Session #56

Emerging Oversight Issues
Merecedes Zajicek Jerry Wallace

Oversight Objectives
–Promote program compliance –Reduce improper payments –Ensure program integrity


Emerging Oversight Issues
• • • • • • • Lender Inducements Loan Verification Certificate Loan Consolidations GA and Collection Agencies 9.5% Audit Requirements Personally Identifiable Information (PII) Guaranty Agency Stability


Lender Inducements
• Department guidance
– Dear Colleague, FP-07-04, 3/30/2007
• Borrower’s right to choose lender

– Electronic Announcement, 9/14/07
• Letter from the Secretary August 9, 2007 regarding proposed regulations • DCL: 95-L-178 March 1995, school lenders to observe prohibitions and limitations • DCL: 89-L-129 February 1989, guidance on prohibited and permissible activities


Loan Verification Certificate
• Department Guidance
– DCL: FP-07-07/Gen-07-03, 5/22/07

• Completing LVC’s Timely
– Facilitates consolidating all loans – Reduces capitalized interest – Lessens likelihood of interest rate changes


Loan Verification Certificate con’t
The LVC reviewed by Lenders could disclose
– Errors in setting up loans – Loans made to ineligible borrowers – Loans made by or loans sold to ineligible lenders


Loan Consolidations
• Marketing of Consolidation loans • Oversight by ELT to ensure that activities of the beneficiary are in compliance with FFEL program rules and regulations


. § 682 203 Responsible parties…
• § 682.203   Responsible parties…
(b) Trustee responsibility. A lender that  holds a loan in its capacity as a trustee  assumes responsibility for complying  with all statutory and regulatory  requirements imposed on any other  holders of a loan.


GA and Collection Agencies
• Conflict of interest
– Examine Pre-claim & post default collection agency relationships

• Collection Agency Contracts
– Must comply with ED rules and regulations – GA must maintain sufficient oversight to protect integrity of student loan program

§ 682 203 Responsible parties…
Delegation of functions. 
• A school, lender, or guaranty agency may  contract or otherwise delegate… • This contracting or other delegation of  functions does not relieve the school,  lender, or guaranty agency of its duty to  comply with the requirements of the Act  and this part.

§ 682.416 Requirements
• 682.416 Requirements for thirdparty servicers
–Standards for administrative capability
•Examine the servicer's compliance with the Act and applicable regulations


§ 682.416 Requirements
–Standards of financial responsibility
•Examine the servicer's financial management of its FFEL program activities (Con’t)


9.5% Audit Requirements
• Department Guidance
–DCL: FP 07-01, 1/23/07
•Applicable requirements of the HEA and regulations that control loans acquired with tax exempt funding •Audit Requirements for 9.5 Percent Minimum Special Allowance Payment Rate

–DCL: FP-07-06, 4/27/07


Personally Identifiable Information (PII)
• Department Guidance –DCL: GEN-07-05, 9/7/07

–NSLDS Access

•Title IV participants are not subject to Federal FOIA •Consult with legal counsel to ensure compliance with FERPA


Guaranty Agency Stability
• Agency Reserve levels
– Factors:
•Recall •Higher risk sharing % •Lower GA fees •GA activities and system changes


Questions and Comments
We appreciate your feedback Thank You


• or Telephone: 646-428-3813 • Loan Verification Certificates FERPA: gen/guid/fpco/index.html


Contact Information
Contact information: Merecedes Zajicek
Phone:312-730-1512 Email:

Jerry Wallace
Phone: 214-661-9515 Email: