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(L-02-235) Summary: Multi-Year Use of Master Promissory Notes by Schools

Publication Date: December 2002

DCL ID: L-02-235

Summary: Multi-Year Use of Master Promissory Notes by Schools.

November 2002

GEN-02-10
G-02-341
L-02-235

Subject: Multi-Year Use of Master Promissory Notes by Schools

Summary: Most schools are approved for multi-year use of Master Promissory Notes in the FFEL and Direct Loan programs.

Date: November 2002

Dear Colleague:

The regulations that govern the use of the Master Promissory Note (MPN) in the Federal Family Education Loan (FFEL) and the Federal Direct Loan (Direct Loan) programs allow student and parent borrowers at most four-year colleges and graduate or professional schools to use the multi-year feature of an MPN [See 34 CFR 682.401(d)(4) and 685.402(f)]. Borrowers attending those schools may receive loans for subsequent academic years based upon a previously signed MPN and are not required to sign another note. The regulations also provide that the Secretary may approve multi-year use of the MPN for borrowers at other schools or preclude the use of the multi-year feature of an MPN at an otherwise eligible school, including a four-year or graduate school.

The limitations on the use of the multi-year feature of the MPN were originally designed to provide an opportunity for the Secretary to monitor the new process before deciding whether to expand its use. We now believe that it is appropriate to authorize borrowers at additional schools to use the multi-year feature of the MPN. Therefore, unless a school is specifically informed otherwise, all schools participating in the FFEL or Direct Loan programs that are located in the United States may allow their student borrowers (and parent borrowers under the soon to be released PLUS MPN [1]) to use the multi-year feature of the MPN. Borrowers attending foreign schools may not use the multi-year feature of the MPN unless the Department specifically informs the school that its borrowers may use the multi-year feature of the MPN.

Under this new policy guidance students who are attending schools that are not four-year colleges or graduate or professional schools (or their parents) are eligible to receive loans for subsequent academic years based upon a previously signed MPN (even if that MPN was signed by the borrower prior to the effective date of this policy change). We urge schools to make certain that their students are aware of this change to the loan application process and its implications for them as Federal student loan borrowers.

This new authority is effective beginning with -

  • Any FFEL loan that is certified by a school on or after March 1, 2003, regardless of the period covered by the loan. We encourage FFEL lenders and guaranty agencies to inform schools when, and under what conditions, they will be able to implement this new authority.

  • Any Direct Loan for the 2003-2004 year that is processed after the 2.0 Release of the Common Origination and Disbursement System. Specific implementation information will be provided in a forthcoming Direct Loan Bulletin.


Please note that institutions and lenders are not required to use the multi-year feature of the MPN. Under existing policy, a school that is eligible for multi-year use of the MPN may decide that it wants all or some of its borrowers to continue to complete and sign a new MPN each year. Similarly, a lender may require a borrower to sign a new MPN to receive a loan from that lender. Most importantly, individual borrowers always have the option of signing a new MPN.

Guidance on the use of the MPN in the FFEL and Direct Loan programs is included in the Student Financial Aid Handbook in Volume 8 (Direct Loan and FFEL Programs) beginning on page 8-37. Particular attention should be paid to the provisions relating to borrower confirmation and the expiration of an MPN for subsequent loans.

If you have any questions about multi-year use of the MPN, please contact the FSA Customer Service Call Center through any of the following means:

Via phone, Call Center staff members are available Monday through Friday between the hours of 9:00 AM and 5:00 PM (Eastern Time) at 1-800-433-7327. After hours calls will be accepted by an automated voice response system. Callers leaving their name and phone number will receive a return call the next business day.

Via FAX, inquiries should be sent to the Call Center at (202) 275-5532.
Via e-mail, inquiries should be directed to the Call Center staff at FSA.Customer.Support@ed.gov.
Via the Schools Portal on the Internet, by going to http://fsa4schools.ed.gov then clicking on the "Got a Question?" button.

Sincerely,

Jeffrey R. Andrade,
Deputy Assistant Secretary
Office of Postsecondary Education

[1] Additional guidance on the use of the new PLUS MPN will be provided shortly. In addition, we are currently working on an MPN for the Federal Perkins Loan Program. It is the Secretary's intent to approve all schools that participate in the Perkins Program for multi-year use of the new Perkins MPN. Specific guidance on the Perkins MPN implementation will be provided in a subsequent Dear Colleague Letter.

Last Modified: 12/03/2002