Financial Aid Professionals Frequently Asked Questions

How is College Loan Market different from comparison sites?

College Loan Market is a reverse auction in which lenders bid for individual loans based upon anonymized information about the potential borrower. When student X visits College Loan Market and opens an auction for an alternative loan, they will receive a bid based upon their individual credit, course of study, degree sought and other factors. The bid for student Y will be different than student X’s based upon their differing factors. A student borrower receives a specific rate and fee quote which is factored into a total cost of funds. Comparison sites simply display the range of rates offered by participating lenders. At a comparison site, the student who received an actual rate and fee quote through College Loan Market, would be told that the lender offers loans from between PRIME – 1% and PRIME + 7.75% with fees between 0% and 12%. In this case, the borrower has been told nothing that aids in the search for the best rate.

What is a reverse auction?

According to Wikipedia, “It is a type of auction in which the role of the buyer and seller are reversed, with the primary objective to drive purchase prices downward. In an ordinary auction (also known as a forward auction), buyers compete to obtain a good or service. In a reverse auction, sellers compete to obtain business.”

How much will this cost the school?

Absolutely nothing. We do not charge either the school or the student borrower to use this platform. We assess an exchange fee to the winning lender. We do not charge schools or students, period. Our platform does not require integration with the school's SIS system, it operates as a separate web-based platform which is simply linked-to from the school's Financial Aid page, thus there are no integration costs or delays.

Will students understand the auction model?

One word answer: eBay.

What loan types can be auctioned?

With the exception of Direct Loans, all types of student loans can be put up for competitive bidding and thus reduce the cost of funds for student borrowers. FFELP Stafford, PLUS, and Grad PLUS are all eligible for auction, though the greatest benefit to students will be found in credit based products such as alternative loans.

Does the school still specify the participating lenders?

In the school signup process we list all major national and regional lenders. Schools can elect to have all lenders participate or can select specific lenders. We suggest that the greatest acceptable number of lenders be included and require that at least three unaffiliated lenders be selected for participation.

What information gets provided to lenders?

Lenders bid based upon anonymized information, they are not provided with the identity of the loan applicant until the borrower selects an auction winner and specifically requests that the winning lender be provided with their identity. Lenders are provided with credit information (in the case of alternative loans), school attended, school year, course of study, degree sought, and grad year as well as information about the loan request, such as loan amount, loan type, length of loan, and repayment terms. This information allows lenders to accurately bid for a loan without knowing the identity of the student borrower.

Does this violate FERPA?

Absolutely not, the school is not disclosing any information about the student. All information is provided by the student under expressly clear consent. Additionally, College Loan Market operates under an extremely strict privacy policy.

What is the College Loan Market privacy policy?

The following are the basic principles of our privacy policy:

We will only use your personal information for the expressed purpose for which you provided it, namely obtaining auction bids for your student loans.
We will only release personally identifiable information with your expressed consent, e.g. at the close of an auction you will be offered an opportunity to accept a lender's bid and have that lender be provided with your identity. We will only release information to a lender with your expressed permission.

With the exception of when you have asked us to release your identity to a lender who has won your auction, we will not release any personal information about you to any third party unless required to do so under court order.

The information that we provide lenders to allow them to bid on your loan is anonymized. Thus your name, address, social security number, email address, and phone number are NOT provided to lenders as part of the bidding process.

Information which you have provided, such as the amount of the loan requested, your school, your program of study, and other information which cannot be used to personally identify you, including non-identifiable information provided by credit bureaus in conjunction with your loan request, will be provided to lenders to allow them to accurately bid for your loan business.
click here to view the full privacy policy.

If you don’t take money from schools or students, what is your business model?

We assess an exchange fee to the winning lender. We do not charge schools or students, period.

What can be customized on our school site?

In addition to the branding of the site, which can feature your school’s logo and color scheme, the school may also determine what lenders participate, what loan types are available by auction, and the maximum allowable interest rate and fee for their students. Customized messaging specific to the school may also be incorporated.

How does College Loan Market discourage excess borrowing?

A key feature of College Loan Market is our transparent factoring of all loan bids to a single figure representing the total cost of funds over the life of the loan. Because of this approach, students are made clearly aware that a $10,000 alternative loan may actually cost $20,000. Our video help system encourages students to borrow only the amount that they absolutely need and to fully understand the relationship between loan duration and total cost. We also clearly explain the differences between deferred repayment, interest only repayment, and interest and principal repayment.
Additionally, before any student can request bids for an alternative loan through College Loan Market, they are instructed to expend their full federal loan eligibility before applying for private loan funds.

Does this comply with the NY Attorney General’s Code of Conduct?

Although adopting an auction model doesn’t in itself assure compliance with the Code of Conduct, replacing a preferred lender list with an open auction in which all lenders may participate, goes a long way to separate the financial aid office from any suggestion of lender bias or impropriety.

Does this comply with the Student Loan Sunshine Act?

The College Loan Market process was specifically adapted to facilitate school compliance with the Student Loan Sunshine Act in a number of ways.

• By requiring at least three unaffiliated lenders to participate in the school’s auction.
• By informing all alternative loan applicants as to the availability of federal loans.
• By allowing schools to completely replace preferred lender lists with an open auction.
• By reducing loans to a single cost of funds figure based upon front end guaranteed benefits, we factor out the “marketing spin” of misleading, under-utilized, back end benefits.

Can my school use College Loan Market for alternative loans, but still use a Preferred Lender List for FFELP loans?

Absolutely, your school’s College Loan Market site can host auctions for whatever loans you feel are appropriate. College Loan Market can also be used in conjunction with a PLL to assist students in getting the best rates from the preferred lenders.

Does the auction model replace our PLL?

It certainly can, you can simply replace your on-line PLL with a description and link to your school-specific auction site.