Bulletin ID
DLB - 98 - 6
| PublicationDate: 2/1/98 BulletinID: DLB - 98 - 6 February 1998 DLB-98-6 SUMMARY: This letter provides instructions for ordering Direct Loan promissory notes for the 1998-99 academic year; guidance for the use of 1997-98 (Year 4) and 1998-99 (Year 5) promissory notes; and discusses the 1998-99 changes to Direct Loan promissory notes and the Borrower's Rights and Responsibilities Document Dear Colleague: Preparations for the 1998-99 academic year of the William D. Ford Federal Direct Loan (Direct Loan) Program are well underway! We know that many of you have been waiting for promissory notes (Pnotes); these documents are ready now for distribution. This bulletin contains instructions for ordering the 1998-99 Pnotes, provides guidance on the use of both the 1997-98 and 1998-99 Pnotes, and identifies changes to the 1998-99 Direct Loan Pnotes and Borrower's Rights and Responsibilities Document. ORDERING INSTRUCTIONS FOR 1998-99 (YEAR 5) PROMISSORY NOTES Copies of the 1998-99 Direct Loan Pnotes are enclosed. Also enclosed is an order sheet for: - Direct Stafford/Ford Loan Promissory Notes (pin fed and single sheet version) - Direct Plus Loan Promissory Notes (pin fed and single sheet versions) - Direct PLUS Loan Promissory Note Instructions: (PLUS instructions are separate from the note and must be ordered if needed; Direct Stafford/Ford Loan instructions are part of the Pnote and do not need to be ordered.) - Direct PLUS Loan Promissory Note Addendums (Endorser) - Direct PLUS Loan Promissory Note Addendum (Endorser) Instructions - Direct Stafford/Ford Borrower's Rights and Responsibilities - Direct PLUS Borrower's Rights and Responsibilities GUIDANCE ON THE USE OF THE 1998-99 (YEAR 5) PNOTES Schools should immediately begin using the 1998-99 Pnotes to make loans. Because the new promissory notes have a different alignment from the 1997-98 promissory notes, it is necessary to use the promissory note that corresponds to the software for that same year. THEREFORE, DUE TO THE CHANGES MADE ON THE 1998-99 PNOTES, YOU CANNOT USE THE 1997-98 SOFTWARE TO PROCESS THE NEW NOTES. NOTE: THIS IS A CHANGE FROM LAST YEAR WHEN THE 1997-98 NOTES WERE FULLY COMPATIBLE WITH THE 1996-97 SOFTWARE. SCHOOLS MAY NOT USE 1997-98 PNOTES TO MAKE 1998-99 LOANS. AGAIN, YOU MUST USE THE 1998-99 PNOTES WITH THE 1998-99 SOFTWARE. GUIDANCE ON THE USE OF THE 1997-98 (YEAR 4) PROMISSORY NOTES Schools may only use 1997-98 Pnotes to make loans for the 1997-98 academic year. If your school is still making 1997-98 loans, you must continue to submit these loans using the 1997-98 software, even though the 1998-99 software is available. The software for both the 1997-98 and 1998-99 academic years will be operational at the same time. GUIDANCE ON THE 1998-99 (YEAR 5) PROMISSORY NOTE EXPIRATION DATE The current OMB expiration date on the 1998-99 Pnotes is 12/31/98. However, the 1997-98 Pnote has a 12/31/99 expiration date. The Department recognizes that the earlier expiration date for the new 1998-99 Pnotes may cause confusion for some schools. Remember, the new 1998-99 Pnotes replace the 1997-98 notes. While the Department requested clearance of the 1998-99 Pnotes for three years, the forms were only cleared for one year. The Department already has requested that OMB immediately grant a 6 month extension to the expiration dates on the 1998-99 Pnotes. The requested extension would take the clearance date to 6/30/99. We fully expect to receive OMB approval for this extension very quickly. We will notify you immediately when the extension is confirmed. Further, it will not be necessary to print new Pnotes with the 6/30/99 expiration date. 1998-1999 CHANGES TO DIRECT LOAN PROMISSORY NOTES CHANGES TO BOTH THE DIRECT STAFFORD/FORD AND PLUS PNOTES: - Format Changes: Key data element areas have been enlarged and reconfigured to give the additional space needed to avoid overprinting problems. - Reference Area Text Bolded: Text in this area has been highlighted so the borrower recognizes that this area must be completed. This change was requested by schools, because this section is often overlooked by borrowers when they complete the promissory note. - Wording Changes: In the "I promise to pay..." section on the front of the promissory note, there is new wording. Now the borrower's signature certifies that he or she has read, understands, and agrees to the terms and conditions on the Promissory Note and the statement of Borrower's Rights and Responsibilities. NOTE: ADDING THE STATEMENT OF BORROWER'S RIGHTS AND RESPONSIBILITIES TO THIS SECTION MAKES IT IMPERATIVE THAT THE BORROWER HAS BEEN FURNISHED WITH THIS DOCUMENT WHEN THE BORROWER SIGNS THE PNOTE. - Interest Rate Information: We have reconfigured the interest rate information in the "Disclosure of Terms." This brings to the forefront the interest rate information that informs the borrower of the statutory change to the way the interest rate will be determined for loans made on or after July 1, 1998. The applicable rate of interest will be equal to the bond equivalent rate of the security with a comparable maturity as established by the Secretary, rather than the bond equivalent rate of the 91-day Treasury Bill (for Direct Subsidized Loans and Direct Unsubsidized Loans) or the 52-week Treasury Bill (for Direct PLUS Loans). For loans made on or after July 1, 1998, there will be no separate interest rate calculation during the in-school, grace and deferment periods. Additionally, the Department has added wording that would prevent having to use an addendum, in the event that there is a change in the way the interest rate is calculated during the upcoming year. - Borrower Reminder: We have added wording to remind the borrower to retain a copy of the signed note for his or her records. - Date Changes to Accommodate Year 2000: All dates now need to be shown in a month, day, and four digit year (MM/DD/YYYY) format to accommodate the year 2000. CHANGES TO STAFFORD/FORD PNOTES ONLY: - Chart Configuration Change: The configuration of the chart (in Section B) has been changed to spread out the columns and give more space between columns to accommodate printing needs. CHANGES TO THE PLUS PNOTES ONLY: - Default Information Changes: In Section A (item 14) and Section B (Item 20) default status wording has been changed. This item asks the borrower (and student) if he or she is currently in default on a federal education loan or owes a refund on a federal student grant (select a "yes" or "no" answer). If the borrower or student answers "yes" to this question, we then ask if the borrower or student has made satisfactory repayment arrangements (select a "yes" or "no" answer). If the response is "yes", we ask that the borrower attach documentation to the PLUS Application and Promissory Note. This change in wording and format was made to be more compatible with the school's override capability currently available on the origination record. - Parent Intends to Try To Obtain An Endorser? A new question (Item 15) has been added in response to requests from schools. The question gives schools some preliminary indication of the parent's intentions to try to obtain an endorser, if it is determined that the parent has an adverse credit history. The borrower is asked to respond (select a "yes" or "no" answer) about whether the borrower will likely try to obtain an endorser, if notified that the borrower has an adverse credit history. This will not be a mandatory field, and it is intended to serve only as an informational tool for schools in their packaging of aid. 1998-1999 CHANGES TO BORROWER'S RIGHTS AND RESPONSIBILITIES INFORMATION CHANGES TO THE DIRECT STAFFORD/FORD LOAN AND THE FEDERAL DIRECT UNSUBSIDIZED STAFFORD/FORD LOAN BORROWER'S RIGHTS AND RESPONSIBILITIES: - We have replaced the chart in the Maximum Loan Amount section (#1) that addresses the maximum annual loan amounts available to borrowers under the Direct Loan and FFEL Program. The way that information is presented in the new chart is easier to understand and more user-friendly. - In the Change of Status section (#3), we have added that the borrower must notify the Direct Loan Servicing Center, in writing, if the borrower's telephone number changes before the loan is repaid. - In the Interest Rate section (#5), we have reconfigured the interest rate information: This brings to the forefront the interest rate information that informs the borrower of the statutory change to the way that the interest rate will be determined for those loans made on or after July 1, 1998. CHANGES TO FEDERAL DIRECT PLUS LOAN BORROWER'S RIGHTS AND RESPONSIBILITIES: - In the Change of Status section (#3), we have added that the borrower must notify the Direct Loan Servicing center, in writing, if the borrower's telephone number changes before the loan is repaid. - In the Interest Rate section (#5), we have reconfigured the interest rate information: This brings to the forefront the interest rate information that informs the borrower of the statutory change to the way that the interest rate will be determined for those loans made on or after July 1, 1998. - In the Credit Bureau Notification section (#11), we notify the endorser of a delinquent PLUS Loan that he or she may be reported to credit bureaus. - In the Deferment section (#13), because the endorser of a PLUS Loan is not entitled to all of the same benefits as the Direct PLUS Loan borrower, we notify the endorser that he or she is not eligible for a deferment. IF YOU DEVELOP YOUR OWN PROMISSORY NOTES.... PLEASE NOTE: ALL SCHOOLS THAT GENERATE THEIR OWN PNOTES MUST CHANGE THEIR NOTES TO REPLICATE THE 1998-99 (YEAR 5) PNOTES. These schools must have their Pnotes reviewed and approved by Pennie Summers, of the U.S. Department of Education, prior to making any loans using the new Pnotes. Schools should send their original Pnotes, with dummy data, to Pennie for her content review and certification. After she reviews the Pnote, she will forward the note to the LOC for imaging and testing. (DUE TO THE IMAGING PROCESS, XEROXED OR FAXED COPIES WILL NOT BE ACCEPTED.) Any notes forwarded to the LOC without having been reviewed first will be returned to the school. Send your Pnotes to: Pennie Summers, U.S. Department of Education, Direct Loan Program, Room #3067 ROB-3, 7th and D Street, S.W., Washington, D.C. 20202. If you have questions, you can call Pennie at 202-401-8422. If you only choose to include a school bar code when you print on Pnotes furnished by the Department, prior approval from the Department is not necessary. However, the bar code may not be placed on the bottom of the note. The entire bottom margin is reserved for use by the Department's processor. If you have questions about this bulletin, please contact your regional Client Account Manager. Thank you for your continued support of the Direct Loan Program. Sincerely, Joe L. McCormick, Chair Direct Loan Task Force Enclosure A Enclosure B |