| DCLPublicationDate: 11/1/98 DCLID: GEN-98-25 AwardYear: Summary: This letter and its attachments provide detailed information regarding the introduction of a Master Promissory Note for Federal Stafford Loans in the Federal Family Education Loan (FFEL) Program November 1998 GEN-98-25 98-G-315 98-L-211 SUMMARY: This letter and its attachments provide detailed information regarding the introduction of a Master Promissory Note for Federal Stafford Loans in the Federal Family Education Loan (FFEL) Program.*1* Dear Colleague: This letter and its attachments provide details on the introduction of the Master Promissory Note (MPN) in the Federal Family Educational Loan (FFEL) Program as announced in ANN-98-10 dated September 1998. The MPN form, which will first become available for the 1999-2000 academic year, will be the only approved promissory note for FFEL Federal Stafford loans beginning with the 2000-2001 academic year. The new MPN will be used by borrowers to obtain loans for attendance at all schools that participate in the FFEL Program. The MPN is designed to be used as both a single year and as a multi-year note. Under the MPN process, most borrowers will sign a promissory note once, at the time they first borrow. They may obtain additional loans, based on that same note, during the same year or in subsequent years. The use of the MPN as a multi-year instrument will initially not be available to borrowers at all schools. In general, four-year and graduate/professional schools will be authorized to use the multi-year feature of the MPN. In addition, other schools may be designated by ED to use the multi-year feature. Borrowers at schools not using the multi-year feature will sign a new MPN for subsequent borrowing. Borrowers who receive subsequent loans under a previously signed MPN must have participated in either a notification or confirmation process as described in the attachments to this letter. Notification or confirmation will take the place of the requirement that the borrower sign a new note for each academic period. Lenders will continue to provide borrowers with disclosure documents in accordance with the provisions of Section 433 of the Higher Education Act and will inform them of the specific terms and amount of each loan. In order to provide borrowers with the most useful information about their loans, we are developing a Plain English Disclosure Statement that will be provided to borrowers for any subsequent loans provided under the MPN. Some schools using the multi-year feature of the MPN will be asked to be members of a test group of institutions that will evaluate processes for notification or confirmation of proposed loan types and amounts. These tests could include obtaining the borrowerÂ’s input, during the loan certification stage, prior to the initial disbursement of each subsequent loan, or prior to each disbursement of a loan. For academic year 1999-2000, the schools in the test group will be asked to design the notification or confirmation approaches they will subsequently test in academic year 2000-2001. Additional information on this test process will be provided at a later time. The MPN forms are currently in the formal clearance process as is required by the Paperwork Reduction Act of 1995. Once cleared, FFEL lenders and guaranty agencies will be free to distribute the forms either to schools or directly to FFEL borrowers for use for the 1999-2000 academic year (loan periods beginning on or after July 1, 1999). Alternatively, the current FFEL Application/Promissory Note form can continue to be used for the 1999-2000 academic year. However, the new MPN form must be used for all Federal Stafford Loans beginning with the 2000-2001 academic year (for loan periods beginning on or after July 1, 2000 and for any loan certified on or after July 1, 2000, regardless of loan period). On October 2, 1998 we posted to our Information for Financial Aid Professionals (IFAP) website (http://www.ifap.gov) drafts of the new MPN for both the FFEL and Direct Loan programs, along with drafts of several supporting documents. These forms can be accessed at the IFAP site by going to the listing for "Electronic Announcements" and opening the October 2, 1998 announcement on this subject. The forms can be viewed with version 3.0 or greater of the free Adobe Acrobat Reader software. The attachments to this letter provide additional detailed information on the new MPN process Schools may contact the guaranty agencies or FFEL lenders they normally work with to determine how they plan to implement the new Master Promissory Note process. As noted in our earlier letter (ANN-98-10) I would like to thank many members of the FFEL community, schools, and student groups, all of whom helped advance this effort to streamline the loan process for our students and schools. Sincerely, Diane E. Rogers Acting Chief Operating Officer Office of Student Financial Assistance Programs *1* As announced in ANN-98-10, the Department is also developing a Master Promissory Note for use by borrowers attending schools that participate in the Direct Loan Program. Most of the borrower and school requirements discussed in this letter for the FFEL MPN will also apply to the Direct Loan MPN. Additional information about the introduction of the MPN in Direct Loans will be provided in a separate communication. LIST OF ATTACHMENTS Attachment A: Multi-year Feature of the MPN Attachment B: Rights and Responsibilities of a Borrower Who Uses the MPN Attachment C: Examples of Notification and Confirmation Attachment D: Tests of Alternatives for Notification and Confirmation Attachment E: Features of the Federal Stafford Loan Master Promissory Note Attachment F: BorrowerÂ’s Rights and Responsibilities Form Attachment G: Paper Federal Stafford Loans School Certification Form Attachment H: Printing Instructions for Forms Attachment A Attachment B Attachment C Attachment D Attachment E Attachment F Attachment G Attachment H |