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Setup Instructions |
JUL 30 1993
To: Schools and Lenders Participating in the Health Education Assistance Loan (HEAL) Program
Subject: Co-signers for
HEAL Loans
HEAL Lender Policy Memorandum 93-15
HEAL School Policy Memorandum 40
Public Law 102-408, the Health Professions Education Extension Amendments of 1992, added a new section 708(c) to the HEAL statute, which requires a lender to reduce a HEAL borrower's insurance premium by 50 percent if a credit worthy parent or other responsible party co-signs the HEAL loan note. In response to lender requests for additional guidance on this provision, this memorandum provides a detailed example of one possible approach for implementing the co-signer option, by way of the following attachments:
(1) A sample set of criteria
that may be used to determine whether an individual is credit worthy, for purposes
of this provision; and
(2) A sample co-signer application and instructions that a lender may use for
individuals interested in applying to co-sign a HEAL loan.
Please be aware that these samples provide one example of how a lender may implement this provision, and are provided only as a possible approach, not as requirements. Lenders have the option of developing their own co-signer credit worthiness criteria and application materials, as long as they assure that the procedures are at least as stringent as procedures that would be followed for approving a co-signer for commercial credit purposes.
Lenders are also reminded that it is their responsibility to assure their procedures for screening and approving co-signers are in compliance with any applicable state laws.
We would like to express our appreciation to the lending/holding community for their assistance in the development of these sample documents. Please contact Ms. Terri Ehrenfeld o the HEA T Branch at (301) 443-1540 if there are any questions on this memorandum.
Michael Heningburg
Director
Division of Student Assistance
HEAL COSIGNER CREDITWORTHINESS CRITERIA
I. STABILITY
A. Employment
1. At least 24 months full-time employment in the same job or field. Copies of most recent federal income tax return with W-2 forms and two most recent paystubs required.
2. If self-employed: At least 24 months in same business or profession. Copies of most recent two years federal income tax returns plus a current year financial statement.
3. If retired: Pension check copies or other documentation required for last 3 months.
B. Residence
1. At least 24 months at
current address. Possible exceptions to include:
a. Relocation due
to employment transfer
b. Change of residence
in same area
INCOME ADEQUACY - At least 40% of gross monthly income should remain after deducting federal/state taxes, monthly installment debt, mortgage/rent payment, other fixed monthly expenses (such as alimony, child support or child care), and proposed HEAL borrowing.
III. ASSET ACCUMULATION
A. Checking and Savings accounts should show sufficient funds to cover at least two payments on loan.
B. Total Assets should be at least 125% of Total Liabilities.
IV. CREDIT HISTORY
A. The following deficiencies within a credit report may be cause for disapproval of the loan:
1. A bankruptcy within the past three years.
2. An open repossession, suits filed, wages garnished, skip account, tax lien, charged-off account, judgment, collection account or any resolution of above within the past two years.
3. Any prior education loan default.
4. A delinquency of 60 days or more on any current debt.
B. A lack of a credit history will not result in denial providing the other credit tests are met.
