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[Xenon481]

37(b)(3) Postsecondary Educational Expenses
    The HEOA defines ``postsecondary educational expenses'' as any of
the expenses that are listed as part of the cost of attendance of a
student under section 472 of the Higher Education Act of 1965 (20
U.S.C. 1087ll). Proposed Sec.  226.37(b)(3) would adopt this definition
and provide illustrative examples of postsecondary educational
expenses. Examples include tuition and fees, books, supplies,
miscellaneous personal expenses, room and board, and an allowance for
any loan fee, origination fee, or insurance premium charged to a
student or parent for a loan incurred to cover the cost of the
student's attendance. Proposed comment 37(b)(3)-1 would clarify that
the examples in the rule are not exhaustive.

Not sure why it wasn't listed on the site you linked, but Google found it here:
http://www.bankersonline.com/topstory/74fedreg/74FR12464.txt

That is 226.37, not 226.26 as is referenced in Prosper's agreement.

[no-whammies]

Although, as I read elsewhere on the forum today, Prosper the company intends to become a Prosper lender.

Link for the lazy?

[Xenon481]

Although, as I read elsewhere on the forum today, Prosper the company intends to become a Prosper lender.

Link for the lazy?

http://www.prospers.org/forum/prosper_to_begin_bidding_on_loans-t24638.0.html

[no-whammies]

(v) use any loan proceeds for postsecondary educational expenses (i.e., tuition, fees, required equipment or supplies, or room and board) at a college/university/vocational school, as the term "postsecondary educational expenses" is defined in Federal Reserve Board Regulation Z, 12 C.F.R. § 226.26(b)(3).

This is a typo. 

(v) use any loan proceeds for postsecondary educational expenses (i.e., tuition, fees, required equipment or supplies, or room and board) at a college/university/vocational school, as the term "postsecondary educational expenses" is defined in Federal Reserve Board Regulation Z, 12 C.F.R. § 226.46(b)(3).

http://www.bankersonline.com/regs/226/suppi226-46.html
http://www.fdic.gov/regulations/laws/rules/6500-1850.html#fdic6500226.46

(3)  Postsecondary educational expenses means any of the expenses that are listed as part of the cost of attendance, as defined under section 472 of the Higher Education Act of 1965 (20 U.S.C. 1087ll), of a student at a covered educational institution. These expenses include tuition and fees, books, supplies, miscellaneous personal expenses, room and board, and an allowance for any loan fee, origination fee, or insurance premium charged to a student or parent for a loan incurred to cover the cost of the student's attendance.

[no-whammies]

.

[DontDefault]

somebody (christoofar?) told a story on here about law students paying for law school with 2nd mortgages and promptly defaulting upon graduation

I could be wrong, but I think 2nd mortgages have recourse, so not only do they lose their house, but technically I think the bank can go after them for the loss too.  I'm pretty sure if you refinance your mortgage and your original mortgage was in a non-recourse state (the bank can't go after you for walking away), the refinanced mortgage becomes recourse.  Not sure about 2nd mortgages.

[bamalucky]

My guess is education loans probably could run afoul of govt guidelines

[ira01]

I don't think I have seen this section before.  Is it new?

(v) use any loan proceeds for postsecondary educational expenses (i.e., tuition, fees, required equipment or supplies, or room and board) at a college/university/vocational school

high rates of default? .. plus some people like to dump their school loans into private unsecured loans prior to defaulting etc. I dont know how prevalent the practice is, but I hear about it.

Yeah, I think it may be because you can write off unsecured loans in bankruptcy, but student loans stay with you forever.  I've heard that if you pay your student loans off using a credit card or similar unsecured debt and promptly declare bankruptcy, the bankruptcy courts will null the transaction and keep the student loan on there.

If you run up any large expenses shortly before filing BK, the BK court is likely to not discharge the debt, because it is fraud to take out a loan (or run up an existing credit account) without the present intention to repay it.  That is not especially uncommon -- someone takes a big vacation, or buys a big plasma TV, or whatever, and then promptly declares BK.  Unless the debtor can show that at the time he/she planned to repay the debt but then some circumstance intervened making the BK suddenly necessary, the debt generally won't be discharged if the creditor objects. 

[Xenon481]

I reported the following listing as violating the BRA due to the post-secondary education prohibition:

https://www.prosper.com/invest/listing.aspx?listingID=512338

The loan has now funded 100% and is awaiting verification. We will see what Prosper does with it.....

Just some quickies from the listing:

- Requested Amount = $4,000
- HR at ~31%
- Net income = $7,000/mo
- Total expenses = $2,500/mo

Why doesn't he just use the $4,500 he has laying around left over after every single month?

[triad]

"Purpose of loan:
This loan will be used to assist me with paying for college. I attend Auburn University in Montgomery and I am majoring in Early Childhood Education. I currently own my own daycare and I hope to obtain this degree so that I may transform my daycare into a school. I am extremely excited about my goal, but I need a little financial assistance so that I will be able to continue earning my degree. Books and classes are extremely expensive, and I would also like to purchase a computer and printer to update the "slow as Christmas" desktop that I have. "

Just another example of Prosper not supervising their site.

That's one I stupidly bid on in 2008.  Credit score in 700s, debt to income ratio 15%.  Made 18 on time payments then disappeared for 16 months.  Made one more payment, then disappeared for another 3 months (feels like 6 since Prosper can't seem to figure out how to timely and accurately post payments when it's in collections.  Amount on listing doesn't match cash).

[Shenandoah]

Prosper's own Help page states

Prosper is unable to offer private education loans for postsecondary educational expenses because some of the rules in the federal law aren’t compatible with our platform. Specifically, the law says that, once the lender approves a loan application, the borrower must have at least 30 days to accept or reject the offer. This rule is incompatible with Prosper’s platform, which requires borrowers to commit to obtaining and repaying a loan in the amount specified if their loan is funded by the end of the listing period.

Doesn't that mean that Prosper is admitting to violating the law if they allow these to go through?

[Xenon481]

Prosper's own Help page states

Prosper is unable to offer private education loans for postsecondary educational expenses because some of the rules in the federal law aren’t compatible with our platform. Specifically, the law says that, once the lender approves a loan application, the borrower must have at least 30 days to accept or reject the offer. This rule is incompatible with Prosper’s platform, which requires borrowers to commit to obtaining and repaying a loan in the amount specified if their loan is funded by the end of the listing period.

Doesn't that mean that Prosper is admitting to violating the law if they allow these to go through?

And Prosper has absolutely zero excuse if the listing has been reported.

[pioneer11]

Lobby?

[ira01]

Lobby?

Seconded.

[wftrust]

Although, as I read elsewhere on the forum today, Prosper the company intends to become a Prosper lender.

Link for the lazy?

http://www.prospers.org/forum/prosper_to_begin_bidding_on_loans-t24638.0.html

Isn't Prosper the lender (owner) on all loans made after the SEC finished with them? So would think the clause would pertain to them as well.