11 KAR 3:005. Lender participation

Section 1. In order to be considered for participation in the authority's insured student loan program, a lender shall submit to the authority, if requested, information sufficient to enable the authority to determine the eligibility of the lender and whether it meets the following criteria. In determining whether to enter into a contract of insurance with an applicant, and, if so, what the terms of the contract will be, the authority considers: (1) Whether the applicant is an organization described in, and not disqualified pursuant to, 435(d) of the federal act (20 U.S.C. 1085(d)); (2) Whether the applicant is capable of complying with federal regulations and 11 KAR Chapter 3 as they apply to lenders participating in the authority's insured student loan program; (3) Whether the applicant is capable of implementing adequate procedures for making, servicing, and collecting insured student loans; (4) Whether the applicant has had prior experience with a similar federal, state, or private nonprofit student loan program, and the amount and percentage of loans that are currently delinquent or in default under that program; (5) The financial resources of the applicant; and (6) In the case of a school that is seeking approval as a lender, whether it is accredited. Section 2. Â (1) The authority may enter into a contract of insurance with an eligible lender approved by the secretary, if the lender is: (a) Capable of complying with federal regulations and 11 KAR Chapter 3 as they apply to lenders participating in the authority's insured student loan program; (b) Capable of implementing adequate procedures for making, servicing, and collecting insured student loans; and (c) Located in any state. (2) The authority shall issue loan guarantees for lenders under contracts described in Section 3 of this administrative regulation without regard to the residency of the borrower or the state in which the educational institution is located

student loan program; (b) Capable of implementing adequate procedures for making, servicing, and collecting insured student loans; and (c) Located in any state. (2) The authority shall issue loan guarantees for lenders under contracts described in Section 3 of this administrative regulation without regard to the residency of the borrower or the state in which the educational institution is located. (3) In the event that loan guarantees are issued pursuant to subsection (2) of this section, and none of the principal parties (lender, educational institution or borrower) are located in the Commonwealth, then, for purposes of the federal act, the authority shall deem the state in which the participating lender is located to be the area served by the authority. Section 3. The Contract of Insurance. (1) In order to participate, an eligible lender shall execute a contract of insurance with the authority. No loan guarantee shall be issued by the authority unless it is covered by such an agreement. (2) In general, under a contract of insurance, the participating lender agrees to comply with all laws, administrative regulations, and other requirements applicable to its participation as a lender. In return the authority agrees to insure each eligible loan held by the lender against the borrower's default, death, total and permanent disability, or bankruptcy. (3) The authority may include in a contract of insurance a limit on the duration of the contract and the number or amount of loans the participating lender may make or hold

ther requirements applicable to its participation as a lender. In return the authority agrees to insure each eligible loan held by the lender against the borrower's default, death, total and permanent disability, or bankruptcy. (3) The authority may include in a contract of insurance a limit on the duration of the contract and the number or amount of loans the participating lender may make or hold. (4) Except as otherwise approved by the authority, a contract of insurance with a school lender limits the loans made by that school lender that will be covered by the loan guarantee to those loans made to students, or to parents borrowing on behalf of students, who are: (a) In attendance at that school; (b) In attendance at other schools under the same ownership as that school; or (c) Employees or dependents of employees, or whose parents are employees, of that school lender or other schools under the same ownership, under circumstances the authority considers appropriate for loan guarantees. (5) A limit imposed under subsection (4) of this section on a school lender that makes loans to students, or to parents of students, in attendance at other schools under the same ownership, or to employees, or to dependents or parents of employees of those other schools may be imposed on a school-by-school basis.