Patricia Reilly, Tufts University

Christine McGuire, Boston University

Bernard Pekala, Boston College

Patricia ReillyDirector of Financial Aid

Tufts University

“Preferred Lender List”

Simplifies students’ process of selecting lenders

Guides students to the “best” lenders Gives schools leverage to negotiate the

“best” deals– For the student– For the institution– For both

Everybody Everybody WinsWinsRightRight??

Cuomo: School loan corruption widespread

Large student-loan firm settles with N.Y. AG

Sallie Mae to alter business practices, pay $2 million to education fund

Cuomo: States Will Pursue Student Loan Fiasco

N.Y. Code of Conduct

Prohibition of certain remuneration to University employees or the University.

Limitations on University employees serving on Lender advisory boards.

Regulations on how preferred lender lists and can constructed and what need to be disclosed to families about the lists.

Statement of Ethical Principles

And

Code of Conduct

For

Institutional

Financial Aid Professionals

The primary goal of the institutional financial aid professional is to help students achieve their

educational potential by providing appropriate financial

resources.

To accomplish this,

financial aid professionals

are expected to…

Commit to the highest level of Commit to the highest level of ethical behavior and refrain from ethical behavior and refrain from

conflict of interest or the conflict of interest or the perception thereof.perception thereof.

NASFAA Code of Conduct

Refrain from taking any action for his or her personal benefit.

Refrain from taking any action he or she believes is contrary to law, regulation, or the best interests of the students and parents he or she serves.

Ensure that the information he or she provides is accurate, unbiased and does not reflect any preference arising from actual or potential personal gain.

NASFAA Code of Conduct

Be objective in making decisions and advising his or her institution regarding relationships with any entity involved in any aspect of student financial aid.

Disclose to his or her institution in such manner as his or her institution may prescribe any involvement with or interest in any entity involved in any aspect of student financial aid.

NASFAA Code of Conduct

Refrain from soliciting or accepting anything of other than nominal value from any entity involved in themaking, holding, consolidating or processing of any student loans

All Things Considered, April 25, 2007

New York Attorney General Andrew Cuomo told lawmakers that if the federal

government doesn't step in to regulate the student loan industry, the states will.

Student Lending Accountability, Transparency and Enforcement Act

(SLATE)

Mirrors codes of conduct embedded in agreements entered into between NY Attorney General, lenders and

institutions.

Student loan probe pushes Congress to act

Lawmakers say Cuomo-endorsed rules should be applied nationwide

Final Regulations(Federal Register, November 1, 2007)

Preferred Lender Lists must contain at least three unaffiliated lenders.

No lender who offers the institution any benefits may be on a Preferred Lender List

Must be reviewed and updated annually.

Lenders may not automatically be assigned through award packaging for first time borrowers.

Final Regulations(Federal Register, November 1, 2007)

Institution must disclose – method and criteria for selecting lenders– Comparative information about interest

rates and other benefits offered by lenders

– That students are not required to use lenders on the list

Final Regulations(Federal Register, November 1, 2007)

Lenders are prohibited from– Any philanthropic activities, in return for being

placed on a Preferred Lender List– Paying costs of aid administrators attending

conferences, or for entertainment at lender-sponsored events

– Conducting in person entrance or exit counseling– Soliciting a school employee to serve on an

advisory board or paying for costs associated with serving on an advisory board

Final Regulations(Federal Register, November 1, 2007)

Lenders are permitted to– Offer in-person financial literacy outreach to

students.– Provide short term staffing on an

emergency, non-recurring basis.– Pay for meals, refreshments, and

receptions that are reasonable in cost if scheduled on conjunction with a training, meeting or conference open to all attendees.

Boston UniversityBoston UniversityBoston UniversityBoston University

Christine McGuire

Executive Director

What is the standard process forchange in the aid programs?

Proposed LegislationMust pass both houses of Congress and be

signed by the President to become law

Negotiated RulemakingNotice of Proposed Rulemaking (NPRM)Final Regulation is published

February 8, 2006

President Bush signed the Higher Education Reconciliation Act of 2005 (the “HERA”), Pub. L. 109 171, which made significant changes to the Higher Education Act of

1965, as amended (the “HEA”), and reauthorized the Federal Family Education

Loan (FFEL) Program.

Negotiated Rulemaking Required by the Department

The loans team began meeting in December.

Met 4 times for a total of approximately 12 days.

Finished in April without consensus on the whole package of regulations.

Why consensus was difficult?

Negotiators represented sectors rather than specific organizations

Department of Education decided consensus was all or nothing

Political situation exploded in the middle of the negotiating

Choice of lender in Direct Loans?

The U.S. Department of Education commented on this during negotiated rulemaking…

There are two federal guaranteed loan programs developed and maintained with distinctly different purposes.

The school chooses which program in which to participate.

Press releases and media coverage have confused the current laws and regulations regarding Preferred Lender Lists.

Regulations now in place for FFELP lender lists have been broadly applied to private loans in the eyes of anyone from outside the aid office.

Impact of the Media Coverage

Mapping the Landscape

Why have a Lender List?

Students and families want advice

Families and schools want to process funds

efficiently to ensure the bill is paid

Direct marketing can be confusing and sometimes

misleading

Mapping the Landscape

Why not have a Lender List?

Reduce concern of real or perceived conflict of

interest

Reduce the schools responsibility to disclose

methods and criteria for selection

What approach should schools be taking regardless of whether DL or

FFELP?Articulate clear policies regarding:

Institutional gift policyConflict of interest policyThe process for evaluating and

disclosing lenders or loans recommended, regardless of Federal or private credit

Bernard PekalaDirector of Financial Aid Strategies

Boston College

Campus Considerations

Decision Making: To BE or Not TO BE:

InformIncludeCommunicate

Campus Considerations

Decision Making: To BE or Not TO BE: (cont.)

InformDecision MakersDecision Approvers

Campus Considerations

Decision Making: To BE or Not TO BE: (cont.)

IncludeNeed-to-Know Interested Parties

Campus Considerations

Decision Making: To BE or Not TO BE: (cont.)

CommunicateOften InclusiveFinalFollow-up

Campus Considerations

Include??Internal

PresidentVice-Presidents/Deans (various

Executive, Financial, etc..)Departments (Financial Aid,

Bursar, Legal, Purchasing, etc..)DirectorsCoordinatorsStaff

Campus Considerations

Include??

ExternalStudents/ParentsGuarantee AgenciesMASFAA/EASFAA/NASFAAConsultantsLenders

ProfitNon-Profit

Campus Considerations

Options??

No listsPartial lists

UG OnlyGrad OnlyBy ProgramBy SchoolFFELPPrivate

Campus Considerations

Options??

How many on the listList Types

Inclusive (All)VolumeBenefit

Campus Considerations

Information Collection Options??

Request For ProposalsRequest For Information

Boston College’s RFI

Four Parts

Cover Letter (optional)Actual RFIAnswer SheetAnalysis SheetsDisclosure Information

WebPrinted

DISCUSSIONDISCUSSIONand and

QUESTIONSQUESTIONS

DISCUSSIONDISCUSSIONand and

QUESTIONSQUESTIONS