New Truth in Lending (TILA) Requirements Related to Alternative (non-Federal) Loans
As a result of the HEOA (Higher Education Opportunity Act) of 2008, a number of significant changes have been mandated to provide student borrowers with additional information to assist them in making an informed borrowing decision. Such regulations went into effect February 14, 2010 and require lenders to produce and provide the following disclosures to borrowers (note that students failure to respond to disclosures requiring a response will lengthen the processing time associated with the loan):
- Application and Solicitation Disclosure - the lender must provide a general range of rates and fees so that borrowers can make informed decisions when choosing a private loan lender. This disclosure is designed to provide general information about interest rates, fees, default or late payment costs, eligibility requirements and repayment terms. In addition, it includes an example of the total cost of a loan based on the maximum interest rate offered by a lender, a defined loan amount and calculations for each payment option. It should assist the borrower in comparing alternative loans. Lenders are required to mail this disclosure within 3 days after a phone application is taken and they pull a credit report on the applicant.
- Loan Approval Disclosure - Upon conditional approval for the loan, the lender must send this disclosure with borrower-specific interest rates and fees. This disclosure includes detailed information on the interest rate, itemization of fees associated with the loan application (including fees associated with late payments and defaults) and a statement on the alternatives to private education loans through the federal student financial assistance programs. Lenders must give an applicant 30 calendar days after the date on which the applicant receives this disclosure to decide to accept the offered private loan. Borrowers can accept the terms of the loan by mail, phone or electronically.
- Final Disclosure - This is sent to the borrower after the loan terms are accepted and the school has certified the students eligibility for the loan. The Final Disclosure gives the borrower a three day right (business days) to cancel the loan. If the applicant accepts a loan within the 30 day calendar acceptance period provided in the application disclosure, the lender must provide a final disclosure which includes updated information on the applicable interest rate, repayment terms, fees and default or late payment costs. The lender may not disburse any private education loan funds until the cancelation period has ended.
In addition to the disclosures listed above, a lender must obtain a signed and completed Private Education Loan Applicant Self-Certification form from the borrower. The self certification form includes information about the availability of federal student loans, the student's cost of attendance, estimated amount of financial assistance, and the difference between the student's cost of attendance and estimated financial aid.
Disclosures for the following lenders are listed below. In no way does this list imply a recommendation for these lenders. Students are free to borrow though any alternative loan program.