Mon, Feb 9, 2015
NCUA, along with the other federal financial regulatory agencies, issued guidance for financial institutions on private student loans with graduated repayment terms at origination. The guidance provides principles that financial institutions should consider in their policies and procedures for originating private student loans with graduated repayment terms. Graduated repayment terms are structured to provide for lower initial monthly payments that gradually increase. Financial institutions should consider the following principles in their policies and procedures for underwriting private student loans with graduated repayment terms at origination:
- Ensure orderly repayment;
- Avoid payment shock;
- Align payment terms with a borrower’s income;
- Provide borrowers with clear disclosures;
- Comply with all applicable federal and state consumer laws and regulations and reporting standards; and
- Contact borrowers before reset dates.