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Responsibilities of the Director of Financial Aid Federal Laws
The Director of Financial Aid is responsible for the following:
1. Compiling and making available on an annual basis a list of the lenders and loans, including private loans, that the institution endorses or recommends through its preferred lender arrangements. The list must disclose the method and criteria used to select its preferred lenders, including (a) payment of origination or other fees for borrowers; (b) highly competitive terms and conditions, including interest rates; (c) high-quality servicing; and (d) benefits beyond the standard terms. the list must contain at least 3 FFEL lenders that are not affiliates of each other and if the institution endorses private loans the list must include at least 2 lenders that are not affiliates of one another. For each lender, the list must disclose whether and to which other lender it is an affiliate and if it is an affiliate of another lender, describe the affiliation. If the institution chooses to use a preferred lender list, the institution must submit annual reports to the US Dept. of Education explaining why a preferred lender arrangement exists. The institution must include a statement that families and students are not required to borrow from a preffered lender. See HEOA Section 120 for the definition of *preferred lender*. A neutral and comprehensive list of lenders that have provided loans to students at the institution is not a preferred lender list. (See preamble to 74 Fed. Reg. 37432 (July 28, 2009).
2. The disclosure in #1 above must state that students do not have to borrow from a lender on the list, and the borrower's loan certification must not be impeded by failure to choose a lender on the list. This statement must also be included on the financial aid web site and in any publications
3. A Code of Conduct must be in place under federal law if the institution has a preferred lender arrangement. The regulations for the federal code of conduct are subject to negotiated rulemaking. The Code must contain the following: Provisions prohibiting conflicts of interest, revenue sharing arrangements, the solicitation or acceptance of gifts, receipt of fees, payments or other financial benefits for consulting services by anyone in the institution with responsibilities for student loans, assistance with call centers or staffing, the acceptance of funds to be used for private loans in exchange for providing concessions to a private lender, and the acceptance of anything of value except reimbursement for reasonable expenses by an employee with responsibilities for financial assistance that sits on a lender’s advisory board or commission.
4. The District of Columbia and schools in DC have adopted a voluntary Code of Conduct regarding appropriate lending practices, and per the terms of that agreement the Code must be posted. The Code of Conduct has been updated to relfect changes made by the Higher Education Opportunity Act.
5. General institutional disclosures must be made to borrowers of FFELP loans, as follows: the maximum amount of federal grant and loan aid available under Title IV, the interest rate and terms and conditions of the loan, information on charges associated with the loan, the annual and aggregate maximum amounts that may be borrowed under the FFEL program, the amount of interest that may accrue on the student’s loan, the consequences of default, contact information for the lender, and any other information the Secretary requires be disclosed. The proposed rules to implement chagnes in the HEOA clarify that disclosures must be made at the time the loan is approved, at or prior to disbursement, and at or prior to repayment, and during repayment.
6. Schools that provide information on private loans to students must also disclose that the borrower may qualify for Title IV federal financial assistance, and that those terms may be more favorable.
7. If the school is an eligible lender under Title IV, the Director must provide a notification when a loan is approved by the school summarizing the rights and responsiblities of the borrower and consequences of default. Also, not less than 30 days or more than 150 days bedore the first loan payment is due, institutional lenders must make other disclosures. See the NAFSAA Required Student Loan Disclosure by Lenders Chart summary of Section 433. 8. Provide entrance and exit counseling for borrowers, now applicable to all types of Title IV loans.
9. Ensure internal checks and balances for administering financial aid that meet the regulations. (34 CFR 668.16)
10. Ensure the functions of determining awards and disbursing funds are divided. (34 CFR 668.16)
11. Adopt procedures to ensure frequent, periodic reconciliation of fiscal office and financial aid office award data. (34 CFR 668.14; 16; 24; and 674.19, 675.19, 676.19 and 690.81)
12. Adopt a system to identify and resolve discrepancies in information received from various sources re a student's application for aid. (34 CFR 668.16)
15. Establish a Title IV refund policy for students who withdraw from class (34 CFR 668.22)
16. Submit annual financial audit statements to DOE on time. (34 CFR 668.23) 19. Ensure there is a process to obtain necesary approvals for re-establishing institutional eligiblity and for reporting required changes in officers, new locations, etc. (34 CFR 600.10, 600.20, and 600.21)
Resources
August 24, 2009 Hogan and Hartson memo on HEOA negotiated Rulemaking-Federal Education Loans (not public) Information for Financial Aid Professionals
The Higher Education Opportunity Act II: Student Lending Related Reporting and Disclosure Requirements, NACUANOTE Sept. 16, 2008 by NACUA member Kate Tromble (Drinker Biddle).
HEOA Lender Disclosure Chart *****
NASFAA Summary of the HEOA as it relates to issues of interest to Financial Aid Administrators****
updated 8-13-09 by JP to add policies; updated 10-26-09 to fix link to new Code of Conduct and add references to negotiated rulemaking Last Revised 26-Oct-09 11:52 AM.
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