Federal Student Aid - IFAP
   

Publication Date: May 19, 2006

Author: G. Kay Jacks, General Manager, FSA Application, School Eligibility and Delivery Services

Summary: HERA Operational Implementation Guidance (CPS, COD System, and EDExpress Suite)—Master Promissory Note Addenda, Revised Disclosure Statements, and Revised Plain Language Disclosures for Direct Loan Program Loans

Posted on 05-19-2006

This communication announces the availability of Master Promissory Note (MPN) addenda and revised Plain Language Disclosures (PLDs) that explain the changes to the terms and conditions of William D. Ford Federal Direct Loan (Direct Loan) Program loans that were made by the Higher Education Reconciliation Act of 2005 (the HERA), P.L. 109-171. In addition, it addresses one change that we will make to the Direct Subsidized/Unsubsidized Loan Disclosure Statement (Subsidized/Unsubsidized Disclosure Statement) and Direct PLUS Loan Disclosure Statement (PLUS Disclosure Statement). The addenda, revised PLDs, and revised disclosure statements are to be implemented as explained in this announcement for all loans from this point forward, regardless of a loan's program year.

In this announcement, we cover information in the following order:

  • Continued Use of Current MPNs and Borrower's Rights and Responsibilities Documents
  • Use of Addenda with Current MPNs
  • Use of Revised Disclosure Statements and PLDs
  • Implementation of MPN Addenda, Revised Disclosure Statements, and Revised PLDs
  • Contact Information

Continued Use of Current MPNs and Borrower's Rights and Responsibilities Documents

In DLB-05-11, we notified schools of the impending expiration of the current MPNs for Direct Subsidized/Unsubsidized Loans and Direct PLUS Loans and announced that we expected to have revised MPNs approved by the Office of Management and Budget (OMB) before the 2006-2007 Award Year. However, we determined that there was not enough time to incorporate the changes to loan terms and conditions made by the HERA into the revised MPNs that had been submitted to OMB for approval. As a result, we decided to delay development of the revised MPNs and asked OMB to extend the current MPNs with no changes for two years.

OMB has extended the current MPNs through March 31, 2008, and we will continue to use the Direct Subsidized/Unsubsidized Loan MPN (with a 10/31/05 expiration date) and the Direct PLUS Loan MPN (with a 1/31/2006 expiration date) until the revised MPNs are developed and approved for use. The revised MPNs will incorporate the changes to loan terms and conditions made by the HERA, as well as additional changes that we had originally planned to make.

There are also no changes to the Borrower's Rights and Responsibilities documents that accompany the MPNs. We will make changes to these documents in conjunction with the development of the revised MPNs.

Use of Addenda with Current MPNs

Until revised MPNs are developed and approved for use, the attached addenda must be used with the current forms to inform borrowers of the changes made to the terms of their loans by the HERA. There is one addendum for the Direct Subsidized/Unsubsidized Loan MPN and a separate addendum for the Direct PLUS Loan MPN. The addendum to the Direct PLUS Loan MPN provides specific instructions for completion of the MPN by a graduate or professional student PLUS (Grad PLUS) borrower. (In a separate Electronic Announcement (http://www.ifap.ed.gov/eannouncements/0516HERAOpImpGuidance.html), we provided a comprehensive overview of Direct PLUS Loans for Grad PLUS borrowers.) The addenda do not require completion, signature, or return by borrowers.

In addition to informing borrowers of the changes made to loan terms and conditions, each addendum informs borrowers that OMB has approved the continued use of the applicable MPN and provides the new expiration date. For this reason, only limited expiration date changes will be required:

  • Schools should not change the expiration date on MPNs that they produce.
  • We will not change the expiration date on the paper MPNs that schools order from us.
  • We will not change the expiration date on MPNs that we system generate for schools.
  • We will change the expiration date on both the Direct Subsidized/Unsubsidized Loan MPN and the Direct PLUS Loan MPN on the Direct Loan Electronic MPN Web site.

Use of Revised Disclosure Statements and PLDs

We have made one HERA-related change to both the Subsidized/Unsubsidized Disclosure Statement and the PLUS Disclosure Statement. We deleted the references to "(Variable Interest Rate)" on each disclosure statement. We will make other changes to these documents in conjunction with the development of the revised MPNs.

The attached PLDs have been revised to include information on the changes made by the HERA for borrowers who are receiving second or subsequent loans under a previously signed MPN. There is one revised PLD for Direct Subsidized/Unsubsidized loans and a separate revised PLD for Direct PLUS loans.

Implementation of MPN Addenda, Revised Disclosure Statements, and Revised PLDs

MPN Addenda

We are in the process of printing the MPN addenda and making the necessary modifications to the Electronic Direct Loan MPN Web site.

  • We expect that paper MPN addenda will be available for schools to order in bulk from the FSA Pubs Web site (www.fsapubs.org) no later than July 1, 2006. In a subsequent communication, we will update the availability status and remind schools of the ordering process.
  • We will implement the modifications to the Direct Loan Electronic MPN Web site (www.dlenote.ed.gov) on July 29, 2006. These modifications will incorporate the applicable addendum into the process for completing a Direct Subsidized/Unsubsidized Loan MPN or Direct PLUS MPN electronically.

Schools must begin using the MPN addenda as follows:

  • A school that wants to program and produce the addenda must begin using the addenda as soon as it is able to make the necessary programming changes.
  • A school that wants to order paper addenda from us must begin using the addenda as soon as practical after the paper addenda are available for order and delivery.
  • A school that has its borrowers complete MPNs electronically is not required to provide the addenda to borrowers. (As a reminder, a school may not require its students to complete an MPN electronically.)

Of course, any school may choose to print the attached addenda for distribution to its borrowers; however, this is not required. Due to the staggered implementation of addenda use, we will include the appropriate addendum with every disclosure statement that we print and mail to borrowers over the next several months. This means that in some cases a borrower will receive two copies of the applicable addendum.

Revised Disclosure Statements

We are in the process of updating the print specifications for the revised disclosure statements. We have produced PDF versions of the revised documents.

  • Print specifications for the Subsidized/Unsubsidized Disclosure Statement and the PLUS Disclosure Statement will be updated and made available in Volume VI, Section 7 of the
    2005-2006 COD Technical Reference and the 2006-2007 COD Technical Reference in late May 2006.
  • PDF versions of the revised Subsidized/Unsubsidized Disclosure Statement and the revised PLUS Disclosure Statement are available now on the Direct Loan Web site (http://www.ed.gov/offices/OSFAP/DirectLoan/mpn.html).

A school that provides the Subsidized/Unsubsidized Disclosure Statement and the PLUS Disclosure Statement to borrowers must begin using the revised disclosure statements as follows:

  • A school that wants to program and produce the disclosure statements must begin using the revised disclosure statements as soon as it is able to make the necessary programming changes.
  • A school that wants to print the PDF versions of the disclosure statements must begin using the revised disclosure statements as soon as practical.

Revised Plain Language Disclosures

We are in the process of printing the revised PLDs. We have produced Word versions of the revised PLDs.

  • We expect that paper revised PLDs will be available for schools to order in bulk from the FSA Pubs Web site (www.fsapubs.org) no later than July 1, 2006. In a subsequent communication, we will update the availability status and remind schools of the ordering process.
  • Word versions of the revised PLDs are available now on the Direct Loan Web site (http://www.ed.gov/offices/OSFAP/DirectLoan/mpn.html).

A school that provides the Subsidized/Unsubsidized Disclosure Statement and the PLUS Disclosure Statement to borrowers must begin using the revised PLDs for borrowers who are receiving second or subsequent loans under a previously signed MPN as follows:

  • A school that wants to order paper PLDs from us must begin using the revised PLDs as soon as practical after they are available for order and delivery.
  • A school that wants to print the Word versions of the PLDs must begin using the revised PLDs as soon as practical.

Contact Information

Thank you in advance for your assistance in implementing the MPN addenda, revised disclosure statements, and revised PLDs. If you have any questions about this announcement, contact the COD School Relations Center at 800/848-0978. You may also e-mail CODSupport@acs-inc.com.

Attachments/Enclosures:

Addendum to the Direct Subsidized Loan/Direct Unsubsidized Loan Master Promissory Note in Microsoft Word Format, 35KB, 1 pages

Revised Plain Language Disclosure for Direct Subsidized Loans and Direct Unsubsidized Loans in Microsoft Word Format, 43KB, 2 pages

Addendum to the Direct PLUS Loan Application and Master Promissory Note and Endorser Addendum in Microsoft Word Format, 39KB, 1 pages

Revised Plain Language Disclosure for Direct PLUS Loans in Microsoft Word Format, 42KB, 2 pages