Ballard Spahr Partners Alan S. Kaplinsky and John L. Culhane, Jr., to Discuss Rules During August 19 Teleconference

On July 30, 2009, the Federal Reserve Board issued, in final form, the amendments to Regulation Z necessitated by the Higher Education Opportunity Act enacted last summer. These amendments include both new substantive rules and new disclosure rules for private education loans. In fact, on February 14, 2010, or six months after their publication in the Federal Register, whichever is earlier, when compliance with these rules becomes mandatory, creditors offering such loans will be obligated to provide disclosures significantly different from other Truth in Lending disclosures now required.

Truth in Lending disclosures will also be required at three different times. Creditors offering private education loans will be required to provide disclosures at the time of application (or at the time of solicitation, if an offer is made that does not require the consumer to complete an application), again at the time of loan approval, and, finally, after the consumer accepts the loan and no later than three business days before loan disbursement. In general, once an approved loan has been accepted the terms of that loan may not change, even though the consumer can still cancel the loan.

These disclosure requirements and corresponding substantive limitations apply to

  1. banks and others offering closed-end loans made expressly for post-secondary educational expenses;
  2. banks and others offering mixed-use closed-end loans—even business loans—if the consumer indicates on the application that any part of the loan proceeds will be used for such expenses; and
  3. accredited postsecondary schools, such as colleges and universities, and unaccredited postsecondary schools, such as flight schools, offering their own closed-end financing programs for such expenses. 

Of equal significance, few private educational financing arrangements are excluded from these new rules—only open-end lines of credit, loans secured by real property or a dwelling, loans for post-graduate expenses (provided that no part of the loan is used for postsecondary educational expenses), state "service requirement" programs where the obligation to repay occurs only as the result of an unanticipated breach of the consumer's legal obligation to perform a service (such as teaching or practicing medicine in an underserved area), school billing plans that do not carry an interest rate and that have a term of one year or less, and school "emergency" loans with a term of 90 days or less.

Ballard Spahr partners Alan S. Kaplinsky, chair of the Consumer Financial Services Group, and John L. Culhane, Jr., will discuss these new substantive rules and new disclosure rules in a Practising Law Institute teleconference, "New Truth in Lending Disclosure Rules for Private Education Loans," on August 19 from 1:00 p.m. to 2:00 p.m. (ET).

Contact Information

For more information about these rules, please contact Alan S. Kaplinsky (215.864.8544 or, John L. Culhane, Jr., (215.864.8535 or, or any member of Ballard Spahr's Consumer Financial Services Group, which has significant experience in representing banks, creditors, and schools offering private education loans and related programs.

Copyright © 2009 by Ballard Spahr LLP.
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