NASFAA proposal for school certification on all private loans, including direct-to-consumer loans
While some of the provisions could change during negotiations with the Senate, the House bill contains a number of provisions that Sallie Mae believes will help students and families. For example:
School certification of all private education loans (including direct-to-consumer)
A proposal developed by the National Association of Student Financial Aid Administrators (NASFAA) is included in H.R. 4137 (PDF, 12KB).
- Before any lender can issue a private education loan, they must first obtain the institution's certification of the borrower’s enrollment, cost of attendance, and the difference between the borrower's cost of attendance and the borrower's estimated federal financial aid.
This means that all private education loans, including direct-to-consumer loans, must be certified by the school.
- The bill also requires lenders make the institution aware, in writing, of the name of the student on whose behalf the loan is being extended and the amount of the loan before the funds are disbursed.
Should the proposal become law, students will be further protected against borrowing amounts above the cost of attendance.
These new requirements replace the provision in the committee-approved version of H.R. 4137 which would have just required lenders to notify a borrower's school in writing before issuing a private educational loan of $1,000 or more.
As the nation's leading saving- and paying-for-college company, Sallie Mae always advises families to use our 1-2-3 approach to financing an education, helping them maximize the use of grants, scholarships, payment plans, and federal loan programs as the lowest cost methods to pay for college.
Students win when they find and consider free money first, such as scholarships and grants; turn to federal student loans next; and then use private student loans only as a last resort, to fill any remaining funding gap up to the cost of attendance.
The proposal to require school certification of all private education loans builds on Sallie Mae's industry leading practices to prevent over-borrowing and ensure students are borrowing wisely. Given the rapid growth of direct-to-consumer student loans, NASFAA should be commended for its leadership on this important issue.