?Negotiated rulema
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1. DEVELOPING A PREFERRED LENDER LIST Sarah Bauder
Director
University of Maryland
sbauder@umd.edu
2. AGENDA
Review Negotiated Rulemaking
Why Was Neg Reg Needed?
Lender Lists
Inducements
Define Regulations
Current Issues
Developing Your Own Process
Understanding the Current Environment
Best Practices
Questions
3.
NEGOTIATED RULEMAKING
What is Negotiated Rulemaking?
Negotiated rulemaking is a process which brings together representatives of various interest groups and a federal agency to negotiate the text of a proposed rule. The goal of a negotiated rulemaking proceeding is for the committee to reach consensus.
4. MAIN FOCUS OF LOAN TEAM
Preferred Lender Lists
Section 682.212(h)(1)
Inducements
Section 682.200 and 682.401
5. REGULATORY LANGUAGE
INDUCEMENTS – WHAT IS ALLOWED
a lender may provide—
Staffing services to a school on an short-term, emergency basis to assist the school with financial aid related functions;
Support of and participation in a school’s or a guaranty agency’s student aid and financial literacy related outreach activities;
6. REGULATORY LANGUAGEINDUCEMENTS – WHAT IS ALLOWED
The cost of meals, refreshments, and receptions that are part of a meeting, training, or conference as long as those meals, refreshments, or receptions events are open to all meeting or conference attendees;
Meals and refreshments, reasonable as to cost, nature, and amount, that are provided in connection with lender-sponsored training of program participants;
Toll-free telephone numbers for use by schools or others to obtain information about FFEL program loans and free data transmission service, or for use by schools
7. REGULATORY LANGUAGEINDUCEMENTS – WHAT IS ALLOWED
Other benefits to a borrower under a repayment incentive program that requires, at a minimum, one or more scheduled payments to receive or retain the benefit; and
Items of a nominal value to schools, schools-affiliated organizations, and borrowers that are offered as a form of generalized marketing or advertising or to creation of good will.
8. INDUCEMENTS: WHAT IS NOT ALLOWED
Schools cannot accept nor can lenders/guarantors offer anything in exchange for loan volume
9. INDUCEMENTS: WHAT IS NOT ALLOWED
Payments or other benefits provided to a school or school affiliated organization
Payment of conference or training registration, transportation, and lodging costs for an employee of a school or school affiliated organization
10. INDUCEMENTS: WHAT IS NOT ALLOWED Payment of entertainment expenses for employees of a school or a school affiliated organization including private hospitality suites, tickets to shows or sporting events, meals, alcoholic beverages, and any lodging, rental, transportation, and other gratuities related to a lender-sponsored social activity
11. DEFINITION OF A SCHOOL AFFILIATED ORGANIZATION …a school-affiliated organization is any organization that is directly or indirectly related to a school and includes, but is not limited to alumni organizations, foundations, athletic organizations, and social, academic, and professional organizations.
12. CONNECTION BETWEEN LENDER LISTS AND INDUCEMENT
“School affiliated organization”
Language “prohibits a lender from undertaking philanthropic activities including providing scholarships, grants, restricted gifts or financial contributions in exchange for FFEL loan volume…”
“…the Secretary applies a rebuttable presumption that the payments or activities were offered or provided to secure applications for FFEL loans or to secure FFEL loan volume…”
13. REGULATORY LANGUAGE FOR PREFERRED LENDER LISTS Must have at least three unaffiliated lenders
Department of Education changed definition in March 2008
Cannot impede or deny a borrower’s choice of lender – provide prominent statement on choice
Cannot include lenders who have been known to offer financial benefits (inducements) to an institution
Provide disclosure as to method used
Cannot assign a lender to a first time borrower
14. BEST PRACTICES FOR LENDER LISTS Create a firewall around the process
Ask Questions of Lenders – RFI, RFP, Survey
Keep the lender list static each year
Know the mission of your institution for disclosure purposes
Communicate to your President
15. Create a Firewall Committee decides lender list
Students
Staff
Director – not included but can have influence
16. Different Methods Which every method you choose, keep the questions concise. No more than 30 questions. Remember: you need to review it.
RFP – Request for Proposal (not recommended)
Creates a contract
Goes through Procurement
RFI – Request for Information
Often gives a purpose
Survey
Just asks questions
17. POTENTIAL PROCESS (see handouts) 30 question survey
Decision is by committee
Quantitative data
Qualitative data
Letter to Lenders for Reason
Provide Disclosure to Institution and Students
18. www.financialaid.umd.edu
19. CALENDAR
Effective date: July 1, 2008
20. QUESTIONS AND ANSWERS
Sarah Bauder
University of Maryland
College Park
301-314-8279
sbauder@umd.edu