Selecting a Preferred Lender List

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Selecting a Preferred Lender List

• Sunday, March 18th, 2007

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Selecting a Preferred Lender List

• Northwestern Universitys approach
• NU developed a 40 question Request For
  Information (RFI) mainly based on guidance
  received from NASFAAs Monograph (May 2005,
  Number 15) Guide to Developing a Preferred
  Lender List

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Northwesterns RFI Process

• NU developed a committee consisting of members of
  the financial aid and student accounts
  communities. In addition theAssociate Provost
  for Enrollment Management and the Associate Vice
  President for Financial Operations were included
  so that we had input beyond the financial aid
  staff.
• Our first committee meeting was dedicated to
  drafting the RFI and discussing who would receive
  the RFI.

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Recipients

• Who did NU send an RFI?
• NU sent RFIs to 20 lenders
• Current preferred lenders
• Lenders we had heard good things about from
  colleagues
• Lenders who we had received visits from or had
  read about and wanted to learn more

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Developing a RFI

• When developing a RFI there are a number of items
  you may want to include. The following are some
  main points NU tried to address in our RFI

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Developing a RFI Factors to Consider

• Borrower benefits
• Origination fees?
• Interest rate reductions?
• At what point are the benefits available?
• Affect of consolidation on the benefits?
• Are there any qualifying criteria to receive the
  benefit? Can they be reestablished if lost (late
  payment etc)?

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Developing a RFI Factors to Consider

• Lender Stability
• Lenders mission statement
• Number of years in Student Loan business
• Mergers and acquisitions in the past five years

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Developing a RFI Factors to Consider

• Lender Operational Standards
• Relationship with guarantors and ELM
• Does lender service their own loans? Do they sell
  the loans?
• How do they communicate with students (mail,
  email, phone)?

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Developing a RFI Factors to Consider

• Lender Service
• Call center hours for students and FAAs
• Do they do any marketing of other banking related
  products to students?
• Request copies of their promotional materials

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Developing a RFI Factors to Consider

• Private Loans
• What are the interest rate tiers?
• Do they offer a loan that doesnt require school
  certification?
• Fees?
• Consolidation?
• Approval response time?

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Developing a RFI Factors to Consider

• Default Management
• What is their default rate on the national and
  state level?
• What debt education and default prevention
  services to they provide? (online as well as
  presentations etc)

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Timeline

• Allow one month for lenders to respond
• Take one month to evaluate and respond to
  lenders.
• Are you able/willing to allow lenders come to do
  presentations on their RFI?

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Evaluating the Responses

• NU developed a scorecard (which also help to
  have on file when you have to explain to a lender
  why you didnt choose them.
• First committee meeting to discuss first review
  of RFI responses. Do we have more questions,
  need clarification?
• Second meeting to discuss final selections.

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Other things to Consider

• Call the lenders 1-800 number yourself and act
  like a borrower. How long does it take to get a
  real person? How would you rate the quality of
  the service provided?
• Are there unique needs for your students that you
  need to include/address in the RFI?

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Other things to Consider

• Does your preferred lender list offer a real
  choice (variety)? Ensure lenders are not all
  subsidiaries of one entity.

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Presenting the Information to Students

• NU
• Created a lender list/comparison chart
• Links and contact information for all lenders
• Borrower benefit comparison
• Order in which the lenders appear on the list is
  rotated from year to year.

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Presenting the Information to Students

• Schools must state that borrowers always have a
  choice in selecting a FFELP lender.
• School cannot deny student the choice.
• 34 CFR 682.603(e)(3)

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Student Loan Sunshine Act

• Things to keep in mind
• Requires full disclosure of the reasons why an
  institution of higher education has selected a
  lender for its "preferred lender" list, including
  any special arrangements the lender has with the
  school
• Encourages borrowers to maximize their borrowing
  through the governments loan programs before
  taking out alternative loans and
  direct-to-consumer loans with higher interest
  rates.
• Requires full disclosure of special arrangements
  that lenders and institutions of higher education
  have to offer loan products at the institution.