Private Loan Partnerships: Legal Risks and Compliance for Institutions
Given recent changes to borrowing limits set by the One Big Beautiful Bill Act (OBBBA),1 private lenders have become even more relevant in the student loan marketplace. Beginning July 1, 2026, professional students (law students, medical students, etc.) are limited to $50,000 annually in Federal student loans, and graduate students are limited to $20,500 per year. These limits will cause many students to turn to the private loan market to meet the full cost of law school tuition, making it more important than ever for lenders and institutions to clearly communicate how they can financially support student borrowers. However, both parties must ensure that they are complying with all relevant federal laws and regulations when entering into partnerships and otherwise promoting private loan products on campus. Many lenders have strengthened partnerships with financial aid offices through preferred lender arrangements and educational programs to meet this upcoming need. Other lenders are engaging students directly by offering paid internships or “ambassadorships” where students promote private lenders and share available loan options with their peers.
Key Takeaways •
Institutions and lenders must follow federal preferred lender rules regarding disclosure and reporting requirements related to education loans.
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Other federal laws also apply to schools, lenders, and third-party servicers promoting private lenders and loan products.
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Students promoting a lender’s loan product while employed by the lender or another third party could be viewed as an “agent” of the school.
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Even if schools do not directly hire students, their actions could make the promotion appear school-connected, thus triggering legal obligations.
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Schools have affirmative duties under the law to ensure that no misleading information is conveyed, avoid bias or steering, and disclose relationships clearly.
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Schools should limit or carefully control on-campus solicitation and address conflicts involving students who hold institutional roles, such as financial aid workers, peer advisors, or resident assistants.
Preferred Lender Arrangements Preferred Lender Arrangements (PLAs) refer to formal partnerships between a university and private lenders where the institution recommends or endorses the lenders’ loan products. Preferred Lender Lists (PLLs) are the physical or digital roster of those lenders under the PLA. In exchange, borrowers at these institutions receive benefits like institutionally vetted loans, better loan terms, streamlined processes, or other perks while the lender receives a marketing advantage. 1 One Big Beautiful Bill Act, H.R.1, 119th Congress (2025), https://www.congress.gov/bill/119th-congress/house-bill/1/text.
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