Articles
Yes, You Probably Make Them (January 2010)
FAQs
Question: If a private education loan is granted to a parent of a student, do the Regulation Z rules related to private education loans apply? If yes, would the required disclosure about alternative federal student loan programs include only the PLUS program?
Answer: Although the language in the final rule is not entirely clear, it appears that it makes no difference if the loan is to a student or to a parent of a student. See the discussion of the definition of “private education loan” in the official staff commentary to Regulation Z section 1026.46(b)(5):
46(b)(5) Private education loan.
1. Extended expressly for postsecondary educational expenses. A private education loan is one that is extended expressly for postsecondary educational expenses. The term includes loans extended for postsecondary educational expenses incurred while a student is enrolled in a covered educational institution as well as loans extended to consolidate a consumer’s preexisting private education loans.
2. Multiple-purpose loans. i. Definition. A private education loan may include an extension of credit not excluded under § 1026.46(b)(5) that the consumer may use for multiple purposes including, but not limited to, postsecondary educational expenses. If the consumer expressly indicates that the proceeds of the loan will be used to pay for postsecondary educational expenses by indicating the loan’s purpose on an application, the loan is a private education loan.
The only other hint that coverage applies to either a student or a parent comes from the definition of post-secondary educational expenses, at Regulation Z section 1026.46(b)(3):
(3) Postsecondary educational expenses means any of the expenses that are listed as part of the cost of attendance, as defined under section 472 of the Higher Education Act of 1965 (20 U.S.C. 1087ll), of a student at a covered educational institution. These expenses include tuition and fees, books, supplies, miscellaneous personal expenses, room and board, and an allowance for any loan fee, origination fee, or insurance premium charged to a student or parent for a loan incurred to cover the cost of the student’s attendance.
As for which programs under the Act must be disclosed, the regulation is pretty clear. Essentially, whenever the lender has a covered loan, the disclosure must include the fact that alternative programs are available under Title IV of the Higher Ed Act of 1965, and the lender must provide the interest rates available under each program. There doesn’t seem to be any exception when describing the federal programs depending on whether the borrower is a student or a parent of a student.