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DRAFT for discussion at 2nd session 

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Issue 7 

Proposed Regulatory Language 

 Team II – School-based Loan Issues 

Origin: HEOA section 493(h) 

 

Issue: PPA: Preferred Lender Lists 

Statutory cites: HEA section 487(h)

Regulatory cites: New §668.14(b)(28) 

DCL GEN-08-12 cite: Page 70 

Summary of issue: The HEOA adds a new requirement to the 

Program Participation Agreement (PPA) for an institution 

that enters into a preferred lender arrangement. 

An institution that enters into a preferred lender 

arrangement must—as a condition of program participation—

compile, maintain, and make available to students and their 

families a list of the specific lenders for loans made 

under a Title IV program and for private education loans 

the institution recommends or promotes in accordance with 

its lender arrangement. The institution must, at least 

annually, compile and make the list available in print or 

other medium. 

In compiling, maintaining, and making available the 

preferred lender list, an institution must: 
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 • disclose detailed information about the terms and 

conditions of the loans offered by preferred lenders, as 

required under section 153(a)(2)(A) of the HEA; 

• disclose why it entered into an arrangement with 

each lender, particularly with respect to terms and 

conditions or provisions favorable to the borrower; 

• disclose that students and families of students do 

not have to borrow from a lender on the preferred lender 

list; 

• ensure that the list contains at least three

unaffiliated lenders for FFEL loans and, if the institution 

has a preferred lender list for private loans, at least two 

unaffiliated lenders for those loans. The list must 

specifically indicate whether a lender is or is not an 

affiliate of each other lender on the list. If a lender is 

an affiliate of another lender, the institution must 

describe that affiliation; 

 

• prominently disclose the method and criteria used in 

selecting the lenders to ensure that the lenders are 

selected on the basis of the best interests of the 

borrowers; 

• exercise a duty of care and a duty of loyalty in 

compiling the list without prejudice and for the sole 

benefit of students and their families; and 
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• not deny or impede the borrower’s choice of a lender 

or unnecessarily delay certifying a Title IV loan for a 

borrower who chooses a lender not on the list. 

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 

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 the institution enters into a preferred 

lender arrangement (as defined in 34 CFR 601.2), 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 
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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.

* * * * * 

 (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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§ 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 C.F.R. §§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—

(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
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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—

(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]