No more dotted line

Beginning next month, student-loan hopefuls will be able to electronically sign their applications with a personal identification number — a system that should simplify the process while eliminating paperwork.

The Education Department's Office of Student Financial Assistance Programs is set to launch the service July 2. Student PINs submitted as part of Title IV education loan applications will be verified against information in OSFAP's PIN database through a commercial system called the Student Authentication Network (Stan), built by NCS Pearson Inc.

Stan verifies that the information associated with a PIN — including the applicant's name, date of birth and Social Security number — matches what's stored on OSFAP's database.

The system will make processing applications easier for commercial lenders and eliminate the dreaded lines students typically face at the start of each school year, said Neil Sattler, project director for OSFAP's Office of Information Resource Management Operations. "Students will no longer have to stand in line to sign promissory notes."

It's also a pioneering effort under digital signatures legislation enacted last year, he added. The Electronic Signatures in Global and National Commerce Act provides a legal basis for using technology to sign contracts and perform other electronic legal transactions.

"It's the coolest thing the government's ever done. Seriously," Sattler said. "This is giving out billions of dollars on the strength of a PIN. No one, clearly, is doing this."

About four months ago, OSFAP asked NCS Pearson — which has worked closely with the performance-based organization for a number of years and built its PIN database — to expand OSFAP's PIN services beyond the Federal Direct Loan Program, said Melanie Barton, business development manager at NCS Pearson. Stan will enable the hundreds of private lenders who issue Title IV loans under the Federal Family Education Loan Program to take advantage of PIN-based electronic signatures, she said.

Lenders will be directed to a Stan Web site, where they can enter applicants' PINs and related personal information for verification with OSFAP's database. A record of that verification creates an "audit trail," stored at OSFAP and by Stan, which creates the binding signature, said Andy Morrical, a systems engineer at NCS Pearson.

All students who request federal funding must complete a Free Application for Federal Student Aid form, on paper or online. When processing those applications, OSFAP automatically issues PINs to students. PINs can also be requested online at pin.ed.gov.

After considering several options, including digital certificates, OSFAP officials chose to use PINs for electronic signatures because it was the "simplest, easiest, wisest solution," Sattler said.

"It's not just the signature, but the strength and legality of it," he said. "It's the process, the method we use that ensures the enforceability."

Morrical said that having lenders enter PIN information directly to the Stan Web site will reduce the chances of data being intercepted. In addition, OSFAP information held by NCS Pearson for verification is encrypted and stored locally — off the Internet and behind a firewall.