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. 

 

With the 2008-09 lender lists now up on school websites, I thought it would be useful to enumerate the elements of the process that lenders are choosing to disclose to increase the transparency of the process.  Here is the information that we are finding that schools are providing about their process (this information will be updated so be sure to refer back to it often):

1. Discuss the rationale for having a lender list (e.g. Why have one in the first place?)
   1. East Tennessee State University provided the most common rationale: "Borrowers frequently ask for guidance in the selection of a FFELP lender.  For this reason, the University publishes an updated List of Preferred Lenders early each spring."
2. Disclose the means used to collect information from lenders (e.g., RFI, RFP, questionnaire)
3. Provide a sample of the RFI or the actual answers provided by the lenders.  
   1. Northwestern provides example of their 2006 RFI.
   2. Johns Hopkins provides their 2007-2008 Alternative Loan RFI on their website.
   3. The Connecticut State University system provided their RFI for student loan services on the web.
   4. Catholic University RFI
4. Indicate what members of the community were included on the committee. 
   1. East Tennessee State University had "representatives from the Office of Financial Aid, the Bursar/Financial Services Office, and the Office of Internal Audit" on their lender selection team.
   2. In some cases, the Financial Aid Director has chosen not to be involved in the process (e.g. Western Illinois University indicated that "The Director of Financial Aid did not serve on the committee.")  
5. Indicate the number of lenders invited to participate and an explanation as to why these lenders were chosen. 
   1. Connecticut College indicated that 24 lenders had been invited to participate and that 17 had responded by the deadline.  
   2. West Chester University indicated that they sent an RFI to 50 lenders based on their loan volume and got 10 responses. 
6. Indicate the number of lenders who responded to the proposal by the deadline (see #5 for examples).
7. Indicate the criteria utilized to select lender, often listing them based on their importance
   1. Drexel University indicated that they determined the criteria based on surveys of students and parents.
   2. College for Financial Planning lists their criteria in this disclosure statement. 
8. Indicate the scoring or rating system utilized to rate lender responses
9. Indicate the frequency which list is/will be evaluated.
10. Indicate how the committee dealt with the frequent lender changes.
11. Provide statement that borrower can choose any lender whether or not they are on the lender list.