Student [INSERT LOGO] [INSERT DATE] [INSERT BORROWER'S ADDRESS] Dear [INSERT BORROWER'S NAME], We are happy to inform you that you will receive a new repayment incentive benefit on your recently disbursed Direct Subsidized Loan and/or Direct Unsubsidized Loan. The new benefit is an interest rebate that the U.S. Department of Education is giving to you as a sign of its commitment to you as a Direct Loan borrower. We want to develop a good repayment relationship with you from the beginning. So, we will credit this rebate to your loan account, and all you have to do to keep this benefit is make your first twelve required monthly payments on time. The interest rebate amount is equal to 1.5 percent of the loan amount that you borrow. This is the same amount that would result if we lowered your interest rate by approximately 0.24 percent--but you will receive the rebate up front. In early November of this year, the Direct Loan Servicing Center will credit the interest rebate amount to your loan account. Even though we will not credit your loan account until November, the credit is effective from the date that your loan was disbursed (paid out) to you. After this initial credit, each time an additional Direct Loan disbursement for the 2000-2001 school year is reported by your school, the Direct Loan Servicing Center will credit the additional rebate amount to your loan account. Beginning in November, you can confirm these credits to your loan account by checking our website at www.dlservicer.ed.gov. To keep the interest rebate, you must make your first twelve required monthly payments on time when your loan enters repayment after you leave school or drop below half-time status. If you do not make all twelve payments on time, we will add the rebate amount back to your loan account. To best ensure that payments are made on time, you may want to consider paying through our Electronic Debit Account (EDA) repayment option. Under EDA, your bank automatically deducts your monthly Direct Loan payment from your checking or savings account. We will send you more information about the EDA repayment option shortly before you must begin repaying your loan. We look forward to continuing to assist you as you pursue your educational objectives. If you have any questions about the interest rebate, call the Direct Loan Servicing Center at 1-800-848-0979. Sincerely, William D. Ford Federal Direct Loan Program Example of How the Interest Rebate Works A student borrows a $4,000 Direct Unsubsidized Loan for this school year, and the Fall disbursement of $2,000 was made on August 15th. The interest rebate of $30 will be credited to the student's loan account at the Direct Loan Servicing Center in early November. The effective date of the credit will be August 15th. When the Spring disbursement of the remaining $2,000 is made on January 25th, another $30 will be credited to the student's loan account. As a result, the actual outstanding principal balance on the $4,000 loan will be only $3,940. Of course, once repayment begins the loan balance may be slightly higher due to interest that accrued from the time of the disbursements.