Do you know what these are?
- Regulation Z
- Truth in Lending
- Title X
Wait, how about this one?
Well, I hope you do, because they went into effect on February 14, 2010.
Maybe you’re thinking these won’t affect you. Maybe you’re right, but if you have institutional loans or have students who have taken out private loans, including institutional Loan Repayment Assistance Programs, you might want to have a general understanding of the new legislation and how it might impact your policies and procedures as well as your students’ application processes.
Okay, let’s back up. What am I talking about? The Private Student Loan Transparency and Improvement Act, more commonly referred to as Title X of the Higher Education Opportunity Act (HEOA) of 2008amends the Truth in Lending Act (TILA) of Regulation Z which is governed by the Federal Reserve Board. Phew, I know it’s a mouthful. Until this amendment, private educational loans were exempt from some provisions of the TILA.
The intended purpose of these regulations is to protect borrowers by:
- Ensuring that they are aware of all their federal options
- Discouraging deceptive private lending practices
Generally, this amendment provides students with specific information about the private loans they may be borrowing and allows them time to decide if a private loan is their best option.
These regulations amend the TILA so that they impact you and/or your students by
- Adding disclosure and timing requirement that apply to lenders making private educational loans,
- Requiring lenders to obtain a self-certification form signed by the borrower before consummating the private student loan,
- Adding limitations on certain practices by lenders, including limitations on “co-branding” their products with educational institutions in the marketing of private education loans and
- Requiring lenders with preferred lender arrangements with educational institutions to provide certain information to those institutions.
What does this mean for private student loan borrowers?
In a nutshell, it means completing more information and receiving more forms/information from the lender, but for the most part, the process should be relatively seamless and not impact the borrower tremendously. A note of caution for your borrowers that tend to wait until the last minute to accomplish things, in order for the borrower to have an opportunity to decide not to take the loan, there is a waiting period prior to disbursement. For borrowers who complete things on time or ahead of schedule this should not be a problem. It is only those that we so often are helping in a panic at registration that will not receive their funds as quickly as they would have prior to this change.
