Improving the Self-Certification Process For Private Student Loans

Here is some of the feedback provided by the financial aid community on the new regulations requiring students to complete a self-certification form prior to receiving a private student loan.  The original intent of the form was to inform students about federal loan options before they took out a private loan and to limit overborrowing by having the student complete information on their total cost of attendance and estimated financial assistance.  The form carries this warning should the student seek to borrow more than the difference between their COA and est. financial assistance:  "WARNING: If you borrow more than the amount on line C, you risk reducing your eligibility for free or lower-cost federal, state, or school financial aid."

The suggestions from the financial aid community about self-certification fit into a few buckets:

Substitute school certification for the self-certification process (the most popular response)

• "All private student loans through lenders should be required to complete school certification which would prevent the student from borrowing in excess and allow the school the opportunity to counsel the student."
• "The form is unnecessary and redundant. With school-certification, we let the students know if they have other loan options, regardless of a school certification form."
• "Get rid of it - ensure school certification on all private education loans and skip this useless form." 

Move self-certification process to the beginning of the application process, not the end:

• "I would like to see the questions from the self-certification form added to the loan application itself. As it is now, many students are completing the form hastily without understanding why these questions are being asked. I think that the intent of the regulation is to get students and families thinking about how much they need and how much they borrow. Adding these questions to the front-side of the application process will encourage them to weigh these things when they are deciding how much to apply for. Answering the questions after-the-fact is putting the horse after the cart."

Make changes to verbiage on the self-certification form:

• "Change the language about how to get the information needed to complete the form to include paper award letters and online tools PROVIDED by the financial aid office, not solely the office itself."

• "As to the form, I would include identifiable information such as student's ID or SSN, as well as customize for lender's name and address to return form to them and not the school."

• "Indicate on the form that the bottom line figure may reduce the loan amount applied for (some lenders will reduce the loan amount based on that figure, while others do not adjust). Makes for a rough time when we've already certified the loan and then the SC form causes a drastic change. Had several borrowers affected by this and they were extremely upset thinking we (school) did something wrong."

Add a requirement that a financial aid officers sign off on the self-certification form:

• "I think the student should be required, as part of the self-certification to have a financial aid officer's signature from the school they are attending. Students that are smart enough to find the information already available on the website can be borrowing alternative loans through self-certification and not have applied for federal student loans. Many students that started out with alternative loans declined them when they found out they get could lower-interest federal loans."

Do not require form of international students:

• "Change the requirement so that students who are NOT eligible for federal aid (International students) do not need to compete this form."

Have lenders change the way they process the forms:

• "Lenders should clarify, in basic terms and easy to understand language, what the form is and why it's necessary."

• "...I think lenders should develop an electronic method for receiving and submitting the form, with an e-signature or or dynamic form that students can submit so that printing, signing and faxing is unnecessary. Students are really frustrated with the way the form slows down their processing."

• "...ALL lenders should require the form BEFORE final approval of the loan. NO lender should request school certification until after the self-certification takes place. It is very burdensome to the school to keep track of certified loans that have not paid." o "No lender [should] send the loan to the school for certification until the self-cert form is received."

Any other suggestions?

 

Comments

[Shirley Dohring]

Absolutley, without question, get rid of this form and have the school certify any request for a private loan. The self certification form serves no purpose.