[Lender] Electronic Signature Overview

[Client Relations]

Although this topic has been discussed for many months, it is evident that
Electronic Signatures will be implemented for both FFELP and the FDSLP loan
programs. The U.S. Department of Education (DE) has been busy releasing new
information concerning the implementation of the electronic signature.
Additionally, DE has announced it's plans to implement a PIN-based
electronic signature program for Direct Loans by July 2nd of this year, and
will allow FFELP participants to implement within the same timeframe.  

OGSLP would like to provide you with highlights of the most recent
developments.


Release of Dear Partner Letter with Electronic Signature Standards:

Earlier this month, DE released GEN-01-06, informing the student financial
aid community that as a result of the recent passage of the Electronic
Signatures in Global and National Commerce Act (E-Sign Act), lenders and
borrowers will soon have the option of using electronic promissory notes and
signatures.

As part of the letter, DE provided the "Standards for Electronic Signatures
in Electronic Student Loan Transactions (Standards)." These Standards
provide guidance to FFELP participants regarding the use of electronic
signatures in conducting student loan transactions, including the use of
electronic signatures for signing loan promissory notes.

Usage of the Standards is voluntary and lenders are free to develop their
own standards to protect the enforceability of their loans. However, DE has
stated that lenders who use the their Standards will be protected from the
loss of federal benefits on a loan if the loan is determined to be legally
unenforceable by a court based solely on the processes used for the
electronic signature or related records. For your reference, listed below is
a link to GEN-01-06 that includes the Electronic Signature Standards.  
 
 http://www.ifap.ed.gov/dpcletters/gen0106.html


Town Hall Meeting:
Several of the industry associations sponsored a joint Town Hall Meeting on
Electronic Signatures on May 3rd. During this meeting, DE advised that
regulations will not be issued at this time. They believe that the
"Standards for Electronic Signatures in Electronic Student Loan
Transactions" provides sufficient guidance to FFELP participants. 

Discussion during the meeting included the topic of authentication. The
Standards require lenders to confirm the borrower's identity through an
authentication process. This process is made available through DE's
contractor, NCS Pearson.   Expected charges for this authentication process
for low volume users (less than 500 thousand requests per year) has been
reduced from $0.28 to $0.25 per transaction.

Note:  The attached link leads to a set of Questions and Answers from the
meeting that is posted to NCHELP's web site. This site contains an entire
section devoted to progress on Electronic Signatures including DE's
presentation, information provided by NCS Pearson (DE's contractor for the
project) and FFELP Community Comments on the Standards. 
 
 http://www.nchelp.org/esign/esignQ&A.htm


More information...

As you can see, much is going on with this topic. It is yet to be seen
whether FFELP participants will choose to use the PIN model provided by DE
or choose to implement electronic signatures using their own methodology.
One major issue is the requirement that the PIN be mailed to the borrower,
potentially lengthening the application process. (see Electronic Standards
for more in depth information regarding the overall process). 

OGSLP expects much to develop on this subject over the next several weeks
and will continue to keep you advised.. The topic is also to be discussed at
various industry conferences including the NCHELP Spring Convention
scheduled for the first week of June. OGSLP staff will be present and will
pass on all pertinent information as we receive it. However, in the interim,
if you have any questions or are unable to access any of the attached
documents, please contact Client Relations at (405) 234-4329 or
1-800-247-0420 or via email at clientrelations at ogslp.org.


Client Relations
OGSLP
(405) 234-4329 or 1-800-247-0420
Fax - (405) 234-4459
clientrelations at ogslp.org