To PLAy or Not to PLAy: Preferred Lender Arrangements
The U.S. Department of Education provides guidance to ensure borrowers receive information about all the loan options available to help them finance their education—looking first to federal loans for their protections and numerous repayment options, and then looking to private education loans. Those of us who work with student loan borrowers are required to provide students and families with access to current, accurate information to help them make the best decisions for their financial well-being.
How to Provide Students With their Private Loan Options
Your financial aid office may:
- Opt not to provide a lender list for students and families, but instead let students find the best option on their own, among the countless they’ll likely encounter in a basic Internet search.
- Provide a comprehensive, historical list of lenders and loan programs that have been used by students at your school from a certain number of years in the past.
- Provide a third-party list for students and families exploring educational loan options.
- Provide a list of lenders and loan programs from a PLA.
In all of these cases aside from a PLA, you relinquish some control—and your aid office is still likely to receive questions from families about the process, lenders, and loan programs.
Preferred Lender Arrangements, Explained
As defined by the Higher Education Act, a PLA exists if both of the following conditions exist:
- A lender provides or issues education loans to students, or the families of such students, attending a covered institution; and,
- The covered institution or an institution-affiliated organization recommends, promotes, or endorses the education loan products of the lender.
If both of those conditions are met, a PLA exists, whether or not the covered institution and the lender entered into a formal agreement.
Guidance and Intentions of Using a PLA
The U.S. Department of Education specifies that a PLA should:
- Provide greater transparency.
- Improve the information provided to students regarding cost.
- Ensure students are aware of federal loan options.
- Encourage students to consult with their financial aid office before making education financing decisions to prevent over-borrowing.
Schools that enter into a PLA are required to do so without prejudice and for the sole benefit of students attending their school. This means that they ensure borrowers know they ultimately have their choice of lender. Schools also agree to provide selections based on the best interest of the borrower.
What Are Private Lender Selection Criteria?
Let’s look at some of the important factors that should impact a school’s private lender and loan selection.
Lender Loan Programs Available
When deciding whether to include loan programs in your PLA, you’ll want to consider these things that will greatly impact whether the loans selected will be good options for the particular borrowers at your school. Examples of these criteria are as follows.
- Borrower/school eligibility and borrower benefits
- Pricing, rates, fees, and other terms and conditions
- Special uses (for example, previous school charges outstanding, application processing after end of semester, less than half-time, computer purchase, or study abroad)
- Reputation and track record, including stability and longevity
- Quality of lender customer service and support, such as: automated processing, technical support, default management, etc.
- Institutional and student financial aid office operational needs, such as: student education requirements, other regulatory compliance needs, application assistance needs, etc.
FastChoice Can Help You PLAy
There’s so much to consider when providing PLAs to students. FastChoice can help take the guesswork out of the process! You can easily customize which private loan selection, disclosure, and loan education to meet your school’s needs. And best of all? It’s free and fully supported by our team of experts. Contact your Great Lakes rep today for more information and to get started.