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The Blanket Certificate of Guaranty loan processing option, or Blanket Guaranty as it is commonly referred to, is another process designed to complement the lender flow of data. Blanket Guaranty was authorized as a pilot program in the 1998 Reauthorization of the Higher Education Act. The pilot program has officially concluded and Blanket Guaranty may now be an option for all interested parties.
What is Blanket Guaranty?
Blanket Guaranty allows a lender to submit loan data to the guarantor after a disbursement has been made.
- Blanket Guaranty allows loan origination to occur between the school and the lender.
- Blanket Guaranty requires loan processing to be done electronically using an Internet-based platform that accommodates the lender flow of data, or an approved file transfer protocol (FTP) product.
- A Certificate of Blanket Guaranty is a legal agreement between the lender and the guarantor.
- Real time guarantees are possible using the Blanket Guaranty process.
- Redundant processing is reduced by eliminating the concurrent transmission of data to multiple parties.
Blanket Guaranty Lender Flow (In CommonLine Terms)
- School sends loan certification data in an Application Send File to lender.
- Lender edits data and makes disbursements in a Disbursement Roster File.
- After disbursement, lender sends Application Send File to guarantor.
- Guarantor resolves any data discrepancies and then confirms guarantee in an Application Response file sent to the lender.
Frequently Asked Questions
Who can use the Blanket Guaranty Process?
The Blanket Guaranty process has moved out of the pilot program and is now an option for any school that can meet the technical requirements of the process.
What is the benefit of using Blanket Guaranty?
Blanket Guaranty, along with other electronic loan processing initiatives, allows loans to be processed in real-time. The process is quicker and more efficient.
Does a school have to use Blanket Guaranty?
At this point a school does not have to participate in the Blanket Guaranty process.
How is borrower eligibility managed in this process?
A borrower must meet certain criteria to qualify for a blanket guaranty. The lender is responsible for ensuring that a borrower meets the criteria. As long as the lender verifies this required information and had no reason to know that a borrower was ineligible, reinsurance coverage will remain in effect on the loan.
How does this impact FFELP lenders?
Schools interested in Blanket Guaranty should work with their preferred lenders to implement this process. While schools must meet certain technical and process flow requirements in order to participate, it is the lender who signs the Certificate of Blanket Guaranty with the guarantor.
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