New York SLATE Act

The Student Lending Accountability Transparency and Enforcement (SLATE) Act of 2007 was enacted into law by the Governor of New York on May 30, 2007. The following provisions of the law are applicable to students attending higher education institutions in the state of New York, parents of those students, institutions of higher education authorized to confer degrees by the state of New York, and employees of those institutions.

Prohibition of gifts made by lenders to institutions and their employees
A lender cannot, directly or indirectly, offer or provide any gift to an institution or its employee in exchange for any advantage or consideration provided to the lender related to its educational loan activities. Also, a lender cannot engage in revenue sharing with an institution. 

Prohibition of receipt of gifts by an institution
An institution cannot, directly or indirectly, solicit, accept, or receive any gift from or on behalf of a lender in exchange for any advantage or consideration provided to the lender with regard to its educational loan activity. The institution cannot engage in revenue sharing with a lender. 

Prohibition of receipt of gifts by an institution’s employees
An institution must require that their employees do not directly or indirectly solicit, accept, or receive any gift on their own behalf or on behalf of another employee from a lender or on behalf of a lender. An employee must report to the Department any instance of a lender attempting to give a gift to the employee. The law does not restrict an employee from conducting business on his or her own behalf with the lender as long as that business is unrelated whatsoever to the institution. 

Prohibition of participation on lender advisory boards
A lender must ensure that no employee of an institution receives any payment for serving as a member or participant of an advisory board or receives any reimbursement of expenses incurred while serving on an advisory board. Likewise, the institution must ensure that no employee receives any payment for serving on a lender’s advisory board or reimbursement of expenses incurred while serving on an advisory board. 

The law does not prohibit an employee from participating on a lender’s advisory board that is unrelated to educational loans. Additionally, the law does not prohibit an employee who does not have a direct interest in or does not benefit from the functions of the institution’s financial aid office from serving on the board of directors of a publicly traded or privately held company. 

Employees of an institution who are directly involved with or benefit from the functions of the financial aid office are required to report to the New York State Education Department all participation or financial interests related to any lender. 

Misleading identification of lender employees
A lender must ensure that its employees or agents do not represent themselves as employees, representatives, or agents of an institution to borrowers or potential borrowers. Also, the institution must ensure that no employee or agent of the lender be identified to borrowers or potential borrowers as an employee, representative, or agent of the institution. 

Prohibition of lender employees staffing a financial aid office
Lender employees cannot staff an institution’s financial aid office. 

Disclosure of financial aid availability under Title IV of the Higher Education Act
An institution must inform an existing or potential borrower who inquires about financial aid of all Title IV financing options before a lender can provide a private educational loan to the borrower. The institution must inform the borrower of any terms and conditions of Title IV loans that are more favorable than the terms and conditions of a private loan. 

Prohibition of high risk loan agreements
A lender and institution cannot enter into an agreement or otherwise provide any high risk loans in exchange for the institution providing concessions or promises to the lender that may prejudice other borrowers or potential borrowers. 

Standards for preferred lenders lists
An institution that provides a preferred lender list must comply with the following standards: 

• The preferred lender list must disclose the process by which the institution selected lenders for the list, including, but not limited to, the method and criteria used to choose the lenders and the relative importance of the criteria used.
• The preferred lender list must state in the same font size and manner as the predominant text on the document that borrowers have the right and ability to select the lender of their choice, do not have to choose a lender on the list, and will suffer no penalty for choosing a lender not on the list.
  The institution’s decision to include a lender on the preferred lender list and the location of the lender on the list must be determined solely by consideration of the best interest of the borrowers and without regard to the monetary interests of the institution.
• The preferred lender list must be reviewed and updated at least annually.
• No lender can be placed on the preferred lender list unless the lender provides assurance to the institution and to borrowers who obtain educational loans from the lender that advertised benefits upon repayment will continue regardless whether the lender sells the loans.
• An institution must make a reasonable inquiry as to a lender’s loan sale arrangements with another unaffiliated lender. No lender having such an arrangement can be placed on the institution’s preferred lender list unless the arrangement is disclosed on the list in the same font size and manner as the predominant text of the list.
• No lender can be placed on an institution’s preferred lender list or in a favored location on the list for a particular type of loan in exchange for benefits provided to the institution or to the institution’s students in connection with a different type of loan.

Proper execution of Master Promissory Notes (MPN)
An institution cannot direct in any manner whatsoever potential borrowers to an electronic MPN or other loan agreements that do not provide a reasonable and convenient alternative for the borrower to complete the MPN with any federally-approved lender which offers the relevant loan in the state of New York. 

Disclosure of default rates
At the request of an institution, a lender must disclose to the institution the historical default rates of private educational loans obtained by borrowers from the institution, the interest rates charged in the year prior to the disclosure, and the number of borrowers obtaining each rate of interest. The lender must provide the information in reasonable detail and form. 

Penalties
Lenders and institutions found in violation of this law may be liable for a civil penalty up to $50,000. An institution’s employee found in violation of this law may be liable for a civil penalty up to $7,500. 

A lender found in violation of this law cannot remain or be placed on an institution’s preferred lender list unless a notice of the violation is provided to all potential borrowers at the institution.

Definitions 

• Borrower – A student attending a covered institution in the state of New York, a parent of the student, or a person in a parental relationship to the student who obtain a loan from a lender to pay for higher education expenses.
• Covered institution (or “institution”) – Any college, vocational institution, or approved program (defined in Section 601).
• Covered institution employee – Any employee, agent, contractor, director, officer, or trustee of a covered institution.
• Educational loan – Any FFELP loan, high risk loan, or private loan made for the purpose of paying for higher education expenses.
• Gift – Any discount, favor, gratuity, inducement, loan, stock, thing of value, or other item having more than nominal value. This term includes, but is not limited to, the following:
  • Any money, service, loan, entertainment, honoraria, hospitality, loading costs, meals, registration fees, travel expenses, discount, forbearance or promise
  • Any gifts provided in kind, by purchase of a ticket, payment in advance, or reimbursement after expenses have been incurred
  • Any computer hardware for which the recipient pays below-market prices
  • Any printing costs or services
    
    The term does not include the following:
  • A lender’s own brochure or promotional literature
  • Food, refreshments, training, or informational material furnished to a covered institution employee as an integral part of the training session if the training session contributes to the professional development of the employee
• High risk loan – Any agreement between a lender and an institution in which the lender provides loans to students with a poor credit history or no credit history who would otherwise not be eligible for an educational loan.
• Higher education expenses – Tuition, fees, room and board costs, and costs incurred for books, supplies, transportation, and miscellaneous personal expenses.
• Lending institution (or “lender”) – Any of the following:
  • An entity that makes educational loans through itself or through an affiliate
  • An entity that securitizes educational loans
  • An entity or association of entities that guarantee educational loans
  • An industry, trade, or professional organization or other entity that receives money related to educational loan activities from any organization described in the preceding three sub-bullets
• Preferred lender list – A list of one or more recommended or suggested lenders that the institution makes available in print or any other medium or form for use by borrows, potential borrowers, or others.
• Revenue sharing – Any arrangement where a lender pays an institution or an entity or organization affiliated with the institution a percentage of the principal of each loan directed to the lender from a borrower at the institution.