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DRAFT for discussion at 3rd meeting

4/23/2009

Issue 7

Proposed Regulatory Language

Team II – School-based Loan Issues

Origin: HEOA section 493(c)

Issue: PPA: Preferred Lender Lists

Statutory cites: HEA section 487(h)

Regulatory cites: New §668.14(b)(28) and §682.212

DCL GEN-08-12 cite: Page 70

Status: Unresolved

Regulatory language: 

§ 668.14 Program participation agreement.

(a)(1) An institution may participate in any Title IV, 

HEA program, other than the LEAP and NEISP GAP programs, 

only if the institution enters into a written program 

participation agreement with the Secretary, on a form 

approved by the Secretary. A program participation 

agreement conditions the initial and continued 

participation of an eligible institution in any Title IV, 

HEA program upon compliance with the provisions of this 
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part, the individual program regulations, and any 

additional conditions specified in the program 

participation agreement that the Secretary requires the 

institution to meet.

(2) An institution's program participation agreement 

applies to each branch campus and other location of the 

institution that meets the applicable requirements of this 

part unless otherwise specified by the Secretary.

(b) By entering into a program participation 

agreement, an institution agrees that—

* * * * *

(28) If For any year in which the institution enters

into has a preferred lender arrangement (as defined in 34 

CFR 601.2(b)), it will at least annually compile, maintain, 

and make available for students attending the institution, 

and the families of such students, a list in print or other 

medium, of the specific lenders for loans made, insured, or 

guaranteed under title IV of the HEA or private education 

loans that the institution recommends, promotes, or 

endorses in accordance with such preferred lender 

arrangement. In making such a list, the institution must 
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4/23/2009

comply with the requirements in 34 CFR 682.212(h) and 34 

CFR 601.10.

* * * * *

(Approved by the Office of Management and Budget under control number 1840–

0537) 

(Authority: 20 U.S.C. 1085, 1088, 1091, 1092, 1094, 1099a3, 1099c, and 1141)

[59 FR 22425, Apr. 29, 1994, as amended at 59 FR 34964, 

July 7, 1994; 63 FR 40623, July 29, 1998; 64 FR 58617, Oct. 

29, 1999; 64 FR 59038, Nov. 1, 1999; 65 FR 38729, June 22, 

2000; 65 FR 65637, Nov. 1, 2000; 67 FR 67072, Nov. 1, 2002; 

73 FR 35492, June 23, 2008]
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DRAFT for discussion at 3rd meeting

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§ 682.212 Prohibited transactions.

* * * * *

(h) (1) A school may, at its option, make available a list 

of recommended or suggested lenders, in print or any other 

medium or form, for use by the school's students or their 

parents provided such list provided that such list complies 

with the requirements in 34 CFR 601.10 and 668.14(a)(28).

(i) Is not used to deny or otherwise impede a borrower's 

choice of lender;

(ii) Does not contain fewer than three lenders that are not 

affiliated with each other and that will make loans to 

borrowers or students attending the school; and

(iii) Does not include lenders that have offered, or have 

offered in response to a solicitation by the school, 

financial or other benefits to the school in exchange for 

inclusion on the list or any promise that a certain number 

of loan applications will be sent to the lender by the 

school or its students.

(2) A school that provides or makes available a list of 

recommended or suggested lenders must—
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(i) Disclose to prospective borrowers, as part of the list, 

the method and criteria used by the school in selecting any 

lender that it recommends or suggests;

(ii) Provide comparative information to prospective 

borrowers about interest rates and other benefits offered 

by the lenders;

(iii) Include a prominent statement in any information 

related to its list of lenders, advising prospective

borrowers that they are not required to use one of the 

school's recommended or suggested lenders;

(iv) For first-time borrowers, not assign, through award 

packaging or other methods, a borrower's loan to a 

particular lender;

(v) Not cause unnecessary certification delays for 

borrowers who use a lender that has not been recommended or 

suggested by the school; and

(vi) Update any list of recommended or suggested lenders 

and any information accompanying such a list no less often 

than annually.

(3) For the purposes of paragraph (h) of this section, a 

lender is affiliated with another lender if—
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(i) The lenders are under the ownership or control of the 

same entity or individuals;

(ii) The lenders are wholly or partly owned subsidiaries of 

the same parent company; or

(iii) The directors, trustees, or general partners (or 

individuals exercising similar functions) of one of the 

lenders constitute a majority of the persons holding 

similar positions with the other lender.

(Authority: 20 U.S.C. 1077, 1078, 1078–1, 1078–2, 1078–3, 

1082, 1097)

(Approved by the Office of Management and Budget under control number 1845–

0020) 

[57 FR 60323, Dec. 18, 1992, as amended at 72 FR 62002, 

Nov. 1, 2007]

(Authority: 20 U.S.C. 1094)
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DRAFT for discussion at 3rd meeting

4/23/2009

Issue 7

Amendatory Language

Team II – School-based Loan Issues

[The amendatory language for adding (b)(28) to §668.14 

is set out in Issue Paper 2.]

 ―(b) By entering into a program participation 

agreement, an institution agrees that--‖]

(28) For any year in which the institution has a 

preferred lender arrangement (as defined in 34 CFR 

601.2(b)), it will at least annually compile, maintain, and 

make available for students attending the institution, and 

the families of such students, a list in print or other 

medium, of the specific lenders for loans made, insured, or 

guaranteed under title IV of the HEA or private education 

loans that the institution recommends, promotes, or 

endorses in accordance with such preferred lender 

arrangement. In making such a list, the institution must 

comply with the requirements in 34 CFR 682.212(h) and 34 

CFR 601.10.

PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM
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x. The authority citation for part 682 continues to 

read as follows: 

Authority: 20 U.S.C 1070g, 1071 to 1087–2, unless 

otherwise noted.

x. Paragraph (h) of §682.212 is revised to read as 

follows:

§682.212 Prohibited transactions.

* * * * *

 (h) A school may, at its option, make available a 

list of recommended or suggested lenders, in print or any 

other medium or form, for use by the school's students or 

their parents provided that such list complies with the 

requirements in 34 CFR 601.10 and 668.14(a)(28). 

(Authority: 20 U.S.C. 1094)