Publication Date: August 2003
DCL ID: CB-03-14
Implementation of the Federal Perkins Loan Master Promissory Note
Posted on 08-18-2003
August 2003
CB-03-14
Subject: Implementation of the Federal Perkins Loan Master Promissory Note
Summary: This letter provides guidance on the implementation of the Federal Perkins Loan Master Promissory Note.
Dear Colleague:
The Federal Perkins Loan Master Promissory Note (Perkins MPN) has been approved by the Office of Management and Budget (OMB). The OMB number for the Perkins MPN is 1845-0074, and it is authorized for use through June 30, 2006. This letter provides guidance on the implementation of the Perkins MPN.
General information about the Perkins MPN
The Perkins MPN can be used for one or more Perkins Loans at one school. The Perkins MPN will also be used for loans made to former National Direct Student Loan (NDSL) borrowers. In general, use of the new Perkins MPN will not substantially change the lending process. A school will continue to determine a borrower's eligibility for a Perkins Loan, ensure that there is a signed promissory note for a loan, provide loan disclosures and notices to a borrower as required in 34 CFR 674.16(a) and 34 CFR 668.165(a), disburse a loan, and collect on a loan as it has always done.
As a reminder, 34 CFR 674.16(a) specifies the information that a school must provide in writing to a borrower before the school makes the first disbursement of each Perkins Loan for an award year. This information includes the principal amount of the loan, certain terms of the loan, and the cumulative amount the student has borrowed. The regulations at 34 CFR 668.165(a) specify when a school must notify a borrower of the dates and amounts of loan disbursements and of the borrower’s right to cancel all or a portion of a loan.
Two options for using the new Perkins MPN
A school may choose to use the Perkins MPN as a single-award year promissory note or as a multi-award year promissory note. Single-award year use of the Perkins MPN is consistent with what most schools have done to date—it requires a borrower to sign a promissory note at a minimum on an annual basis. Multi-award year use of the Perkins MPN, however, is new and requires just one signature when the first loan is made under the Perkins MPN.
Single-award year use
With single-award year use of the Perkins MPN, a borrower signs a Perkins MPN each award year. The signed Perkins MPN covers all loans that the school makes to the borrower during that award year. The borrower signs a new Perkins MPN for each subsequent award year during which the school makes loans to the borrower.
Multi-award year use
The Perkins MPN has a new optional multi-year feature for loans made in more than one award year. Under this multi-year feature, a borrower will generally only be required to complete a Perkins MPN once, when he or she first borrows a Perkins Loan from the school. The signed Perkins MPN covers all loans that the school makes to the borrower until the Perkins MPN expires (up to 10 years). If an MPN expires, the borrower would have to sign a new Perkins MPN only for loans that the school makes to the borrower after that expiration date. Please note that use of the multi-year feature is at the school’s option and a school may continue to require a borrower to complete a new promissory note for each award year.
Additionally, the language in the Perkins MPN reflects the terms and conditions that apply to Perkins Loans. Each Perkins Loan received under a multi-year Perkins MPN is a separate and distinct loan. The terms that apply to each loan (for example, eligibility requirements for deferments) are dependent on the terms that are in effect at the time each loan is made. Because loan amount and loan period information is not reflected on the Perkins MPN as it was on the previous Perkins promissory note, a school will need to disclose loan amount and loan period information to a borrower through a means other than the promissory note. The school may also find it prudent to keep its student aid and institutional records that support a borrower’s Perkins Loan transactions should the school need to enforce a loan made under a Perkins MPN through the litigation process.
Expiration conditions for the Multi-Year Perkins MPN
No subsequent loans may be made under a Perkins MPN after the earliest of the following dates:
· The date the school receives the borrower’s written notice that no further loans may be made under the MPN;
· Twelve months after the date the borrower signs the MPN, if no disbursements are made under the MPN; or
· Ten years after the date the borrower signs the MPN or the date the school receives the MPN (except that a remaining portion of a loan may be disbursed after this date).
If a borrower does not want to have further loans made under the multi-year Perkins MPN, he or she must notify the school in writing. If that borrower later wants to receive another loan, he or she must complete a new Perkins MPN. However, any remaining disbursements of a loan made under the Perkins MPN prior to receipt of the borrower’s notification may still be made.
Effective date for use of the Perkins MPN
The Perkins MPN may be used for award years beginning on or after July 1, 2003. However, a school must use the Perkins MPN beginning with all new loans for Perkins and former NDSL borrowers made on or after November 1, 2004.
The current closed-end and open-end versions of the “Federal Perkins Loan Promissory Note” (OMB No. 1845-0061) remain valid and may continue to be used for making Perkins Loans until October 31, 2004. The current closed-end and open-end versions of the “National Direct Student Loan (NDSL) Promissory Note” (OMB No. 1845-0061) remain valid and may continue to be used for making NDSLs until October 31, 2004.
Document formats for the Perkins MPN
The Department posted the Perkins MPN in Word format on July 17, 2003. The Word file is again attached to this letter, and the letter will be posted on the Department's Information for Financial Aid Professionals website at http://www.ifap.ed.gov. Federal law and regulations bar a school from changing the presentation of the Perkins MPN or changing, deleting, or adding to the prescribed text except that any text enclosed by "[ ]" may be deleted at the option of the school. As we have indicated in the past, the addition of coding (for example, bar coding for filing or processing purposes) is permitted.
If you have any questions about this letter, please contact Brian Smith on 202-502-7551 or at brian.smith@ed.gov or Vanessa Freeman on 202-502-7523 or at vanessa.freeman@ed.gov.
Sincerely,
Jeffrey R. Andrade
Deputy Assistant Secretary for
Policy, Planning and Innovation
Attachment:
Federal Perkins Loan Master Promissory Note in Word Format
Attachments/Enclosures: