USA Funds Answers Lender Questions Regarding 'Lender Discrepancies'

An Aug. 14 USA Funds^® Education Access Report article, and separate communications to education lenders, regarding discrepancies in the lender selected by an education-loan borrower prompted several questions from our lender-customers. The article dealt with USA Funds' procedure when the lender listed on a pending Master Promissory Note differs from the lender listed by the same borrower in the school certification of a loan request.

Here are some of the lender questions and USA Funds' answers:

My understanding of the process is that if the borrower's physical MPN lists Lender A, and the school then certifies Lender B, USA Funds will guarantee the loan with Lender B. If my understanding is correct, how does that support the statutory requirement that borrowers of Federal Family Education Loan Program loans ultimately have a right to select their lenders?

Why would you not let the borrower pick the lender that the borrower wants? Your process lets the school pick for them.

When there is a discrepancy between the lender selected by the borrower on an MPN that is pending on the EAGLE loan-guarantee system and the school certification/guarantee-request file received for processing, the loan will be guaranteed with the lender in the school certification/guarantee-request file. The only exceptions are loans on which the school certification specifies a lender that uses Sallie Mae or USA Funds as its disbursing agent through the Lender Funds Management system, commonly known as LFM. In that case, the borrower will be contacted to confirm the borrower's choice of lender. (See additional information in response to the next question.)

By certifying a loan, the school is providing the lender and guarantor with the most-accurate, up-to-date information it has regarding the borrower's eligibility and the borrower's choice of a lender. By relying on the school certification to resolve the lender discrepancy, USA Funds is, in fact, supporting the borrower's selection of a lender.

If Sallie Mae or USA Funds is the disbursing agent for the loan, the borrower is called to ascertain the borrower's choice of lender. What message is conveyed during the call?

In the event of this type of lender discrepancy, Sallie Mae or USA Funds is acting as the disbursing agent for the loan and therefore requires additional confirmation of the borrower's choice. The disbursing agent is the entity responsible for resolving any lender discrepancy prior to disbursement. Borrowers are asked if they select the lender listed on the MPN or the lender listed in the school certification. No additional lenders are suggested to the borrower.

It is important to note that, if a lender that uses the LFM disbursement service is listed on the MPN, but a non-LFM lender is listed on the school certification, no call will be made to the borrower; the loan will be guaranteed with the non-LFM lender listed in the school certification, and the guarantee will be forwarded to that lender.

We have an MPN in-house that has not been certified by the borrower’s school. In the meantime, USA Funds processed a guarantee on the loan with another lender based on the school's certification. How will this discrepancy be resolved?

If the borrower completed an MPN with the lender, but the lender has not yet submitted the loan request to USA Funds, USA Funds would have no knowledge of a "lender discrepancy." The loan therefore would be guaranteed with the lender listed in the school certification.