Iowa Code 261F.5 – Loan disclosure — loan bundling — prohibitions
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1. A covered institution that has entered into a preferred lender arrangement with a lender regarding private educational loans shall inform the borrower or prospective borrower of all available state education financing options, and financing options under Tit. IV of the federal Higher Education Act of 1965, as amended, including information on any terms and conditions of available loans under such title that are more favorable to the borrower.
Terms Used In Iowa Code 261F.5
- Bankruptcy: Refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may discharge their debts, perhaps by paying a portion of each debt. Bankruptcy judges preside over these proceedings.
- Borrower: means a student attending a covered institution in this state, or a parent or person in parental relation to such student, who obtains an educational loan from a lending institution to pay for or finance a student's higher education expenses. See Iowa Code 261F.1
- Covered institution: includes an authorized agent of the educational institution, including an alumni association, booster club, or other organization directly or indirectly associated with or authorized by the institution or an employee of the institution. See Iowa Code 261F.1
- Educational loan: means any loan that is made, insured, or guaranteed under Tit. See Iowa Code 261F.1
- following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
- Forbearance: A means of handling a delinquent loan. A
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- Lender: means a person whose name appears on the records of the museum as the person legally entitled to property held or owing by the museum. See Iowa Code 305B.2
- lending institution: means a creditor as defined in section 103 of the federal Truth in Lending Act, 15 U. See Iowa Code 261F.1
- Loan: means a deposit of property not accompanied by a transfer of title to the property. See Iowa Code 305B.2
- Preferred lender list: means a list of at least three recommended or suggested, unaffiliated lending institutions that a covered institution makes available for use, in print or any other medium or form, by borrowers, prospective borrowers, or others. See Iowa Code 261F.1
- School: means an agency of the state or political subdivision of the state, individual, partnership, company, firm, society, trust, association, corporation, or any combination which meets any of the following criteria:a. See Iowa Code 261B.2
- state: when applied to the different parts of the United States, includes the District of Columbia and the territories, and the words "United States" may include the said district and territories. See Iowa Code 4.1
- Student: means a person who enrolls in or seeks to enroll in a course of instruction offered or conducted by a school. See Iowa Code 261B.2
2. A covered institution shall prohibit the bundling of private educational loans in financial aid packages, unless the borrower is ineligible for financing, is not eligible for any additional funding, or has exhausted the limits of loan eligibility, under Tit. IV of the federal Higher Education Act of 1965, as amended, or has not filled out a free application for federal student aid, and the bundling of the private educational loans is clearly and conspicuously disclosed to the borrower prior to acceptance of the package by the borrower. The provisions of this subsection shall not apply if the borrower does not desire or refuses to apply for a loan under Tit. IV of the federal Higher Education Act of 1965.3. A lending institution included on a covered institution’s preferred lender list shall disclose, clearly and conspicuously, in any application for a private educational loan, all of the following:a. The rate of interest or the potential range of rates of interest applicable to the loan and whether such rates are fixed or variable.b. Limitations, if any, on interest rate adjustments, both in terms of frequency and amount, or lack thereof.c. Coborrower requirements, including changes in interest rates.d. Any fees associated with the loan.e. The repayment terms available on the loan.f. The opportunity for deferment or forbearance in repayment of the loan, including whether the loan payments can be deferred if the borrower is in school.g. Any additional terms and conditions applied to the loan, including any benefits that are contingent on the repayment behavior of the borrower.h. Information comparing federal and private educational loans.i. An example of the total cost of the educational loan over the life of the loan which shall be calculated using the following:(1) A principal amount and the maximum rate of interest actually offered by the lender, or, if there is no maximum rate provided under the terms of the loan agreement or applicable state or federal law, a statement to that effect.(2) Both with and without capitalization of interest, if that is an option for postponing interest payments.j. The consequences for the borrower of defaulting on a loan, including any limitations on the discharge of an educational loan in bankruptcy.k. Contact information for the lender.4. Not later than January 31, 2009, the attorney general shall develop and make available to lenders a model disclosure form that is based on the requirements of subsection 3. Use of the model disclosure form by a lending institution in a manner consistent with this chapter shall constitute compliance with subsection 3.