In June 2000, President Clinton signed the Electronic Signatures in Global and National Commerce Act (E-Sign Act). This Act provided for the use of electronic signatures in business, including the federal financial aid industry. The use of this technology has been implemented in the federal financial aid application process with students and parents obtaining and using a Personal Identification Number (PIN) in lieu of their signature on the Free Application for Federal Student Aid (FAFSA) when completed online at FAFSA on the Web. It is also being used in the student loan process.
An electronic signature is an electronic sound, symbol or process attached to or logically associated with a contract or other record, and executed or adopted by a person with the intent to sign the record. The events to originate a student loan using an electronic signature may follow this path:
- Student enters an eNote Web site and reads notice.
- Student clicks statement that he/she has read consumer consent disclosure and agrees to an eNote process.
- Student enters identification credential.
- An authentication authority verifies identity.
- Student clicks acknowledgement of certifications, authorizations, disclosures and rights.
- Loan data is displayed to the student.
- Student adds/modifies information on the eNote which includes references, driver’s license number, e-mail address, etc.
- Student completes eNote.
- Student reviews completed eNote.
- Student clicks final confirmation page, which includes student identifiers and date signed.
- Student prints or saves eNote.
The law provides, in part, that electronic signatures, contracts and other records related to a transaction may not be denied legal effect, validity or enforceability solely because it is an electronic form, or because an electronic signature or electronic record was used in its formation. It does not require the use of electronic signatures, but rather provides the option for institutions that want to use the technology. In addition, the law is technology-neutral, meaning that it does not dictate the type of technology that is to be used for electronic signatures.
The U.S. Department of Education (ED) has issued a Standards for Electronic Signatures in Electronic Student Loan Transactions document which establishes standards regarding electronic signatures and implementation of certain provisions of the E-Sign Act. Dear Partner Letter GEN-01-06 informed the student aid community that with the passage of the E-Sign Act, ED, guaranty agencies, lenders, schools and borrowers will be allowed to use electronic records and electronic signatures in place of traditional paper records and handwritten signatures.