Preferred Lender Arrangement Compliance Guidance for Schools

The Preferred Lender List (PLL) is a tool for you to provide best lending options for your student borrowers and their families. The Department is required to develop a model disclosure form that will outline the disclosures that need to be met on a PLL. To date, the model form has not been published. HESC will provide more information on the requirements of setting up and maintaining a PLL as we receive it.

Institutions are under no obligation to provide a PLL. However, if you decide to develop a PLL or enter into a Preferred Lender Arrangement (PLA) the following rules must be followed:

• State clearly on your Web site and on all informational material a description of the maximum amount of federal grant and loan aid available to your student under Title IV.
• Choose at least two unaffiliated lenders for your Private Loans PLL. Include details of any affiliations between the lenders on the list.
• Select lenders that will give your student borrowers and their families the best options; do not select lenders that offer the institution some financial or other benefit to be placed on the PLL.
• Obtain assurance from the lender that the advertised benefits will continue regardless of whether the loan is sold.
• Disclose any agreement that the lender has to sell its loans.
• Do not agree to the lender’s use of the name, emblem, mascot or logo of your school.
• Disclose clearly and fully why your institution has entered into a preferred lender arrangement with each lender on the PLL, particularly with respect to terms and conditions or provisions that favor the borrower.
• Disclose the method and criteria, and the relative importance of those criteria, you used for selecting the lenders including comparative information on:
  o payment of loan fees;
  o competitive interest rates or terms;
  o quality servicing; and
  o any other additional benefit for the borrower beyond the standard terms.
• Provide your student borrowers with the Application Disclosure Form from each lender with which you have a PLA on an annual basis before students borrow.
• Include a prominent statement that the borrower DOES NOT HAVE TO USE A LENDER FROM THE PLL.
• Include a statement that the borrower has the right and ability to select the lender of their choice and will suffer no penalty for choosing a lender that is not on the PLL.
• Ensure the lender’s name is displayed in all information and documentation related to the loan.
• Publish your institution’s code of conduct on your Web site.
• Maintain and update the PLL at least annually.
• Submit an annual report to the Secretary of Education, make the report available to the public, and provide the report to students. To date, the Department has not published a model report or established a date upon which the report must be filed.

Keep in mind your institution should not select a lender for the borrower, deny the borrower their right to choose a lender or delay certification because the borrower chose a different lender.

For NYHELPs participating colleges and Marketplace users, HESC will provide assistance with appropriate disclosures. For more information, please contact Lisa Simpson at (518) 473-0842.