Questions and Answers
Since 1999, NSLP's Blanket Guarantee has been speeding loan delivery to thousands of students and schools nationwide. NSLP is the nation's most experienced Blanket guarantor. We were the first to implement Blanket Guarantee because we knew it would help schools and lenders deliver loans more quickly to students. We've demonstrated it can be done without jeopardizing program integrity. The following information explains the basic concepts of NSLP's Blanket Certificate of Guarantee.
What is the Blanket Certificate of Guarantee?
How will schools benefit from Blanket Guarantee?
How will lenders benefit from Blanket Guarantee?
How does the Blanket Guarantee process work?
How is the Blanket Guarantee process different than the traditional guarantee process?
Does Blanket Guarantee create any new risks for schools or lenders?
Will lenders have to change systems or procedures to accommodate the Blanket Guarantee process?
Will schools have to change systems or procedures to accommodate the Blanket Guarantee process?
Will NSLP review the loan information when the lender reports it?
Can a school or lender use the Blanket Guarantee for some loans but not others?
What does the lender need to do to participate in Blanket Guarantee?
Who do lenders contact for more information about NSLP's Blanket Certificate of Guarantee?
What is the Blanket Certificate of
Guarantee?
The Blanket Certificate of Guarantee is an
agreement between the lender and NSLP which permits the lender to
disburse Stafford and PLUS loans before the lender receives a
notice of guarantee from NSLP. The lender disburses the loan based
on information from the school, then reports the loan to NSLP.
Under the Blanket Guarantee process, the loan is guaranteed when it
is disbursed by the lender, then subsequently reported to NSLP. The
Blanket Guarantee process is similar to the Consolidation Loan
Certificate, where the lender disburses the consolidation loan then
reports it to NSLP.
How will schools benefit from Blanket
Guarantee?
Schools that work with lenders who have a
Blanket Guarantee agreement with NSLP can receive loan funds more
quickly from the lender. The school works directly with the lender
to obtain loans---making same-day delivery of loan funds
possible.
How will lenders benefit from Blanket
Guarantee?
Because lenders don't have to wait for a notice
of guarantee from NSLP, they can quickly disburse loans to schools,
and make same-day delivery of loan funds a routine event. Lenders
work directly with schools to make any pre-disbursement loan
adjustments so they can disburse loans without waiting for
guarantee corrections from NSLP.
How does the Blanket Guarantee process
work?
Under the Blanket Guarantee process, schools and
lenders do not need to wait for a notice of guarantee from NSLP
before the loan is disbursed. Schools that currently send loan
information to the lender can continue to do so. Schools that
currently send loan information to NSLP can continue to do
so---NSLP will work with the lender to ensure the loan information
is forwarded to the lender. Once the lender receives the school's
loan information, the lender disburses the loan based on the
schedule provided by the school. The lender reports the loan to
NSLP within 12 calendar days of the first disbursement, then NSLP
immediately acknowledges receipt of the loan information from the
lender.
Schools work directly with lenders to make pre-disbursement loan adjustments. If there are changes to the loan before the first disbursement is made, the school reports them to the lender, who makes the adjustment and then disburses the loan. The lender reports the loan information to NSLP only after making the changes and disbursing the loan.
How is the Blanket Guarantee process different
than the traditional guarantee process?
Traditionally, the lender waits to disburse the
loan until it receives a notice of guarantee following the
guarantor's review of the school's loan certification data. The
guarantor reviews the loan data primarily to:
- ensure nothing in its database indicates the borrower is ineligible for the loan
- prevent discrepancies in the loan data
Some guarantors perform more than 200 edits before issuing a notice of guarantee---mostly to identify minor data discrepancies. The notice of guarantee and the disbursement of the loan are delayed while the data discrepancies are resolved.
Does Blanket Guarantee create any new risks for
schools or lenders?
No. Schools and lenders have the data they need
to determine if borrowers are eligible for student loans and how
much they can borrow. Schools are effectively screening student
loan borrowers using the Department of Education's Central
Processing System (CPS) and National Student Loan Data Systems
(NSLDS). Schools have access to more comprehensive information
about the student---including prior loans and defaults---than a
guarantee agency typically does. A lender, too, maintains its own
database of student loans, checks the student's prior loans and
confirms there are no defaults before the loan is
disbursed.
Schools and lenders have no more risk with the Blanket Guarantee than they have with a traditional guarantee process. A school or lender is only at risk if it chooses to ignore information it has about a borrower's prior loans or defaults or makes loans to borrowers it knows are ineligible.
Will lenders have to change systems or procedures
to accommodate the Blanket Guarantee
process?
Yes, but the system changes depend on how the
lender currently processes loan certification and guarantee
information. To avoid disrupting school and lender data flows and
formats, NSLP accommodates Blanket Guarantee by using
CommonLine® data formats now being used to
transmit loan certification and guarantee information. The lender
may need to make some changes in the way it receives loan
information and the data it provides to NSLP. For example, the
lender needs to be able to update its records to include NSLP's
guarantee number, which is not assigned until the lender disburses
and reports the loan to NSLP. Under the current loan guarantee
process, the lender receives this information before the loan is
disbursed when NSLP issues the notice of
guarantee.
See NSLP's "Blanket Guarantee Process" flow charts for examples of the Blanket Guarantee process. Because loan processing can vary for each lender, NSLP will work individually with lenders to discuss system requirements for the Blanket Guarantee process.
Will schools have to change systems or procedures
to accommodate the Blanket Guarantee
process?
To avoid disrupting school and lender data flows
and formats, NSLP accommodates Blanket Guarantee by using
CommonLine® data formats now being used to
transmit loan certification and guarantee information. Schools that
use CommonLine® won't need to make any system
changes. Schools that use ELITE™, NSLP's loan processing software,
won't need to make any system changes either.
The Blanket Guarantee allows schools to work more closely with lenders, and any changes in procedures will depend on how the school chooses to interact with the lender. Schools that currently send loan information to NSLP can continue to do so---NSLP will work with the lender to ensure the loan information is forwarded to the lender. Alternatively, schools can send loan information directly to the lender. In either case, the school will receive loan information directly from the lender. Lenders using Blanket Guarantee can now provide additional information about the loan to the school, enabling schools to more closely track the status of the loan.
See NSLP's "Blanket Guarantee Process" flow charts for examples of the Blanket Guarantee process.
Will NSLP review the loan information when the
lender reports it?
Yes. NSLP will continue to review loan
information when it is reported by the lender under the Blanket
Guarantee process just as NSLP reviews loan certifications it
receives for guarantee today---including confirming the school's
eligibility, checking the borrower's aggregate loan limits and
determining if the borrower has a prior loan default with NSLP.
However, NSLP will notify the lender if it determines the borrower
is ineligible for all or part of the loan.
NSLP also notifies the lender if there are any data discrepancies to be resolved and works with the lender to resolve them.
What does the lender or school do if notified the
borrower is ineligible for all or part of the
loan?
Because schools and lenders already review a
borrower's prior loans and defaults, it is unlikely schools and
lenders will encounter problems. However, a lender or school that
learns, after the loan is disbursed under the Blanket Guarantee
process, that a borrower is ineligible should follow Common
Manual® requirements and federal regulations to request
the return of the loan funds from the borrower or contact the
guarantor. Lenders and schools that follow these ineligible
borrower requirements are not at risk of losing the guarantee on
the loan under these circumstances.
Can a school or lender use the Blanket Guarantee
for some loans but not others?
Because it streamlines student loan delivery
between the school and lender, the Blanket Guarantee works most
effectively when it's used for all the loans made by the school or
lender. However, NSLP can accommodate either the Blanket Guarantee
process or the traditional guarantee process for schools and
lenders.
NSLP encourages Blanket Guarantee lenders to keep schools informed about their use of the Blanket Guarantee. Schools that have concerns about the Blanket Guarantee process should discuss them with their lenders or NSLP. But NSLP is confident that, when schools have all the facts, they will be comfortable with Blanket Guarantee.
What does the lender need to do to participate in
Blanket Guarantee?
The
lender must have a lender agreement with NSLP and then execute a
"Blanket Certificate of Guarantee" agreement with NSLP. The Blanket
Guarantee agreement requires the lender to report loans disbursed
within 12 calendar days of the first disbursement
date.
Who do lenders contact for more information about
NSLP's Blanket Certificate of Guarantee?
Lenders interested in obtaining a Blanket
Certificate of Guarantee from NSLP should
contact:
P.O. Box 82507, Lincoln, NE 68501-2507
1300 O Street, Lincoln, NE 68508
phone 800-735-8778, ext. 6618
fax 402-479-6658
