| AwardYear: 1995-1996 EnterChapterNo: 10 EnterChapterTitle: Federal Family Education Loan Programs SectionNumber: 7 SectionTitle: The Loan Application Process PageNumbers: 75-92 A borrower may obtain an FFEL application from a guaranty agency, a lender, or a school that participates in the FFEL Program. A common loan application and promissory note was provided to guarantors for use by students applying for a subsidized or unsubsidized Federal Stafford Loan certified on or after July 1, 1994. You should have received a supply of the new common loan application/promissory note WITHOUT a guaranty agency's name in the upper right corner, along with a supply of forms that may have a guaranty agency's logo in the corner. Please note that even if a guaranty agency's name appears in the upper right corner of the form the student uses, there is no reason another guaranty agency cannot process the form. If guaranty agencies use the common form as part of a renewal application process, borrower information and a prior lender and code number may be preprinted on the form, if the borrower has previously received a loan from that lender. [[EFT and new loan application]] A guaranty agency may use an electronic application process, but must include all of the information on the common loan application, the promissory note, and borrower's rights and responsibilities as part of the application process. The student's authorization on the application to transfer loan proceeds by Electronic Funds Transfer (EFT) is an approved means of crediting the student's loan account with the loan proceeds. If your school participates in EFT and the borrower does not authorize transfer of funds (Item 15 on the application) or leaves the item blank, the lender may transfer the loan proceeds by EFT, but you will need authorization from the borrower to transfer proceeds from the school account to the student's account. If you have a question about the new common loan application and promissory note, contact the guaranty agency in your state for clarification. The Federal PLUS loan application is a separate application, also available from lenders and guarantors, that requests the same basic information as the Stafford Loan application. A common PLUS loan application was approved on April 29, 1994. If a student is unable to find a lender willing to make a Stafford Loan, he or she should contact the guaranty agency in his or her state of residence for assistance in finding a lender of last resort (LLR). See page 10-78 for more information about the LLR. An FFEL application will contain three sections: one to be filled out by the borrower, one to be filled out by the school, and one to be filled out by the lender. The borrower is responsible for filling out - - the student (borrower) portion of the loan application; and - the promissory note. [[Promissory note--defintion]] The promissory note is a legal document obligating the borrower to repay the loan. The borrower's rights and responsibilities will be stated on the promissory note, or on other documents the borrower receives when the loan is made. The promissory note is returned to the borrower when the loan is repaid. THE STUDENT'S (BORROWER'S) PORTION In addition to basic information such as name, address, date of birth, and Social Security Number, questions on the student's portion of the application will ask for the student's driver's license number and loan period. The lender's name may be provided if the student has a preference, and the student will be asked for two references. The student will be asked several questions about the loans requested, and will be required to read and sign the promissory note. THE SCHOOL'S PORTION [[School determines eligibility]] You are responsible for determining the student's cost of attendance and estimated financial aid. You are also expected to confirm the student's dependency status and Social Security Number. THUS THE SCHOOL, AND NOT THE LENDER, DETERMINES THE STUDENT'S ELIGIBILITY FOR A STAFFORD OR PLUS LOAN. (An eligible foreign school is also responsible for this analysis, although it generally contracts with a guaranty agency or a consultant to provide the analysis.) You must determine whether the student previously attended another eligible institution and, if so, you must request a financial aid transcript for the student. You may certify the loan application before receipt of the student's financial aid transcript, but you may not release loan proceeds to the student until the transcript is received. (In the case of a PLUS, you may NOT certify the application until the financial aid transcript is received.) [[Increased school control over loan certification]] Financial aid administrators may refuse to certify an otherwise eligible FFEL borrower's loan application, if the reason for the refusal is documented and provided in writing to the student. This includes the authority to refuse to certify a loan application if you believe the student is unwilling to repay the loan for which the application is intended. Similarly, you may certify a loan for an amount less than that for which the student would otherwise be eligible, if your reasons are documented and explained to the student in writing. The FFEL Program regulations, Section 682.603(e), provide cautionary information about the use of this restriction on loan certification. Questions on the school's portion of the application will require determination of the following: DEPENDENCY STATUS In order to determine the sources of income available to a student, you must establish his or her dependency status. The Higher Education Amendments of 1992 revised the definition of an independent student. The new definition was effective beginning with the 1993-94 award year. [[Dependency status---see Chapter 2]] For more information on dependency status, see Chapter Two of the Handbook. LOAN PERIOD OR PERIOD OF ENROLLMENT Information concerning "cost of attendance," "estimated financial aid," and "expected family contribution" must relate to the loan period. The period of enrollment or loan period referred to on the application is the period for which the FFEL loan is intended, and must coincide with one or more of a school's academic terms, such as academic year, semester, trimester, or quarter. [[Minimum enrollment period for loan certification]] The MINIMUM period for which a school may certify a loan application is - - at a school that measures academic progress in credit hours and uses a semester, trimester, or quarter system, a single academic term (for example, a semester or quarter); or - at a school that measures academic progress in clock hours, or that measures academic progress in credit hours but does NOT use a semester, trimester, or quarter system, the lesser of (1) the academic year as defined by the school in accordance with the General Provisions regulations, (2) the length of the student's program at the school, or (3) the remaining portion of the student's program that exceeds the school's academic year. The MAXIMUM period for loan certification is generally the school's academic year. Only if a summer school session overlaps two academic years do you have the discretion to decide to which of the two academic years in question the loan's enrollment period will apply. Whichever academic year is chosen, the same year must also be used for awarding campus-based aid for that period. If a student's loan is certified after the beginning of an enrollment period, the FFEL loan may be made retroactive to cover the entire period of enrollment. For example, a student is admitted to a degree program contingent on the receipt of an acceptable academic transcript, and begins the academic term on September 6. The school receives the transcript on October 15; the school may certify the student for a period of enrollment covering the entire term (September 6 through December 20). If tuition and fees are charged to the student at the beginning of a program that is longer than an academic year, the cost of attendance for FFEL programs should include the full amount of the tuition and fees charged in the PERIOD OF ENROLLMENT in which the loan is made. For example, a school with a 1,350-hour program defines its academic year as 900 hours and charges its students the full $3,000 in tuition and fees at the beginning of the program. In this case, an enrolling student usually would be eligible for two Stafford Loans, because the program is longer than one academic year. The tuition and fee charge for the first Stafford Loan would be $3,000; there would be no tuition and fee component in the cost of attendance for the second Stafford Loan. However, for loans for which the first disbursement is made on or after July 1, 1993, the amount of the second Stafford Loan would be prorated, since the remainder of the program (450 hours) would be less than the school's academic year. See "Loan Limits" in Sections Two and Three for more information on proration of loans. COST OF ATTENDANCE An estimate of the cost of attendance (COA) at your school is required as part of the process of determining financial need. The cost of attendance requirements for all SFA programs are now the same, and are described in detail in Chapter Two of this Handbook. EXPECTED FAMILY CONTRIBUTION The amount a student and his or her family are expected to pay toward the student's cost of attendance at a postsecondary school is called the federal expected family contribution (EFC). The Higher Education Amendments of 1992 established a single need analysis system, called the EFC, for all need-based SFA programs. Beginning with the 1993-94 award year (July 1, 1993 to June 30, 1994), the EFC formula replaces both the Congressional Methodology (CM) and the Pell Grant Formula. Chapter Two of the Handbook explains how this new need analysis system works. A financial aid administrator may use his or her professional judgment to adjust the EFC to account for unusual circumstances affecting the student or the student's family. Such adjustments, however, must be documented in the student's file. Note that income realized from the proceeds of the sale of farm or business assets (capital gain) is excluded from the family income of a student in calculating that student's EFC under the Stafford Loan Program, IF the sale results from a voluntary or involuntary foreclosure, forfeiture, or bankruptcy. Instructions concerning these exclusions of income are provided on the Free Application for Federal Student Aid (FAFSA) and on all multiple data entry forms. [[Other loans can offset EFC for Stafford Loans]] Loans made on behalf of a student under PLUS, unsubsidized Stafford Loans, loans made by a school to assist the student, and state-sponsored and private education loans all can be used to offset (substitute for) part or all of the student's EFC for Stafford Loans and other need-based SFA programs. The following chart is an example of how non-federal aid may be substituted for the EFC in determining a student's financial aid package. John, a student at Grist Mill College, has a COA of $7,000, and an EFC of $1,500. John's financial aid includes a Pell Grant of $1,500, an SEOG of $500, a Futuri Scholarship of $500, and a state-sponsored loan of $2,000. His estimated financial assistance (EFA) of $4,500 added to his EFC ($1,500) would appear to leave him with unmet need of $1,000. COA EFA EFC unmet need $7,000 $4,500 $1,500 $1,000 However, because the state-sponsored loan may offset (replace) the EFC, Grist Mill may approve John's subsidized Stafford Loan application for $2,500. COA EFA EFC Stafford Loan $7,000 $4,500 0 $2,500 Note that the $2,000 state loan is greater than the EFC - the negative EFC is set to zero. Notice that $2,500 is the maximum subsidized Stafford Loan amount that Grist Mill may approve in this example. You may want to establish need for the subsidized Stafford Loan before other loans are figured into the aid package - you must do so in the case of unsubsidized Stafford and PLUS loans - to enable the student to receive the maximum subsidized Stafford Loan amount. [[No EFC required for PLUS]] Calculation of an expected family contribution is not required of a PLUS borrower. ESTIMATED FINANCIAL ASSISTANCE In determining the amount of Stafford Loan eligibility, you must subtract from the cost of attendance both the EFC and the estimated financial assistance for the loan period in question. As noted earlier, for unsubsidized Stafford Loans and PLUS loans, you subtract only the estimated financial assistance from the cost of attendance, since an EFC is not required. In estimating financial assistance you must consider state aid, and must inform the student about any state grants for which he or she may be eligible. You must also consider scholarships and other awards, and any other federal financial aid for which the student would be eligible, even if the student has not yet applied for the aid. ROTC scholarships and subsistence allowances also should be included in estimating financial assistance. See Chapter Two of the Handbook for more information on estimated financial assistance. Remember, ALL student employment that is awarded based on financial need (regardless of whether the award originates in the financial aid office) is considered as estimated financial assistance in determining Stafford Loan eligibility. (Student earnings which are not need-based are considered as income in determining eligibility.) CHANGE IN DEFINITION OF ESTIMATED FINANCIAL ASSISTANCE Effective July 1, 1995, estimated financial assistance is defined as the estimated amount of assistance for a period of enrollment that a student (or a parent on behalf of a student) WILL RECEIVE from Federal, State, institutional, or other sources, such as scholarships, grants, financial need-based employment, or loans. This includes the estimated amount of other federal student aid, such as -- - Federal Pell Grant; - campus-based aid; - loans, such as: * Federal Stafford Loans * Federal Unsubsidized Stafford loans (excluding amounts used to replace EFC); and * Federal PLUS loans (excluding amounts used to replace EFC). [[Change in EFA provisions]] Please note that the definition of "estimated financial assistance" now excludes the amount of expected Federal Perkins Loan or federal work-study aid if the borrower did not apply for those funds. The following illustration summarizes subsidized Stafford Loan eligibility determination: COST OF - ESTIMATED - EXPECTED ATTENDANCE FINANCIAL FAMILY ASSISTANCE CONTRIBUTION (includes Pell, SEOG, other federal student aid, and non-federal aid, such as scholarships) = NEED FOR SUBSIDIZED STAFFORD LOAN Once the need for a Stafford Loan is established, PLUS, unsubsidized Stafford Loans, school loans, and state-sponsored or other private loan programs can be used to offset (replace) all or part of the EFC. Formerly, if an independent student was receiving veterans education benefits, the portion of those benefits that was not included in calculating the EFC was considered as estimated financial assistance in determining Stafford Loan eligibility. However, beginning with the 1993-94 award year, no veterans education benefits will be included in the new need analysis formula (the EFC). Therefore, ALL veterans education benefits are to be included in estimating financial assistance. In the case of a PLUS (for which no EFC is required), the entire amount of those benefits must be counted as estimated financial assistance. See Chapter Five of the Handbook for more information on counting veterans benefits. [[Subsidized Stafford loans cannot exceed need]] Formerly, a student whose unmet need was $500-$999 could receive a subsidized Stafford Loan with federal interest benefits for a loan up to $1,000, subject to the lender's approval, even if that amount exceeded the student's loan eligibility. Now, students may NOT receive an interest-subsidized loan in excess of their need; this means, for example, that a student whose unmet need is $600 may apply, and be certified for, a subsidized Stafford Loan with federal interest benefits for no more than $600. An unsubsidized Stafford Loan cannot exceed the student's cost of attendance minus: the total of any aid the student is eligible to receive from the Pell Grant and subsidized Stafford Loan; aid from state aid, scholarships and other awards; and other federal financial aid for which the student is eligible. ADDITIONAL FACTORS IN DETERMINING LOAN ELIGIBILITY [[Undergrad Stafford applicants must have Pell eligibility determined by FAFSA]] Before certifying a Stafford Loan application, you must determine whether an undergraduate applicant has applied for a Pell Grant using the Free Application for Federal Student Aid, if your school participates in the Federal Pell Grant Program. If the student is eligible to receive a Pell Grant, the amount for which the student is eligible must be included in the estimated financial assistance in determining the subsidized Stafford Loan amount, whether or not he or she actually accepts the Pell Grant. The Pell eligibility determination requirement does not apply to applicants for PLUS loans. [[EFA must be determined for PLUS]] For parent PLUS borrowers who are not eligible for any other SFA programs, and are not required to file an application for federal student aid, you must determine other estimated financial assistance, and subtract that amount from the cost of attendance to determine eligibility for a PLUS. Effective for periods of enrollment that begin on or after July 1, 1994 (or including that date), for purposes of the PLUS program, estimated financial assistance need not include and UNSUBSIDIZED Stafford Loan unless the dependent student is seeking such a loan. LOAN CERTIFICATION REQUIREMENTS [[Default reduction requirements]] Before certifying a Stafford Loan, you must ensure that certain regulatory and statutory restrictions have been met: - You must delay certification for FIRST-TIME UNDERGRADUATE STAFFORD BORROWERS long enough so that delivery of loan proceeds will take place at least 30 days after the beginning of the enrollment period for which the loan is intended. See Section Nine, under "Default Reduction Initiatives" for a more detailed explanation of this requirement. - You must certify that the loan disbursement schedule provided with each application meets the disbursement requirements for Stafford Loans (see Section Nine under "Default Reduction Initiatives" for more information on the loan disbursement requirements). You must prorate Stafford Loans for programs of study that are less than an academic year and for programs in which the "remaining balance" is less than an academic year in length. In addition to the requirements described above, a school may not certify a Stafford or PLUS loan application until the following requirements also are met: - The student's dependency status, enrollment status, and satisfactory academic progress have been established. - A student (or the student and parent in the case of a parent PLUS loan) certifies that he or she is not in default on a Perkins Loan, Stafford Loan, SLS, PLUS, or Consolidation Loan made for attendance at ANY institution, and does not owe a refund on any SFA grant or scholarship program received for attendance at any institution. Financial aid transcripts for students who indicate previous attendance at another eligible school are required as part of this certification. (See Chapter Two of the Handbook for more information on financial aid transcripts.) - A determination of Pell Grant eligibility is made for Stafford Loan applicants. [[Loan amount cannot exceed:]] for subsidized Stafford Loans, the student's need]] - The school reviews its academic and financial aid records, verifies the information certified by the borrower (and the student, in the case of a PLUS) concerning previous loans or grants, and determines that the total loan or loans certified for that period of enrollment will not exceed annual or maximum loan limits and (1) for subsidized Stafford Loans, the student's financial need as determined by an approved need analysis system; (2) for unsubsidized Stafford Loans or PLUS loans, the student's cost of attendance less estimated financial assistance. [[for unsubsidized Stafford or PLUS, COA less estimated financial assistance]] Students who in any academic year borrow more than the annual loan limits for which they are eligible under the Stafford Loan or Perkins Loan programs will lose their eligibility for further SFA program assistance for that academic year. Students who borrow in excess of their aggregate maximum loan limits will lose eligibility for all SFA programs. - Conflicting information with regard to verification requirements is satisfactorily resolved. (See the "Verification Requirements" section under Section Eleven.) - The school can provide documentation of the student's statement of registration status. - The school has provided loan counseling for first-time borrowers. [[School is responsible for loan certification]] You should be aware of the responsibility incurred in certifying the loan application. If you incorrectly certify that an ineligible student is eligible, your school will be responsible for purchasing the loan incorrectly made, and for reimbursing the U.S. Department of Education for all interest and special allowance paid on behalf of the borrower. If you certify that a student is eligible for a larger loan than he or she is entitled to, your school will be responsible for reimbursing the lender for the difference between the loan amount certified and the loan amount to which the student is entitled. Your school must also reimburse the Department for the excess interest and special allowance payments made on the incorrect loan amount. (See the FFEL Program regulations, Section 682.609, for more information on remedial actions.) Be sure to include your school's OPE/ID number when certifying FFEL application forms. Some of the most common errors schools make in certifying loans are - - certifying loans for more than the amount allowed; - certifying loans to students not making satisfactory academic progress; - certifying loans to students in ineligible programs or attending an ineligible branch campus; - certifying loans to ineligible students, such as foreign students on student visas; and - certifying more than one application for the same student for the same loan period, resulting in loans in excess of need and in excess of loan limits. If a subsidized Stafford Loan applicant has been selected for verification, you have two options. You may either -- - refuse to certify the Stafford Loan application until verification is completed; or - certify the application, if there is no information which conflicts with that provided by the applicant, but you may not deliver Stafford Loan proceeds to the borrower until verification is completed. If the school has received Stafford Loan proceeds for a student, funds must be returned to the lender if the verification process is not completed within 45 days of the school's receipt of loan proceeds. See "Verification Requirements" under Section Eleven for more information on verification. After completing the school's portion of the application, you certify that the information you have provided is correct, and that the information provided by the student or parent (if the loan is a PLUS) is accurate to the best of your knowledge. Keep one copy of the application on file. The student (or the school on behalf of the student) sends the other copies of the application to the lender along with the promissory note, if included. The date of loan certification is the date the school official signs the loan application and submits it to the lender - unless the school uses another means of documenting the date it submits the application to the lender. HANDLING OVERAWARDS [[Return to lender of award in excess of need:]] An overaward is an award in excess of need, and usually occurs when, after determining estimated financial assistance and certifying a Stafford Loan, the financial aid administrator learns of additional financial assistance available to the student, such as a grant or scholarship. Until recently, schools were not required to return Stafford Loan proceeds if, after certifying the loan, the school became aware of additional financial assistance. The law now requires that an overaward of Stafford Loan proceeds be promptly returned to the lender, taking into account other financial aid obtained by the student. The school must provide the lender with a written statement explaining why the funds were returned. [[1) before loan proceeds arrive at school]] If, after the loan has been certified, but before the loan proceeds are received, the school becomes aware of additional financial assistance for the student that could result in an overaward, the school can request that the lender cancel or reduce the Stafford Loan. The school also has the option at this point of reducing or canceling aid over which it has control, such as institutional or campus-based aid. The $300 overaward tolerance permitted in the Federal Work-Study Program is not considered to be an overaward for the purpose of the Stafford Loan Program. [[2) after disbursement has been received at school]] When an overaward is identified after the loan proceeds have been received by the school, the school may attempt to reduce or eliminate the overaward by using a student's PLUS or unsubsidized Stafford Loan to replace the family's EFC. HOWEVER, THE SCHOOL MUST REPAY SUBSIDIZED AND UNSUBSIDIZED STAFFORD LOAN FUNDS TO THE LENDER TO ELIMINATE THE OVERAWARD BEFORE ADJUSTING OR CANCELING A STUDENT'S UNDISBURSED CAMPUS-BASED AID. If the overaward can be eliminated by reducing or canceling subsequent disbursements of the loan, the school may do so and deliver the first disbursement to the student. The school must inform the lender of the reduced award, and request cancellation or reduction of subsequent disbursements. If the student is ineligible for the entire loan disbursement, and the overaward cannot be reduced or eliminated, the school must return the loan proceeds to the lender, and the lender must credit to the borrower's account the portion of the insurance premium and origination fee attributable to the amount returned. [[Options for return of part of disbursement]] If the student is ineligible for only a part of the disbursement, the school has two options. (1) The school may return the loan proceeds to the lender and request a new check for the correct amount. If the school chooses this option and asks for a new disbursement, the student will pay only for the reduced insurance premium and origination fee (if applicable) attributable to the reduced loan amount. (2) The school may have the student endorse the loan check or, in the case of a loan disbursed by electronic funds transfer, obtain the student's authorization to release loan funds. The school may then credit the student's account for the amount for which the student is eligible, and promptly refund to the lender the portion of the disbursement for the which the student is ineligible. THE SCHOOL AND NOT THE STUDENT MUST RETURN THE EXCESS LOAN PROCEEDS. If the school has credited the loan proceeds to the student's account because the student is eligible for a portion of the disbursement, the lender does not have to refund the portion of the insurance premium and origination fee attributable to the amount returned. The following example shows possible resolutions of an overaward: Stan's subsidized Stafford Loan was certified for $2,000 - $1,000 for each semester of the school year. Stan received a scholarship for $500 after the first disbursement of $1,000 was received by his school. Stan's need for the loan period is now $1,500. Stan's school could: - return the loan proceeds to the lender and ask for a revised loan amount of $1,500 in two $750 installments; - deliver $750 of the first disbursement to Stan, return $250 to the lender, and request the lender to reduce the second disbursement by $250, in order to disburse the revised loan amount in two equal installments; or - deliver $500 of the first disbursement to Stan, and return the remaining $500 to the lender, to eliminate the entire overaward in the first disbursement. The second disbursement would be for $1,000. When an award in excess of need is identified after all Stafford Loan proceeds have been delivered to the student, an overaward does not exist and a refund to the lender is not required. NOTE: These instructions for handling overawards do not apply to Stafford Loans made to cover the cost of attendance at a school outside the United States, or to PLUS or Consolidation Loans. THE LENDER'S PORTION The lender reviews the Stafford Loan or PLUS application, and completes the lender portion of the loan application. A lender may not discriminate against an applicant on the basis of race, national origin, religion, sex, marital status, age, or handicapped status. However, a lender may decline to make loans to students who do not meet the lender's credit standards, or to students at a particular school, or enrolled in a particular program of study. A lender may require an endorser to sign the promissory note, if permitted to do so by the guarantor. A lender may decline to make FFEL loans for less than a specified amount; for example, a lender could refuse to make a loan for less than $500. [[Lender of last resort provisions]] A student who is otherwise eligible for a subsidized Stafford Loan and, after not more than two rejections, has been unable to find a lender willing to make such a loan should contact the guaranty agency in his or her state of residence or the guaranty agency in the state in which the student's school is located. The guaranty agency either must designate an eligible lender to serve as a lender of last resort (LLR) or must itself serve in that capacity, and must respond to the student within 60 days. A loan made by an LLR may not exceed the borrower's need, nor be for an amount less than $200. The LLR, as with any other lender, may refuse to make the loan if the borrower fails to meet the lender's credit standards. The Higher Education Amendments of 1992 require each guaranty agency to develop rules and procedures for its LLR program. More detail on new LLR provisions is found in Dear Colleague letter 93-S- 71 (November 1993). The lender must receive approval of the guaranty agency for a Stafford Loan to be eligible for payment of federal interest benefits. A lender or guaranty agency may not make or guarantee a Stafford Loan or PLUS until it reviews its records and finds no indication that the applicant (and the student, if the loan is a PLUS) is in default on an SFA loan made for attendance at ANY institution. Once guaranty agency approval is obtained, the lender will send the Stafford Loan proceeds (or the first disbursement of the proceeds) to the school's financial aid office for delivery to the student, or will send the proceeds directly to the student if he or she is enrolled in a foreign school. For a PLUS, loan proceeds are sent to the school by electronic funds transfer or by a check made co-payable to the school and the parent borrower. [[Loan disclosure statement required]] The lender must also give the borrower a copy of the loan disclosure statement when the first loan disbursement is made. For Stafford Loan borrowers, loan disclosure information must be provided not less than 30 or more than 240 days before the borrower's first payment is due. The disclosure statement will provide the borrower the following information: - a statement IN BOLD PRINT stating that THIS IS A LOAN THAT MUST BE REPAID; - the name and address of the lender and the address to which communications and payments should be sent; - a statement that the lender may sell or transfer the loan to another party, and that the address and identity of the party to which correspondence and payments should be sent may change; - the length of the grace period; - the estimated balance owed by the borrower on the loans covered by the disclosure statement as of the date on which repayment is due to begin (including capitalized interest, if applicable); - the stated interest rate on the loan or loans, or the combined interest rate of loans with different rates; - the amount of the loan, the insurance premium, the loan origination fee, and any other charges, and how they are to be paid; - the yearly and cumulative maximum amounts that may be borrowed; - a statement that information concerning the loan (including the amount of the loan and the date of disbursement) will be reported to a credit bureau; - the repayment schedule, including when repayment will begin, when accrued interest must be paid, and the number, amount, and frequency of required repayments; - the minimum annual payment required, and minimum and maximum repayment periods; - an estimate of the monthly payment due the lender, based on the borrower's cumulative outstanding debt (including the loan applied for); - refinancing and consolidation options; - for subsidized Stafford Loans, the projected total of interest charges the borrower will pay, if payments are made according to the repayment schedule; for unsubsidized Stafford Loans and PLUS loans, sample projections of monthly payments at various interest rates and with interest capitalization; - a statement of the borrower's right to prepayment; - a statement of circumstances under which repayment of principal or interest on the loan may be deferred, and an explanation of forbearance; - notice of the Department of Defense repayment option (as an enlistment incentive); - the definition of default (including its consequences); - the effect of the loan on eligibility for other student assistance; and - an explanation of borrower costs incurred in collection of the loan. The information on the disclosure statement will be the most up-to- date information concerning the loan, and will reflect any changes in laws or federal regulations that may have occurred since the promissory note was signed. If there is any conflict of information between the promissory note and the disclosure statement, the information on the disclosure statement applies. If the student has questions about the statement, or wishes to cancel the loan, he or she should contact the lender immediately and should NOT endorse a loan check or an electronic funds transfer form authorizing transfer of loan proceeds to his or her account. For Stafford Loan borrowers, the lender or holder of the loan must notify the borrower, not later than 120 days after the borrower has left school, of the date repayment begins. [[Borrower notification requirements]] For borrowers in the grace period or in repayment, the lender (or holder of the borrower's loan) is now required to keep the borrower informed of address changes. The borrower must be notified not later than 45 days after a lender assigns, transfers, or sells his or her Stafford, SLS, or PLUS loan to another lender, if the result is a change in the party (new holder or servicer of the loan) to whom payments must be sent. The borrower must be provided the following information: - the identity of the purchasing lender, and the name and address of the new lender or servicer; - notice of the loan assignment; and - the telephone number of both the purchasing and selling lenders and servicers. Notification of this change must be made either jointly or separately by purchasing and selling lenders. If a borrower is in a grace period or in repayment, the last school the borrower attended before the beginning of the repayment period may request from the guaranty agency notification of the sale, transfer, or assignment of the loan to another holder, and the address and telephone number of the new holder of the loan. |