The Value of
Private Lender
Lists and Keeping
It Simple
Julie Moreno Rehder – ELM
Resources
Michael McFarlane – Charter
One
© 2012 ELM Resources – Confidential Not for Distribution
Agenda
•
Regulatory Background & Preferred Lender
Arrangements (PLA)
•
The Value of a Lender List
The Value of Private Loans
•
•
•
•
•
•
Myths vs. Facts – Private loans and PLUS/Grad PLUS
Tips When Choosing Lenders
School Lender List Options
ELMSelect as a Loan Selection Tool
Questions
© 2012 ELM Resources – Confidential Not for Distribution
Regulatory Background and Private Loan
Arrangements
© 2012 ELM Resources – Confidential Not for Distribution
Previous ED Guidance
“… a preferred lender list can be an effective tool to
help families…”
“…by providing this information, schools may help
students and their parents navigate the
increasingly complex student loan landscape.”
“…a borrower’s choice of lender may be better
informed by preferred lender lists and other
consumer information...
…which play a useful role in assisting financial aid
administrators in dealing with the large volume of
requests for information and assistance, and in
informing borrower choice.”
Reference: DCL GEN-08-06 posted May 8, 2008
Subject: School Use of a Preferred Lender List in the FFEL
Program
© 2012 ELM Resources – Confidential Not for Distribution
Preferred Lender
Arrangement
A Preferred Lender Arrangement exists if:
 Lender provides
education loans to
students/families, AND
 School recommends, promotes or endorses the
education loan products of a lender
No formal agreement required to trigger definition, Applies to the
entire institution and all staff
© 2012 ELM Resources – Confidential Not for Distribution
The Value of a Lender List and The Value
of Private Loans
© 2012 ELM Resources – Confidential Not for Distribution
The Value of a Lender List
•
•
•
•
•
•
•
Provides a starting points for families to begin
researching private loans
Prevents families from choosing the wrong products
Makes it easier for families to make private loan
decisions by having reliable information in one place
Allows faster private loan processing
Will open dialog with a private loan lender
representative that will keep you updated and
informed on product changes
Saves staff time from having to counsel each family
individually on which loans is best for their situation
Shows how important it is to your institution that
students are informed before making a decision.
© 2012 ELM Resources – Confidential Not for Distribution
The Value of Private Loans
 MYTH: Government loans are always less expensive
for borrowers than private loans.
 FACT: When measuring the true cost of credit
through an APR comparison, private loans often
compare favorably to unsubsidized federal loans,
particularly Graduate PLUS Loans.
 MYTH: Private student loans are all variable products
with extremely high interest rates.
 FACT: Most lenders offer
students the choice of
fixed-rate or variable-rate products.
© 2012 ELM Resources – Confidential Not for Distribution
The Value of Private Loans




MYTH: Private student loans can pose more risk for
borrowers than federal student loans.
FACT: Federal loans, in contrast to private student loans, are
provided without the most basic consumer protection – a
determination of the borrower’s ability to repay.
MYTH: Students and families do not receive adequate
information about private student loan terms before
borrowing.
FACT: Lenders provide three notices containing 18 disclosure
items about private loan terms at three different times
before a private loan is made. These disclosures are required
by law. The Federal Reserve conducted extensive consumer
testing before establishing these new disclosure
requirements, which have been in effect since February
2010.
© 2012 ELM Resources – Confidential Not for Distribution
What to Look for When
Choosing a Lender Program
•
•
•
•
•
•
Comprehensive product offerings
Competitive pricing: fixed & variable rates
and no fee options
Borrower benefits/repayment incentives
Loan Product Features offered
Reputation & track record
Stability & longevity
© 2012 ELM Resources – Confidential Not for Distribution
What to Look for When
Choosing a Lender Program
Quality of Lender Customer Service & Support
• Dedicated marketing/service staff
• Toll free number – single point of contact
• User friendly web-based services offered
• Level of automated processing offered
• Technical support offered
• Training offered
• Default management
• Other value-added services
© 2012 ELM Resources – Confidential Not for Distribution
School Lender List Options
© 2012 ELM Resources – Confidential Not for Distribution
School Lender List Options
•
•
•
•
•
No Lender List
Comprehensive
Historical List
3rd Party List
Preferred Lender Arrangement (PLA)
© 2012 ELM Resources – Confidential Not for Distribution
No Lender List
•
No information, guidance or counseling
assistance is provided to prospective
borrowers on any private education loan
programs by any school staff
•
Borrowers and families are on their own to
educate themselves and make informed
decisions on private education loan options
© 2012 ELM Resources – Confidential Not for Distribution
Comprehensive
•
•
•
•
•
•
•
Provides students with a starting point
Schools can provide a neutral, comprehensive list
of lenders that provided private education loans
from a certain period of time
Cannot exclude any lenders unless they are no
longer providing education loans
Some loan programs may not be available to your
borrowers
Excluding active lenders or adding new lenders
triggers PLA requirements
Terms and conditions of loans may be provided
Private loan disclosure requirements must be met
© 2012 ELM Resources – Confidential Not for Distribution
Historical
•
•
•
•
•
•
•
Provides students with a starting point
Schools can provide a neutral, historical list of
lenders that students used in the past at their
institution
Cannot exclude any lenders unless they are no longer
providing private education loans
Some loan programs may not be available to your
borrowers
Excluding active lenders or adding new lenders
triggers PLA requirements
Terms and conditions of loans may be provided
Private loan disclosures requirements must be met
© 2012 ELM Resources – Confidential Not for Distribution
3rd Party Lender List
•
“[Not a PLA] as long as the institution ensures that the
listing is broad in scope, does not endorse or
recommend any of the lenders on the list and the
lenders on the list do not pay the third party entity to
be place on the list or pay the third party entity a fee
based on loan volume generated.”
•
•
•
School is still responsible for all compliance
Private loan disclosure requirements must be met
Some loan programs may not be available to your
borrowers
Additional topics for consideration:
•
–
–
–
Loan comparison functionality
Advertising influence on 3rd party sites
Unsolicited emails to borrowers
Reference: Federal Register: October 28, 2009 (Volume 74,
Number 207) –Final Rule
© 2012 ELM Resources – Confidential Not for Distribution
Preferred Lender
Arrangement Option
•
•
•
•
School staff can provide guidance and counseling to
borrowers and families
Provides a meaningful starting point for making
informed decisions on private loans
Allows for more streamlining of electronic processing
Will open dialog with a private loan lender
representative who will provide customer service
and keep you updated on product changes.
© 2012 ELM Resources – Confidential Not for Distribution
Information to Compile and
Disclose
This information is based on Discover’s review and interpretation of regulations. This document should not be
construed to be legal advice. Please consult with your own compliance and legal counsel to ensure that you are in
full compliance with the preferred lender arrangement requirements applicable to your school.
© 2012 ELM Resources – Confidential Not for Distribution
ELMSelect a a lender list option
© 2012 ELM Resources – Confidential Not for Distribution
The ELM Solution ELMSelect
 ELMSelect – An online
lender list and comparison
resource







Provides students the ability to compare lenders and
lender products side-by-side
Schools establish their lender or product listing with
lender approvals
Lenders establish their product details and school
relationships
Direct communications between schools and lenders
Complies with current regulations
Complete self-service provided for schools and lenders
with many custom options
Detailed data capture for future analytics
© 2012 ELM Resources – Confidential Not for Distribution
ELMSelect
© 2012 ELM Resources – Confidential Not for Distribution
22
ELMSelect
© 2012 ELM Resources – Confidential Not for Distribution
23
ELMSelect
© 2012 ELM Resources – Confidential Not for Distribution
24
ELMSelect
© 2012 ELM Resources – Confidential Not for Distribution
25
ELMSelect
© 2012 ELM Resources – Confidential Not for Distribution
26
Disclaimer & Reference
The information contained in this presentation is not
comprehensive, is subject to change based on additional
guidance or directives from the U.S. Department of
Education (ED). It serves only as general, background
information for further investigation and study related to
the subject matter. Nothing in this presentation constitutes
or is designed to constitute legal advice.
Please consult your own counsel to ensure that you are in full
compliance with requirements applicable to your institution.
References:
• Federal Reserve final rules for private loans – August 14,
2009
• Federal Register, 34 CRF 601- October 28, 2009
© 2012 ELM Resources – Confidential Not for Distribution
Questions
© 2012 ELM Resources – Confidential Not for Distribution
 Contact
Information for Presenters:
 Julie Moreno Rehder, ELM Resources:

jrehder@elmresources.com
 Michael McFarlane, Charter One:

Michael.McFarlane@CITIZENSBANK.com
© 2012 ELM Resources – Confidential Not for Distribution