Policy Frequently Asked Question: Minimum Number of Guarantors

Do any pending or adopted regulations or legislation require a postsecondary institution to use more than one student-loan guarantor?

Update: Final regulations issued by the U.S. Department of Education on Nov. 1, 2007, are consistent with the guidance in the following article.

Although pending federal regulations and legislation would require postsecondary institutions to include at least three unaffiliated lenders on a preferred lender list, there currently are no new requirements regarding the minimum number of guarantors with which a school must work.

Proposed regulations regarding preferred-lender lists, published by the U.S. Department of Education on June 12, would permit schools to continue to “make available a list of recommended or suggested lenders, in print or any other medium or form, for use by the school’s students or their parents, provided such list … Does not contain fewer than three lenders that are not affiliated with each other and that will make loans to borrowers or students attending the school.” There is no requirement in the proposed regulations regarding the minimum number of student-loan guarantors with which a school must work.

The Student Loan Sunshine Act, passed by the U.S. House of Representatives, and the Higher Education Amendments of 2007, reported out of the U.S. Senate Committee on Health, Education, Labor and Pensions, contain identical language that requires postsecondary institutions that maintain preferred-lenders lists to disclose that “there are not less than 3 lenders named on the each preferred lending list offered by the institution that are not affiliates of each other.” But neither piece of legislation includes any requirements that a postsecondary institution work with more than one guarantor.

New York State’s SLATE (Student Loan Accountability, Transparency and Enforcement) Act does not specify a minimum number of lending institutions that may be on a school’s preferred list.

Although permissible for a postsecondary institution to work with only a single guarantor, it is important to note that student- and parent-borrowers ultimately retain the right to select the lenders and guarantors of their choice.