Highlights of the changes to Title-IV-loan programs include:

• Definition of lender. The term “lender” is redefined. The term excludes any lender that employs improper inducements with the purpose of soliciting loan volume. The list of inducements is expanded.
• School-affiliated organization. This new term is defined as any organization that is directly or indirectly related to a school, including but not limited to alumni organizations, foundations, athletic organizations, and social, academic and professional organizations.
• Interest rates. The regulations specify the progressive reduction in subsidized Stafford-loan interest rates through June 30, 2012.
• Capitalization. Lenders may capitalize interest on consolidation loans for which an in-school deferment is granted only at the end of the deferment period. [Note that this provision of the “loans” NPRM may be implemented by the lender on or after Nov. 1, 2007, but must be implemented no later than July 1, 2008.]
• Identity theft and credit-bureau reporting. Lenders are required to suspend credit-bureau reporting for a borrower for a period of not more than 120 days upon receipt of a valid identity-theft report or notification from a credit bureau that the information furnished by the lender is a result of an alleged identity theft. [Note that this provision of the “loans” NPRM may be implemented by the lender on or after Nov. 1, 2007, but must be implemented no later than July 1, 2008.]
• Identity theft and forbearance. Lenders may grant forbearance for up to 120 days, upon notice to the borrower or endorser, if applicable, upon receipt of a valid identity-theft report or notification from a credit bureau that the information furnished by the lender is a result of an alleged identity theft. [Note that this provision of the “loans” NPRM may be implemented by the lender on or after Nov. 1, 2007, but must be implemented no later than July 1, 2008.]
• Military deferment. A borrower who is eligible for either of the military-deferment options may have the borrower’s request for deferment completed by a representative. Previous rules required that one of the military-deferment requests be completed only by the borrower. If the lender grants deferment based on a request by the borrower’s representative, the lender must notify the borrower of the deferment’s processing. The new rules also are amended to comply with the College Cost Reduction and Access Act provisions that removed the July 1, 2001, criterion for the new military-deferment provisions. This provision opens the deferment to all qualifying military personnel regardless of when their loans were made. [Note that this provision of the “loans” NPRM may be implemented by the lender on or after Nov. 1, 2007, but must be implemented no later than July 1, 2008.]
• Deferment simplification. If a borrower requests deferment verbally or in writing, a lender may grant the deferment request based on eligibility information obtained from another lender or loan holder or from the U.S. secretary of education, or from an electronic database authorized or maintained by the secretary. The lender must notify the borrower that the deferment was granted and that the borrower has the option to pay interest that accrues on any unsubsidized loan or portion of a loan, or that the borrower may cancel the deferment and continue to make regular payments on the loan. [Note that this provision of the “loans” NPRM may be implemented by the lender on or after Nov. 1, 2007, but must be implemented no later than July 1, 2008.]
• Preferred-lender lists. Schools may offer a list of preferred lenders for their students to use in their selection of a FFELP lender. Regulations specify that the list must include at least three lenders that are not affiliated with each other and must be updated at least annually. If the school uses a preferred-lender list, it also must disclose to prospective borrowers:
  • The method and criteria used in selecting the lenders on the list.
  • Comparative information about interest rates and other benefits offered by the lenders.
  • That the students and their parents are not required to use one of the school’s recommended lenders.

The school is not permitted to assign first-time borrowers to any particular lenders or to cause unnecessary delays in the loan-certification process for students who choose a lender not on the school’s preferred list.

• Counseling borrowers. Initial counseling will include graduate and professional students who are obtaining a Grad PLUS loan. The school must provide initial counseling, prior to the release of the first disbursement of the Grad PLUS loan, unless the student previously has received Federal or Direct PLUS-loan funds. [Note that this provision of the “loans” NPRM may be implemented by the lender on or after Nov. 1, 2007, but must be implemented no later than July 1, 2008.]
• Loan certification — Grad PLUS loans. Prior to certifying a Grad PLUS loan for a graduate or professional student, the school must determine the student’s eligibility for a Stafford loan. If the student has not requested information about the student’s maximum Stafford-loan eligibility, the school must notify the student of the student’s maximum Stafford-loan eligibility and provide a comparison of:
  • Maximum Stafford-loan interest rates versus maximum PLUS-loan interest rates
  • Periods when interest accrues on Stafford loans versus interest accrual for PLUS loans.
  • An explanation of when the Stafford loans enter repayment versus when PLUS loans enter repayment.

The school must provide the student the opportunity to request the maximum Stafford-loan amount for which the student is eligible.

• Loan certification — all FFELP loans. Schools may not delay certification or refuse to certify a FFELP loan for any borrower based on that borrower’s choice of lender or guarantor. The school also may not assign a borrower’s loan to a particular lender through its awards package or other method. [Note that this provision of the “loans” NPRM may be implemented on or after Nov. 1, 2007, but must be implemented no later than July 1, 2008.]
• Total-and-permanent disability. For borrowers applying for a loan discharge based on total-and-permanent disability, regulations specify that the conditional-discharge period for loan-discharge applications received by the lender on or after July 1, 2008, will begin on the date that the borrower’s physician certified the loan-discharge application. The borrower must submit the loan-discharge application within 90 days of the date that the physician certifies the application.  The U.S. secretary of education also adds new provisions that permit the secretary to require the borrower to submit additional medical evidence of discharge eligibility, including a review of the applicant’s condition by an independent physician at no cost to the borrower.
• Death-claim documentation. Lenders are permitted to use a copy of a death certificate or a copy of a certified copy of a death certificate as documentation when filing a death claim. Previously, lenders were required to obtain an original death certificate or a certified copy of the original death certificate, a documentation standard that imposed significant difficulty on the estate and family of the decease borrower. [Note that this provision of the “loans” NPRM may be implemented by the lender on or after Nov. 1, 2007, but must be implemented no later than July 1, 2008.]
• MPN retention. If a lender made a loan based on an electronically signed Master Promissory Note, the holder of the electronically signed note must retain the MPN for at least three years following the date that all loans made under the MPN are satisfied. Lenders and guarantors are required to assist the U.S. secretary of education in enforcing electronically signed notes, including providing necessary affidavits and certifications, and providing testimony to ensure the admission of electronic records during litigation or legal proceedings.