Paying for College Blog

Preferred Lender Lists...Here We Come!

I am starting to see a smattering of lender lists on school financial aid websites.  Here are some that I uncovered this afternoon:

• Grinnell College provided the following details for their 2009-10 Stafford Lender List:

        Lender Selection: We contacted lenders previously included on our list and determined that         the following would continue to be included for 2009-10 based on criteria described below.         Additionally, lenders who asked to be added to this list were considered using the same             criteria. Grinnell State Bank is new to the list. This list is effective as of 11/18/2008.

Private Loan Comparison Tables: Creating Order Out of Chaos

You have selected your alternative lenders.  Now you are mulling over how best to display this information to your students.  You might be asking yourself:

• What format should I use to provide this information?
• What types of information should I provide?
• How frequently should I update the information?

The Higher Education Opportunity Act passed in August will require certain disclosures for federal and private loan information.   However, the model format for these disclosures may not be finalized for up to 2 years for private loans.  Please note that lenders will be required to provide their model form to schools where they have a preferred lender arrangement in place (financial aid administrators will no longer need to compile all of this information).  If you are interested in learning more about the impact of the new legislation, please join me for a webinar on Thursday, September 4th about this topic (click here to register).  For a detailed list of the disclosures required in private education loan applications and solicitations based on the new legislation, click here.

Here is a sampling of items on that list of required disclosures in the HEOA:

Disclosing Your Lender Selection Process

Many of you can cite chapter and verse of the pre-HEOA Dept. of Education regulations regarding lender list disclosures (Attend the upcoming SLA webinar on the new HEOA legislation and its impact on lender lists to learn about changes.)  The pre-HEOA regulations require that schools with preferred lender lists "disclose to prospective borrowers, as part of the list, the method and criteria used by the school in selecting any lender that it recommends or suggests."   This clearly provides a lot of latitude on how schools choose to disclose this information. 

 

A Trip to Lender List Nirvana? Nope, Just Out of Date Lender Lists

I thought I entered a time warp today.  While reviewing school lender lists, I came across the following benefits for Stafford loans:

Lender 1:

• No Origination Fee
• No Default Fee
• 0.25% interest rate reduction with automatic withdrawal option
• 3.00% in principal reductions when making on-time payments during the first 36 months in repayment (A.  1.00% principal reduction is applied to the loan for each 12-month on-time payment cycle)

Increasing Transparency on Alternative Loan Lists: Approval Rates and RFI Responses

Two questions that borrowers have when evaluating private lenders are:

• Will I be approved for the loan?
• What interest rate will I pay on the loan?

In Defense of a [Focused] Lender List

Why have a lender list? Many in the financial aid field may be asking that question of themselves these days given all the dramatic changes in regulation and the capital markets. 

You might say that I have a vested interest in lender lists, after all I started SLA to help schools put together the best lender lists for their students.  However, if you stop for a minute and take the perspective of an 18 year old soon-to-be freshman college student or her parents, it would be hard to argue about the wisdom of a lender list. 

First, let's get all the points out there that we hear daily from those who choose not to have a lender list (or who provide a long list of lenders that the school has used in the past three years):