Private Education Loans
Higher Education Opportunity Act of 2008
What: On August 14, 2009, the Federal Reserve Board published final rules amending Regulation Z to implement the provisions of the Higher Education Opportunity Act of 2008. There are now new disclosure requirements for private education loans.
Rules also establish limitations on lending practices. Private education loans are broadly defined as closed-end loans, not secured by real estate, used expressly, in whole or in part, for postsecondary educational expenses. Postsecondary educational expenses include tuition and fees, books, supplies, miscellaneous personal expenses, room and board, and an allowance for any loan fee, origination fee, or insurance premium charged to a student or parent for a loan incurred to cover the cost of the student's attendance.
If any part of the loan is used for postsecondary educational expenses, the loan is a private education loan subject to the new disclosure requirements. Reg Z provides that the lender may rely solely on a loan application check box or a purpose line to determine if the applicant intends to use the loan proceeds for postsecondary expenses.
There are three sets of disclosures:
- At application or solicitation,
- Upon loan approval, and
- When the loan becomes legally binding.
There are model forms for each type of disclosure. In addition, the consumer has the right to cancel within three business days of receipt of the final disclosure.
Effective: September 14, 2009; compliance is optional until February 14, 2010
Solutions:
Partial Private Education Loan Approval Disclosure (PPELApproval)
Partial Private Education Loan Final Disclosure (PPELFinal)
Articles:
ComplianceHeadquarters™ article: New Reg Z rules for private education loans trigger new disclosure requirements
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