Question:

Hi Heather,

My board has asked me to look into student loans. Can we even do it? How would I write a great Policy for this that makes the NCUA happy?

Great Question!

Many credit unions try to avoid making inadvertent private education (PE) loans. They aren’t incredibly difficult, they just require specific disclosures that some CUs aren’t prepare to provide. 

So that’s the first bit – the disclosures.  PE loans are covered by Reg Z – so Reg Z disclosures will be required just like any other consumer loan. You will also want to become familiar with Subpart F of Regulation Z. 

Three separate disclosures are required for PE loans:

1. One provided with an application
2. One provided upon approval and
3. One provided when the loan is closed.

The approval and final disclosures are transaction specific, so you will need to find a document provider to provide these disclosures, and you will need to have them mapped to your origination system (I don’t suggest you try to fill these disclosures in by hand). Part of the disclosures also require you to provide information on the costs of alternate Federal Student loans – so you will need to find out how to get that information from the Department of Education.

You can view the sample disclosures forms here.

Other things:

• The terms you provide in your approval disclosure must be available for 30 days. 
• These loans also have a rescission waiting period after closing and prior to funding (similar to mortgage loans)
• Borrowers must also sign a self-certification form prior to closing
• PolicyPro has a model policy that covers PE loans (Policy 7240). 
• The disclosure rules in Subpart F of Reg Z don’t apply to open-end loans or any loans secured by real estate