• Does your school have a PLA? If so, what are the top three reasons you decided to have one?

• If not, what are the top three reasons that lead you to this decision?

WHILE YOU WAIT

PLA OR NOT TO ‘EH’

Debra Ensor, Wells Fargo Education Financial ServicesKelli Izat, Frostburg State UniversityMichael Poma, SunTrust Bank

• Review of definitions/requirements

• School options for PLA• An inside look from a

school’s perspective• Sharing best practices

WHY ARE WE HERE?

• A “preferred lender arrangement” (PLA) is an arrangement or agreement between a lender and a covered institution…under which the lender provides education loans to the covered institution’s students or their families, and that relates to the covered institution recommending, promoting, or endorsing the lender’s education loan products.1

PREFERRED LENDER ARRANGEMENTS, PLA’S

• “Any action that a [school] takes to recommend, promote, or endorse the education loan products of a lender that provides…education loans to students attending the [school] triggers the preferred lender arrangement requirements. The actions a [school] may take to recommend, promote, or endorse the education loan products of a lender are not limited to including the lender on a preferred lender list.”2

– This may be either intentional or unintentional by the school.

– If you have a disproportionate private loan volume from one or two lenders, you may have unintended PLA’s with that lender or lenders.

PLA CONTINUED

In English, your institution has a list on the webpage or on paper

• Schools who furnish private loan lender lists to their students and parents are considered to have Preferred Lender Arrangements with those lenders included on the list.

• A PLA exists if a school recommends, promotes or endorses a lender, even if this is not in the form of a PLA

Bursar or front desk says, ‘x’ lender offers a loan

Student Loan Marketplace counts as

a PLA

1. Actual Preferred Lender Arrangement

2. Comprehensive written list or web list

3. Third party list4. No referral process

SCHOOL OPTIONS

• Three of the criteria required in compiling a Preferred Lender List require you to explain your choices.

• There is no language per se about the necessity to issue an RFI

• However, you will need to have evidence that you have made informed decisions

RFI OR NO RFI

• Think of 8 – 10 questions about private loans that are important to your students, your office and your institution and create a one-pager

• Utilize the best practices of other schools

• Ask your lender partners for their “boilerplate”- their pre-prepared RFI response, customized for your school

KISS THEORY

“…a school that wants to provide basic information to the school’s students and their parents may provide a comprehensive list of lenders that have made loans to the school’s students or parents in the past three to five years (or some other period) and that have indicated that they would continue to make such loans. The school should not provide any additional information about the lender, including, for example, the percentage of the school’s loans made by the lender.

COMPREHENSIVE LIST

The school must provide a clear statement that a borrower can choose to use any…lender.”

• “…if a [school] includes certain lenders on the list and leaves other lenders off the list, the Department views the [school] as recommending, promoting, or endorsing the lenders on the list over the lenders that it has chosen to leave off the list regardless of whether the [school] includes a disclaimer on the list, asserting that the [school] does not recommend, promote, or endorse the lenders on its list, despite whatever disclaimers the school may attach to the list.”

Make sure you include

everyone, unless the

company is no longer in business

• The Department does not consider an institution that refers its students to a third party entity that maintains a comprehensive, neutral listing of private education lenders to be participating in 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 placed on the list or pay the third party entity a fee based on any loan volume generated. However, if an institution retains a third party entity to develop a customized lender list for the institution to provide to its students as a resource…the Department does consider the institution to be participating in, and subject to the requirements of, a [PLA].”

THIRD PARTY

•Finaid-L•Student Lending

Analytics

NO REFERRAL

Remember: • “Any action that a [school] takes

to recommend, promote, or endorse… education loan products…triggers the preferred lender arrangement requirements.”

• This includes no literature or brochures.

• No one at your institution may ever discuss any lender with prospective student families. The same rules apply to the comprehensive list providers.

NO REFERRAL APPROACH

Is this an advantage for the school or for the student?

• You are not permitted to display any brochures…

• No employee of your school is permitted to reference any alternative loan program without triggering the PLA requirements…

• You’re concerned about the level of customer service you’re providing to students and parents…

• Your students are left searching the web

ASK YOURSELF: IS THIS METHOD MEETING THE NEEDS OF MY INSTITUTION, STUDENTS AND UNIVERSITY?

Shhhh, is the

word

WHAT ARE SOME OF YOUR COLLEAGUES DOING?

• Common for parents to want student to have a loan in their name. Do not want to take PLUS Loan.

– Talk to parents about variable vs. fixed interest rates.

– Let them know that if the student doesn’t repay the loan they are liable for the entire balance anyway because they are the co-borrower.

– Make parents aware of federal and possible alternative loan forgiveness for deceased borrowers.

– Talk to students about applying for federal loans and other aid first.

COUNSELING STUDENTS

Frostburg says a PLA allows them to counsel their

students

• FSU requires all students to do a private loan entrance counseling before we will certify a private loan.

– Great Lakes

COUNSELING STUDENTS

Other options:Mapping Your

Future

• Provide a place where parents and students who do not have experience with private loans can start researching loans.

• Increases time management in the office

• Helps protect students from “fly by night companies”.

• More likely to ensure smooth processing and receive funds on time

• Provides and increased level of customer service

WHY HAVE A PREFERRED LENDER LIST?

– FSU completed the RFI process with a committee the first year we posted a preferred lender list.

• Created an RFI questionnaire that was sent to lenders.

• Gave lenders a deadline for completing and returning questionnaire.

• Created a committee and supplied them with a copy of the questionnaire, a list of scoring criteria, a scoring sheet, and scale for scoring, and each lender’s response.

• Made sure committee was composed of individuals both in and out of the financial aid office.

REQUEST FOR INFORMATION (RFI)

• Tried to keep lender questionnaire as short as possible while still acquiring all important information.

RFI QUESTIONS

Request for Information (RFI) Frostburg State University

Alternative Loans

1. Do you offer any private loan products for students who are less than half-time? 2. Do you offer any private loan products for students who are non-degree (not

degree seeking)? 3. Do you require that a student meets the schools Satisfactory Academic Progress

(SAP) standards in order to qualify? Please just answer Yes or No for clarification purposes.

4. Do you charge any front end fees? 5. Do you charge any back end fees? 6. Do you offer a grace period on your products? 7. Do you offer any borrower benefits on your products? 8. Please list the current interest rate or interest rate range on your private loan

products.

SCORING CRITERIA

Alternative / Private Loan Lender List Selection Criteria

1) Online interfaces / online applications 2) Toll-free numbers3) Stability / Number of years in the student loan business4) Ability to process via Scholarnet5) Ability to send funds via EFT through Scholarnet6) Variety of products, loans for non-degree students, loan for prior balances, less than half-time status, loans for students who don’t meet SAP, etc.7) Front end or back end fees?8) Reasonable interest rates?9) Are any borrower benefits offered?10) Grace period?

FSU focused less on

interest rates and

more on customer service.

• Before giving any lender information to committee members, a scale for rating the loan products must be made.

• FSU used a scale similar to academic grades.

– Lenders were given a grade of A through D on each of the individual criteria.

– An overall grade for the lender was derived by calculating an average of all of the individual criteria scores.

GRADING SCALE

• Each committee member was given a worksheet to fill out with a grade for each criteria, and a place for an overall grade for each lender.

CALCULATING SCORES

ALT Bank A

Bank B

Bank C

Bank D

Bank E

Bank F

Bank G

Bank H

Bank I

Bank J

Bank K

Loan approval Criteria Co-borrows-time frame Overall Approval Interest rates/fees Loan approval w/in tiers Benefits Grace period Direct Consumer Variety of products Customer Service Electronic processing? Overall Grade

• Identify a threshold that will be used to decide whether a lender makes it onto the preferred lender list.

– FSU included everyone who scored an overall grade of A, B, or C.

– FSU decided not to include anyone who requires students to be a resident of a certain state or member of a certain credit union in order to apply.

SETTING CRITERIA FOR BEING INCLUDED ON THE PREFERRED LENDER LIST

• Title X guidelines require that financial aid office’s review their preferred lender list each year. This does not mean that a full RFI is required each year.

– FSU sends out a compressed RFI to each lender on our list and any lender who has requested to be on our list each year in February.

– Having lenders complete a small RFI annually insures that you have the correct information on file about each lender and that their loan programs have not changed.

– Once the completed RFI’s have been received the information is kept on file for auditing purposes. Any necessary adjustments to the list itself are than made.

RENEWING PREFERRED LENDER LIST

What about the annual

report?

• Schools are required to disclose to students who is on their preferred lender list, why they are on it, and that students are not required to borrow from someone on the school’s list.

• To comply with regulations FSU posts all of it’s information regarding it’s preferred lender list online on an “Alternative Loans” page.

DISCLOSURE TO STUDENTS

• The preferred lender list• A statement information students that they are not

obligated to borrow from a lender listed on FSU’s preferred lender list.

• The MD College Loan Code of Conduct• A list of RFI questions• A chart showing a summary of RFI responses• Sample private loan application disclosures from each

lender on the lender list• A copy of the private loan self-certification form and

instructions on how to obtain the information necessary to fill the form out

• A link to FSU’s private loan entrance counseling.

ONLINE INFORMATION DISCLOSURE

• American University• Bowie State University• Frostburg State University• John’s Hopkins University• McDaniel College• MICA• Mount St. Mary’s University• Salisbury University• UMBC• University of Delaware• University of Maryland, College

Park

OTHER SCHOOL’S IN TRI-STATEWITH A PLA

Have you changed your mind and want to be added to

this list?

• http://www.frostburg.edu/ungrad/faid/alternativeloans.htm

EXAMPLE

Questions??• Debra.B.Ensor@wellsfargo.com• kizat@frostburg.edu• Michael.poma@suntrust.com

1. HEOA, p. 402. Fed. Register 10/28/09, page 55630, col. 2,

last paragraph3. DCL ID: GEN-09-084. Fed. Register 10/28/09, page 55630, col. 1,

last paragraph 5. Fed. Register 10/28/09, § 601.10(a) through (c) 6. Fed. Register 10/28/09, § 601.20(a) and (b)7. Fed. Register 10/28/09, § 601.21(a)(2)(ii) and

(iii)8. Fed. Register 10/28/09, § 601.21(c)9. Fed. Register 10/28/09, § 601.21(c)(6)10. Fed. Register 10/28/09, § 601.21(c)(2)(ii)11. Fed. Register 10/28/09, §601.12(b)12. HEOA, p. 7113. Fed. Register 10/28/09, page 55630, col. 2,

second paragraph

RESOURCES