Preferred Lender Arrangement Process

Establishment of Preferred Lender Arrangements at The University of Pennsylvania

Beginning with the 2026–2027 academic year, The University of Pennsylvania (Penn) will implement Preferred Lender Arrangements in response to recent changes in federal loan program regulations, which take effect on July 1, 2026. These regulatory updates have created a need for alternative loan funding options to ensure that students and their families can continue to access necessary financial resources.

Purpose and Scope

The primary objective of these Preferred Lender Arrangements is to provide private educational loans that address funding gaps for students who have already received the maximum allowable federal loans. Additionally, these arrangements will offer private loan opportunities for parents who choose to borrow funds to cover eligible educational expenses for their children. The envisioned private loan programs will be accessible to all undergraduate and graduate students enrolled in academic programs across the university. This includes specialized offerings for international students, health professions students, and those in non-health professions programs. 

Development Process and Regulatory Compliance

To achieve these goals, Penn has undertaken a systematic and carefully tailored initiative to establish its Preferred Lender Arrangements. While the process has been customized to meet the university’s unique needs, it fully adheres to all federal regulations governing such arrangements. Throughout the development and implementation phases, Office of General Counsel’s Associate General Counsel and Student Registration and Financial Services’s Director of Compliance and Training have been actively involved to ensure that every aspect of the program satisfies federal regulatory requirements. 

PROCESS STEPS

  1. Reviewed regulations from the U.S. Department of Education (34 CFR § 601.10), the Consumer Financial Protection Bureau (CFPB) and the Truth in Lending Act regarding the creation of private lender agreements.

     

  2. Reviewed guidance from the National Association of Student Aid Administrators regarding the creation of private lender agreements.

 

  1. Conducted research regarding private lenders utilized and the specific private loans offered at select schools that are similar to the Penn.  Collected and analyzed that information.  See appendix.

 

  1. Developed a Draft Request for Proposal (RFP) to be sent to select lenders.  Informed the Office of General Counsel regarding objectives, goals and a schedule of upcoming tasks. The Draft RFP was reviewed and edited by the Office of Procurement and Office of General Counsel.

 

  1. Developed a list of 34 private loan terms and conditions that were of importance to the Penn.  These terms and conditions were conveyed in the RFP. See Appendix.

 

  1. Created a Penn (Penn) Preferred Lender Arrangement Committee (referred to as “The Committee”) and support structure. 

     

  2. Met with Penn Procurement Services to discuss RFP protocol and calendar of next steps.

     

  3. After reviewing current lenders who provide loans to various Penn student populations, including loan features needed by Penn students, the group notified Procurement Services which 10 lenders are to be sent the RFP. Procurement Services, accompanied by a cover letter, sent an invitation to respond. 

     

  4. A Preferred Lender Arrangement RFP Evaluation Scorecard was developed by the Committee to assess which lenders would be selected and offered a contract. 

     

  5. The Committee selected five lenders to be offered contracts.  Each of the five lenders was sent a contract provided by the Office of General Counsel and distributed by the Associate Director of Strategic Sourcing Procurement Services. 

 

  1. Draft Contracts were received by Procurement Services, reviewed and notated by The Committee and forwarded to the Associate General Counsel for additional review. 

 

17. After additional edits by Penn’s general counsel and each of the lenders, all five contracts were signed and countersigned. 

18. Updates on the progress of the Committee were provided by the Senior University Director of Financial Aid to the Board of Trustees, the Deans of the individual schools, student groups and the Associate Vice President, Student Registration and Financial Services.

 

MAINTENANCE

Penn will review and evaluate all lenders on its updated Preferred Lender List every year throughout the contract period, in accordance with federal regulations. These assessments will focus on how well lenders follow loan terms and conditions, with special attention to; approval rates, timely fund disbursement, student and staff support, staff training, and required reporting