The Board
of Directors of the National Student Financial Aid
Administrators (NASFAA) announced today its support
of a proposal to address the coordination of private
educational loans and other Federal student aid and
other assistance.
The NASFAA proposal will:
- Protect the interest of the
Federal government and Title IV eligible students
and private educational loan
borrowers by helping ensure that they receive the maximum amount
of federal student aid for which they are eligible.
- Replicate
current private educational loan school certification
procedures performed routinely by many financial
aid offices.
- Guarantee that no such private educational loan
will be made beyond the borrower’s cost of
attendance.
- Assist in reducing the potential
of borrowing beyond what is necessary to finance
an education and
limiting the impact of less-than-accurate marketing campaigns
used by some in the lending industry.
“This proposal will help restore confidence
in the student loan industry by making the process
more secure
and easier,” said
Michael J. Bennett, NASFAA national board chair. “At
the same time, we’re working to proactively
address the very real concerns that exist about
students being
enticed to borrow beyond what is necessary to finance
their education.”
NASFAA’s solution
will modify higher education law in a number of
ways in order to help coordinate
private educational loans, Federal student aid
and other assistance.
The proposed changes include:
- The institution
will certify each private educational loan by:
a)
Confirming that the student is enrolled or scheduled
to enroll at the institution;
b) Using procedures determined by the institution,
advising student borrowers about the impact
of the private educational
loan on potential Federal financial assistance
through a Title IV program;
c) Recommending a private educational loan
amount not to exceed the school’s cost
of attendance minus the student’s estimated
financial assistance.
- An institution must preserve
the borrower’s
right to select a lender.
- An institution shall
not certify an amount that exceeds the amount
determined by the calculation
in 1c.
- A lender may not make a private educational
loan that is greater than the amount certified
or make
a private
educational loan prior to receiving the institution’s
certification; however, a lender may reduce
the amount requested by a borrower if warranted
even if a higher
amount was certified by the institution.
- On
or before the date of disbursement the lender
of a private educational loan must notify
the institution
of the loan disbursement amount and date
as well as the
student on whose behalf the loan is made.
- The
Education Department Secretary shall prepare easy-to-understand
materials explaining
the benefits
of Federal aid vs.
private educational loans. Institutions
may provide these materials to their students
and families.
“This proposal was brought to the NASFAA board of directors
after careful study and review by our Federal
Issues Committee and many sectors of our membership. We look
forward to engaging lawmakers and policymakers
in discussions about these important ideas,” said Larry Zaglaniczny,
NASFAA’s Director for Congressional Relations. |
