New York Codes, Rules and Regulations
Title 8 - EDUCATION DEPARTMENT
Chapter XX - Higher Education Services Corporation
Subchapter D - The New York Higher Education Loan Program (nyhelps)
Part 2213 - The New York Higher Education Loan Program (nyhelps)
Section 2213.5 - Due diligence in originating, disbursing, and servicing program loans
Universal Citation: 8 NY Comp Codes Rules and Regs ยง 2213.5
Current through Register Vol. 46, No. 39, September 25, 2024
(a) Due diligence in originating a program loan. The corporation shall notify a lender that a potential borrower has selected the lender for a program loan. The lender shall:
(1) in the absence of contrary
information, rely in good faith upon statements of the borrower, the student
(if not the borrower), the cosigner, the eligible college and the corporation
made in the program loan application process provided, that such reliance shall
not cause an education loan that is later determined to be ineligible for
payment from a default reserve fund to become eligible for any
payment;
(2) determine that all
required forms have been completed, if applicable, by the borrower, any
cosigner, student and eligible college before disbursing the program
loan;
(3) ensure each program loan
contains a legally enforceable promissory note; and
(4) confirm that all underwriting criteria
have been met, including but not limited to, income verification, college
verification, approved financial literacy completion and absence of
disqualifying defaults.
(b) Due diligence in disbursing a program loan. A lender shall perform the following due diligence in disbursing a program loan:
(1) verify the program loan's
initial eligibility for payment from the applicable default reserve
fund;
(2) disburse funds in at
least two but no greater than four installments within any full academic year,
unless the student is in attendance for one term during the academic
year;
(3) disburse by means of
electronic funds transfer (EFT) through the corporation;
(4) make the initial disbursement of the
proceeds of the program loan no earlier than 10 days before the beginning of
the loan period of the program loan and no later than 180 days after the end of
the loan period;
(5) allow one
disbursement for any loan period that is equivalent to one semester, trimester
or summer term; and
(6) with
respect to program loans eligible for sale to a public benefit corporation,
have entered into a contract with such public benefit corporation establishing
the terms of sale for such program loans, the eligibility requirements for the
applicable default reserve fund, and such other terms as the public benefit
corporation may prescribe.
(c) Delayed disbursement. On or after February 14, 2010, no disbursement shall be made with respect to a program loan until the end of the three day period described in section 2213.17(e) of this Part.
(d) Due diligence in servicing a loan. The holder, or other entity servicing the program loan on behalf of the holder, shall:
(1) report
information in accordance with industry standards at least monthly to all
national consumer reporting agencies, or as otherwise directed by the
corporation;
(2) make available a
toll-free telephone number for borrowers to inquire about their program loan(s)
and provide appropriate staff to respond to such inquiries in a timely fashion;
and
(3) upon receipt of a request
for discharge based on the death or total and permanent disability of the
student for which a program loan was taken while a student or of a request for
discharge or deferment based on the death of the borrower while on active
military duty:
(i) suspend collection
activity for 60 days against the individual in question;
(ii) request documentation to validate the
death or total permanent disability of the student while a student or the death
of the borrower while on active military duty;
(iii) comply with procedures in the program's
default avoidance and claim manual for submitting claims to the
corporation;
(iv) upon approval of
a claim by the corporation, return any payments made by, or on behalf of, the
borrower or cosigner after the date of death or determination of total and
permanent disability of the student while a student or the date of death of the
borrower while on active military duty to the borrower or cosigner;
and
(v) upon denial of a claim by
the corporation, apply administrative forbearance for the period of time used
to determine eligibility for program loan discharge and resume any collection
activity.
(e) Enrollment status.
(1) If a holder, or the
entity servicing the program loan, is made aware that a student is no longer
enrolled at a title IV eligible college on at least a half time basis, the
holder, or the entity servicing the program loan, must, within 45 days, contact
the student borrower and establish a repayment schedule.
(2) A holder, or entity servicing the program
loan, must notify the corporation upon receiving notification that a student is
no longer enrolled at an eligible college on at least a half time
basis.
(f) Application of payments.
(1) Payments made by, or on
behalf of, a borrower on a program loan shall first be applied to any
outstanding fees, then to any interest, and then to principal.
(2) Payments made in excess of outstanding
fees and interest shall be applied to the principal balance, unless application
to subsequent monthly payments has been requested by the payor prior to the
reduction of the principal balance.
(3) Borrowers may prepay on their program
loan balance without penalty.
(g) Sale or transfer of program loans.
(1) A program loan may be sold or transferred
to another holder described in paragraph (1) or (2) of the definition of such
term in section
2213.1(s) or a
holder as described in paragraph (3) of such subdivision who is acting as a
fiduciary for a holder described in such paragraph (1) or (2) after the program
loan has been fully disbursed. Any sale to the agency or to another public
benefit corporation authorized to finance the purchase or making of program
loans under the Public Authorities Law, shall be subject to an agreement
between the holder and such public benefit corporation and to the availability
to such public benefit corporation of the proceeds of bonds issued to fund such
purchase. In connection with such sale, the holder may receive an origination
fee to be determined annually by the public benefit corporation. Holders
selling program loans shall notify the corporation of the name and business
address of the buyer.
(2) The
agency shall use the proceeds of its bond issuance to fund the purchase of
fixed-rate program loans from holders. On or after the issuance of bonds by the
agency to fund the program loan purchases, the corporation shall notify holders
of the availability of proceeds for the sale of program loans to the agency,
and the interest rate on the program loans. Holders opting to sell fixed-rate
program loans to a public benefit corporation shall initiate the sale within 60
days of the last disbursement of the program loan or at such other time and
subject to such other terms as may be provided by the agreement between the
holder and the public benefit corporation, subject to the availability of the
proceeds of bonds issued to fund such purchase and in compliance with the terms
of the agreement.
(3) Each holder
of fixed-rate program loans shall inform the corporation and the agency prior
to the date provided by the agreement between the holder and the agency for
each academic year of its intent to sell fixed-rate program loans made during
that academic year to the agency and, if so, must enter into an agreement with
the agency for such purpose. No fixed-rate program loan offers shall be made by
a lender until such lender has informed the corporation and the agency of its
intent to sell or hold the program loans. A lender shall notify the corporation
and the agency of its intent to make and sell any remaining fixed-rate program
loans available in an academic year.
(4) Any unsold program loan(s) may only be
sold or transferred:
(i) to the agency, its
trustee, or a credit or liquidity provider, at the option of the
agency;
(ii) to another holder, if
the current holder of the program loan ceases business operations due a merger,
insolvency or receivership; or
(iii) for securitization purposes.
(5) Loans may be transferred where
there is only a change in the identity of the entity servicing the program loan
on behalf of the holder.
(6) The
current holder and new holder, or new entity servicing a program loan, shall
notify the borrower, within 45 days of the sale or transfer, of the name,
address, and telephone number(s) of the new holder and/or servicer and the
address of the entity to whom subsequent payment or communication must be
sent.
(h) Compliance with applicable laws related to program loans. All holders shall comply with all applicable laws and regulations relating to originating or servicing of private educational loans.
(i) As a condition of the sale of any program loan to a public benefit corporation, a holder shall also enter into and comply with all provisions, terms and conditions of a valid contract with the public benefit corporation.
(j) A holder's failure to perform the required due diligence in originating, disbursing and servicing a program loan may result in the holder's ineligibility to receive reimbursement from the applicable default reserve fund.
(k) Program loans not eligible for reimbursement from the applicable default reserve fund shall be serviced according to program requirements.
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