Bulletin ID
DLB - 95 - 3
| PublicationDate: 3/1/95 BulletinID: DLB - 95 - 3 DLB-3 MARCH 1995 WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM Summary: Instructions for ordering promissory notes and addenda for the 1995-1996 academic year; policy guidance on issues concerning the administration of the William D. Ford Federal Direct Loan Program. Dear Colleague: Preparations for Year Two of the William D. Ford Federal Direct Loan (Direct Loan) Program are well under way! We know that many of you have been waiting for promissory notes; these documents are now ready for distribution. This BULLETIN gives you instructions for ordering the 1995-96 promissory notes and answers some policy questions that we have recently received from several schools. PROMISSORY NOTES Enclosed are copies of the 1995-96 promissory notes for the Direct Loan Program. Also enclosed is an order sheet for- the promissory notes (pin fed and single sheet versions). addenda for Direct Stafford/Ford notes and Direct PLUS Loan notes (only if needed- see note below). Direct PLUS Loan promissory notes instructions. (PLUS instructions are separate from the note and must be ordered if needed; Stafford/Ford instructions are part of the promissory note and need not be ordered). Stafford/Ford rights and responsibilities. PLUS rights and responsibilities. Please note, if you choose to include a school bar code on the promissory notes you print for your borrowers, prior approval from the Department is not necessary. However, the bar code may not be placed in the bottom margin of the note. The entire bottom margin is reserved for use by the Departments processor. ADDENDA An addenda to the 1995-96 promissory note is required for any Year Two Direct Loans if the first disbursements are made before July 1, 1995. Borrowers receiving these loans must sign an addendum in addition to the promissory note. There is one addendum for Direct Stafford/Ford Loans (subsidized and unsubsidized) and one for Federal Direct PLUS Loans. If you will need any of these addenda, please use the enclosed order sheet. The addendum is required because the promissory note contains new provisions (described below) that do not apply to Year Two loans made before July 1, 1995. (The new provisions mentioned below are effective only for loans disburse on or after July 1, 1995.) We have prepared the addenda because a few schools have told us that they need to make Year Two disbursements before July 1. However, no addenda are required for 1995-96 loans if the first disbursements are made on or after July 1, 1995. The Department encourages all schools to make first disbursements of Year Two loans on or after July 1, 1995, so borrowers may benefit from these new provisions: * For Year Two, the interest rate for Federal Direct Stafford/Ford Loans (subsidized and unsubsidized) is lower during any in-school, grace, and deferment period. In Year One, the interest rate for these loans during any 12-month period beginning on July 1 and ending on June 30 is equal to the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to the preceding June 1 plus 3.1 percentage points, up to a limit of 8.25 percent. For Year Two, the 3.1 percentage point adjustment is reduced to 2.5 percentage points during in-school, grace, and deferment periods. The maximum rate remains 8.25 percent. * For Year Two, installment payments will not be considered late unless they are received more than 30 days after the due date. The Year One regulations allow the Department to consider an installment payment past due if it not received within 10 days of the due date. However, under the Year Two regulations, an installment payment is not considered past due until it is more than 30 days late. Please note, that despite this authority, the Department does not currently assess late charges and does not intend to assess late charges during the 1995-96 academic year. LATE DISBURSEMENTS FOR YEAR ONE The regulations for Year One of the Direct Loan Program (the 1994-95 academic year), 34 CFR Part 685, do not establish a deadline for a school to make a late disbursement of a Direct Loan. However, December 31, 1995 is the last day the Year One software will be active. Therefore, any Year One late disbursement must be made on or before December 31, 1995. Please note, the final regulations for Year Two require that all late disbursements be made within 60 days after the end of the loan period or after the student has ceased to be enrolled at least half time (90 days in exceptional circumstances) [See 34 CFR Section 685.303(d)]. LOAN CANCELLATIONS The Secretary wishes to clarify the procedure a school must follow if it learns that it should have canceled, but did not cancel, a borrowers loan proceeds within 120 days of disbursement. In this situation, the school should identify all affected loan records and report to the Direct Loans Servicing Center the date the loan(s) should have been canceled. This will prevent a borrower from being charged loan fees for which he or she should not be responsible. We hope this BULLETIN is helpful. If you have any questions, please call School Relations at 1-800-848-0978. Sincerely, Leo Kornfeld Senior Advisor to the Secretary |