Your previous loan-policy questions, and USA Funds^®' answers, are archived below.

• Does a school have to report to the U.S. Department of Education the school’s preferred lender lists and methods for choosing those lenders?
  The Higher Education Opportunity Act states that a school that has a “preferred lender arrangement” with a lender — for the purpose of awarding either Federal Family Education Loan Program or private education loans — must annually provide a report to the Department. The report should include the following information for each lender with which the school has such an agreement:
  • The minimum information that is required to be disclosed to students and families for FFELP loans.
  • The minimum information that is required to be disclosed to students and families regarding private loans.
  • A detailed explanation of the reasons the school chose to have such an agreement with each lender, including why the terms, conditions and provisions of each type of loan provided under the agreement are beneficial to the schools’ students or families.

Schools also are required to make the contents of these reports available to current and prospective students and their families.

• Are the lenders allowed to pay the federal default fee on behalf of graduate students for Grad PLUS loans?
  Federal Family Education Loan Program lenders are permitted to pay the federal default fee on behalf of a PLUS loan borrower, either a parent or graduate/professional PLUS borrower. Although, federal law requires lenders to charge the origination fee to all PLUS-loan borrowers, there are no similar provisions for the federal default fee.
  
  How can my lending institution implement the blanket-guarantee process for our students who attend foreign schools and have requested that their loan disbursements be sent to them directly, rather than to the school?
  Federal regulations require that the foreign school make the request that the loan disbursements be sent directly to their students. Due to federal requirements outlined in Dear Colleague Letter G-03-348 (L-03-242), lenders generally cannot use the blanket-guarantee process for foreign-school students who request direct disbursement. If a lender that makes loans under a blanket-guarantee agreement wishes to disburse funds directly to a student attending a foreign school, however, the lender may contact USA Funds^® to make special arrangements for such a process and to obtain a waiver of the general policy. In addition, the lender must clarify with USA Funds how the requirements described in the Dear Colleague Letter will be fulfilled.
  
  

• G-03-348 (L-03-242) outlines specific processing requirements for guarantors and lenders to follow prior to disbursing loan funds directly to students who attend foreign schools. In keeping with these requirements, for this special population of loans, USA Funds performs the following actions prior to loan disbursement:

  • Confirms that the foreign school is eligible to participate in the Federal Family Education Loan Program.
  • Confirms the student’s enrollment at the foreign institution.
  • Confirms that the school official who certifies the loan has the authority to do so.

  To contact USA Funds to make arrangements for using the blanket guarantee for this scenario, send an e-mail to Elaine Yednak, USA Funds lender-operations manager.

• What are USA Funds' policies for lenders regarding the use of electronic signatures in the education-loan process? 
  By July 1, 2002, or by the date they subsequently adopt e-signature process, lenders must provide to USA Funds a general explanation of each of their e-signature processes. The description must include an overview of the steps that borrowers must follow in completing that lender's e-signature process. If the lender uses multiple processes, the description also must outline how to identify which process was used for each loan. After providing this initial summary, lenders also must notify USA Funds of any significant changes in their e-signature processes. The lender notification may be sent by e-mail to askpolicy@usafunds.org or by U.S. mail to: Manager, Compliance, USA Funds, P.O. Box 6028, Indianapolis, IN 46206-6028.
  
  USA Funds requires these e-signature-process descriptions from lenders so that we will be able to more effectively answer borrowers' basic questions about specific e-signature processes—which ultimately will save time both for lenders and their borrowers. If a borrower's inquiry requires more detailed information, we will work with each lender to ensure that the borrower promptly receives the necessary information.
  
  In addition, lenders must retain detailed documentation of the e-signature processes that they use, as well as documentation of any changes to their e-signature processes, including the effective date of these changes. This documentation should clearly describe the process under which individual notes are endorsed.
  
  Unless the lender follows guidelines established in the U.S. Department of Education's Safe Harbor policy for e-signatures, loans are not insured if deemed by a court to be legally unenforceable because of the e-signature process in use at the time the note was endorsed. If the loan has not been purchased by USA Funds prior to being deemed unenforceable, then the lender must report the loan as having permanently lost its guarantee. The lender must refund applicable federal interest and special-allowance payments to the U.S. Department of Education in its next submission of ED Form 799. If the loan has been purchased as a claim, the lender will be required to repurchase the loan. If USA Funds must establish the validity of the lender's e-signature process, the lender may be required to assist USA Funds, including the reimbursement of associated legal expenses.
  
  For more information about these requirements, lenders should contact USA Funds' policy advisers at askpolicy@usafunds.org.
  
• May a lender send a borrower an e-mail message with an attached Master Promissory Note (MPN) or Federal Consolidation-loan application and promissory note for the borrower to complete and return to the lender? May the lender provide an electronic version of a promissory note on the lender's Web site for the borrower to complete and return? Is it permissible for borrowers to return only the signature page, or must they return a printed copy of the entire note? 
  USA Funds encourages lenders to use innovative technologies to deliver information to students and borrowers in a faster, easier-to-use format. The use of electronic files to transmit promissory notes is acceptable in both e-mail and Web-site applications. USA Funds believes that a borrower's printing, completion and return of such a document would not impair the enforceability of the loan. Of course, per common guarantor policy, if a loan that is purchased by a guarantor is deemed unenforceable for any reason, the lender is required to repurchase it .