Modify Preferred Lender List Statute
+ The Higher Education Act of 1965 (HEA) requires post-secondary institutions to follow onerous procedures before they can provide information or guidance to students and parents on non-federal loan options. However, due to competing administrative needs, few postsecondary institutions have allocated the time and resources to complete the process.
+ Nonprofit and state-based student loan organizations offer loans utilizing state funding or tax-exempt bond financing, which in many cases enables the organizations to offer loans at lower costs than other programs. If schools do not create a Preferred Lender List, school personnel are restricted from advising students on non-federal loan options, including nonprofit and state-based student loans that are less costly than other programs.
+ Schools that do not create a Preferred Lender List are restricted from advising students on non-federal loan options. This impairs the ability of students and parents to analyze comprehensively the non-federal options available to them, which has the effect of driving them to higher cost loans and reducing access to state-based and nonprofit programs.
+ In 2013, a bipartisan group of senators established a task force of college and university presidents and chancellors to study federal regulation of higher education and to identify potential improvements. The resulting task force report, “Recalibrating Regulation of Colleges and Universities: Report of the Task Force on Regulation in Higher Education,” published in February 2015, concluded that PLL rules are “overly prescriptive and create barriers to providing information about non-Title IV loan programs with favorable terms for students.” To amend this, the authors recommended “making necessary changes to allow institutions to share information about other federal and state loan programs with very favorable terms without having to overcome burdensome barriers.”
Recommendation: Congress should amend the Preferred Lender List requirements to enable schools to provide students and families with information about the less costly and more flexible loans offered by nonprofit, state-based student loan organizations, without requiring schools to complete the onerous preferred lender list process. This will improve consumer choice and transparency, and enable students and families to access information about all the loan options available to them.