April 10, 2009

Private Loan Proposed Rules

On March 24, The Federal Reserve System published proposed rules in the Federal Register to modify Regulation Z, which implements the Truth in Lending Act (TILA). Title X of the Higher Education Opportunity Act (HEOA) amends the TILA by:

• Adding disclosures and timing requirements that apply to private education loan lenders.
• Adding limitations on certain lender practices, including "co-branding" products with schools in the marketing of private student loans.
• Requiring lenders to obtain a self-certification form signed by the borrower before completing the loan.
• Requiring lenders who have preferred lender arrangements with schools to provide certain information to those schools.

Private education loans are defined as loans made expressly for postsecondary educational expenses, excluding open-end credit, real estate-secured loans and loans made, insured, or guaranteed by the federal government under Title IV of the Higher Education Act of 1965.

The proposed rule includes the following forms:

• Private Education Loan Application and Solicitation Model
• Private Education Loan Approval Model
• Private Education Loan Final Model
• Private Education Loan Application and Solicitation Sample
• Private Education Loan Approval Sample
• Private Education Loan Final Sample

The various forms refer to the school certification form in the "Next Steps" section. Applicants are advised to get the school certification form from the financial aid office. The school certification form, which will be produced by ED, has not yet been released.
 
The deadline to submit comments on the proposed rules to the Federal Reserve System is May 26, 2009. You can submit comments using the Federal eRulemaking Portal at www.regulations.gov or by e-mail at regs.comments@federalreserve.gov. Docket No. R-1353 should be noted in any comments submitted.

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