Alert March 24, 2009

FRB Proposes Regulation Z Amendments for Private Student Loans

The FRB proposed amendments to Regulation Z that would revise the disclosure requirements for private education loans.

The proposal implement provisions of the Higher Education Opportunity Act. Under the proposal, creditors that extend private education loans would provide disclosures about loan terms and features on or with the loan application and would also have to disclose information about federal student loan programs that may offer less costly alternatives. Additional disclosures would have to be provided when the loan is approved and when the loan is consummated. The FRB is also proposing model disclosure forms that creditors could use to comply with the new disclosure requirements.

The new disclosure requirements would apply to loans made expressly for postsecondary educational expenses but would not apply where educational expenses are funded by credit card advances, or real-estate-secured loans. In addition, the proposal does not apply to education loans made, insured, or guaranteed by the federal government, which are subject to disclosure rules issued by the Department of Education.

The proposal also implements the Higher Education Opportunity Act’s restrictions on using the name, emblem, or mascot of an educational institution in a way that implies that the institution endorses the creditor’s loans.

The public comment period ends 60 days after publication of the proposal in the Federal Register, which is expected shortly. Click here to access the proposal and the model forms.