Regulators Release Guidance on Private Student Loans

Regulators address graduated repayment terms at origination.

April 2, 2015

Regulators Release Guidance on Private Student LoansNCUA and the federal banking agencies in late January issued guidance for credit unions and other financial institutions on private student loans with graduated repayment terms at origination.

These terms provide for lower initial monthly payments that gradually increase.

According to “Guidance on Private Student Loans with Graduated Repayment Terms at Origination,” credit unions should consider the following principles in their underwriting policies and procedures:

  • Ensure orderly repayment (for example, loan terms should avoid negative amortization or balloon payments);
  • Avoid payment shock, which occurs when a borrower experiences a significant increase in the monthly payment amount after a reset date;
  • Align payment terms with a borrower’s income;
  • Provide borrowers with clear disclosures that comply with applicable laws and regulations (e.g., Truth in Lending and Regulation Z);
  • Comply with all applicable federal and state consumer laws and regulations (such as Regulation B, Regulation Z, federal and state prohibitions against unfair, deceptive, or abusive acts or practices); and
  • Contact borrowers before reset dates.

Access the guidance on