Alert! New Federal Rules Protect Students and Help Borrowers
The U.S. Department of Education announced two final regulations to protect students and help borrowers.
The new rules are designed to help college students avoid paying excess fees when using debit cards promoted by their schools.
WHY were these rules issued? Government estimates show that nearly $25 billion in federal aid is issued on campus debit and prepaid cards annually; about 40% of college students attend a school that partners with a financial institution that provides funds through this method. The rules that were proposed in May were in response to consumer groups and government sources that cited troubling practices in college card agreements.
The proposed rules have been MADE FINAL and become effective in July, 2016. How will these rules impact your financial institution?
Part One: Protecting Students and Federal Student Aid (Presenter Deborah Crawford)
- Prohibit institutions from requiring students or parents to open a certain accountinto which their credit balances are deposited
- Require institutions to ensure that students are not charged overdraft fees if students select an account offered directly or indirectly by contractors that assist institutions in making direct payments of federal student aid
- Require an institution to provide a list of account options that a student may choose from to receive credit balance funds, where each option is presented in a neutral manner and the student’s preexisting bank account is listed as the first, most prominent, and default option
- Require institutions to ensure electronic payments made to a student’s preexisting account are as timely as, and no more onerous to the student than, payments made to accounts marketed through the institution
- Protect students from unreasonable account fees
- Safeguard taxpayer dollars
- Provide transparency regarding accounts offered to students by requiring disclosure of the agreements between institutions and financial account providers as well as the costs students incur
- Ensure students have a choice about how to receive their federal aid
- Prohibit the student’s personal information from being shared without their consent
Part Two: Easing Student Loan Debt (Presenter Susan Costonis)
- Starting in 2016; an expansion of the circumstances under which institutions may challenge or appeal a cohort default rate that appears artificially high because of a corresponding low rate of student borrowing
- Starting July 1, 2016; new procedures for FFEL Program loan holders to identify servicemembers who may be eligible for a lower interest rate under the Servicemembers Civil Relief Act (SCRA), enabling these borrowers to receive this important benefit automatically
- Starting July 1, 2016; A requirement that guarantors provide information to FFEL Program borrowers on repayment plans available to them after they rehabilitate their defaulted loans, to help ensure that borrowers have a smoother transition to regular repayment.
- A provision to allow lump-sum payments made on behalf of borrowers through student loan repayment programs administered by the Department of Defense to count toward Public Service Loan Forgiveness, similar to the application of lump sum payments for Peace Corps and AmeriCorps volunteers. This action assures that these borrowers benefit more fully from their public service employment.
This informative session is designed for the following individuals: Senior Management, Marketing Directors, Student Loan Managers, Deposit Operations, Debit/Credit Card Managers, Compliance Officers, Customer Service Managers, and Auditors.
Deborah Crawford is the President of gettechnical inc. She specializes in compliance and regulations for the deposit side of financial institutions. Her 20+ year career in banking and training began at Hibernia National Bank. She has been a seminar leader for many state associations and credit union groups across the nation. She has Bachelors and Masters degrees from Louisiana State University.
Susan Costonis is a compliance consultant and trainer. She frequently provides consulting services to financial institutions regarding fair lending and other compliance management issues. Her 37 year career in banking and training began with 20 years at First National Bank, an affiliate of Wells Fargo Bank, in Fort Collins, CO. Susan has been a bank compliance consultant or compliance officer in Louisiana since 1998.
During her career, Susan has successfully managed compliance programs and exams for institutions supervised by the OCC, FDIC, and Federal Reserve. She is a Certified Regulatory Compliance Manager and completed the ABA Graduate Compliance School and the Graduate Banking School of the University of Colorado. Susan regularly presents seminars to financial associations.
Institute of Certified Bankers: Visit http://www.icbmembers.org/login.aspx for instructions regarding self-reporting. Estimated credits: 2.5 CE Credits
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