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ATTACHMENT A: MULTI-YEAR FEATURE OF THE MPN Use of New Master Promissory Note: The FFELP Master Promissory Note (MPN) will replace the current application and promissory note used for the processing of subsidized and unsubsidized Federal Stafford loans. The Master Note concept will not be adopted for use in the Federal PLUS Program at this time. The Department will release a copy of the final Master Promissory Note as soon as the Office of Management and Budget (OMB) approves the new form as is required by the Paperwork Reduction Act of 1995. Any changes to the note required as a result of the reauthorization of the Higher Education Act will, of course, be included in the final note approved for use. The MPN will accommodate both single-year and multi-year borrowing and will be available for use for the 1999-2000 academic year -- loan periods beginning on or after July 1, 1999 -- although the existing FFEL Application/Promissory Note form can continue to be used throughout the 1999-2000 academic year. The new MPN must be used beginning with the 2000-2001 academic year (for loan periods beginning on or after July 1, 2000 and for any loan certified on or after July 1, 2000, regardless of loan period). School Participation: Initially, authorization to use the MPN as a multi-year note will be targeted to those student populations most likely to borrow multiple times. As such, authority to use the MPN as a multi-year note will first be extended to all four-year and graduate/professional schools. The Department may exclude specific schools from having the authority to use the multi-year feature of the Master Promissory Note. Similarly, the Department may choose to authorize the use of the multi-year feature to selected schools that are not included in the general category of four-year and graduate/professional. Borrowers attending schools not authorized to use the multi-year feature of the MPN must complete a new MPN for each academic year. A school authorized to have its borrowers use the multi-year feature of the MPN may request that some or all of their students sign a new MPN. In such cases, the school should notify the lender of its request. Also, an individual student may choose not to avail him or herself of the multi-year borrowing feature of the MPN (see following revocation conditions). Process: As noted above, the MPN form will be available for the 1999-2000 academic year and can be used as both a single-year note and, where approved, as a multi-year note. Borrowers who are eligible to borrow under the multi-year feature of a previously executed MPN can do so without signing another note. Schools will simply certify the new loan(s), according to existing requirements and procedures, and submit that certification to the lender. It is expected that most certifications (as well as those for the initial MPN loan(s)) will be submitted electronically by the school to the lender. However, in order to accommodate instances when a school does not submit certifications electronically, we have developed a paper Federal Stafford Loans School Certification form. (See Attachment G). The lender or guarantor will match the information included by the school on the certification (electronic or paper) to the MPN by comparing the student's identifying information, such as the student’s name, birth date and social security number. Address information is included in the certification in order to permit the lender or guarantor to send the MPN and other correspondence to the student, if necessary. The lender or guarantor should review permanent address information on the MPN in the event it reflects a revised address for the student. Although revised certification submission requirements, provided by the recently enacted Higher Education Amendments of 1998, reduce the number of data items that must be included in the loan certification (paper or electronic), schools must continue to maintain information on the student’s cost of attendance, expected family contribution and estimated financial assistance. These data must be made available to the lender, guarantor or the Department upon request. The lender, upon receiving the certification (electronic or paper) from the school will, in addition to its regular required processes, determine if the school submitting the certification is eligible to utilize the multi-year feature of the MPN. The Department will provide program participants with a list of schools approved to participate in the multi-year process. Updates will be provided on a consistent basis. Lenders may rely upon this information as part of their responsibility to determine if a new promissory note is needed for subsequent loans to a student. If a student transfers to a school that is not eligible to participate in the multi-year process, it is the lender’s responsibility to obtain a new signed MPN for loans made for attendance at the new school. In order to disburse a loan, the lender must determine that the loan is supported by a signed MPN and also that none of the revocation conditions listed below have occurred. A lender’s ability to make additional loans under the MPN to students attending schools eligible to use the multi-year feature will automatically expire upon the earliest of: 1. The date the lender receives written notification from the student asking that the MPN no longer be used as the basis for additional loans; 2. Twelve months after the original MPN was signed if no disbursements were ever made under that MPN; or 3. Ten years from the date the student signed the MPN. However, if a portion of a loan is made on or before ten years from the signature date, remaining disbursements of that loan can be made. The lender will be responsible for ensuring compliance with these restrictions. A guarantor may elect to assist in the process. A lender may elect not to make a subsequent loan under the MPN or decide to require the borrower to submit a new MPN even though the student remains enrolled at a school authorized to use the multi-year process. This might occur, for example, due to a change in borrower circumstances (such as bankruptcy or delinquency) or because the loan is being requested under a Lender of Last Resort program. A critical requirement for the multi-year function of the MPN process is that the borrower must have been notified of or must have confirmed the proposed dollar amount, by type of loan (subsidized or unsubsidized) of each loan being made under the multi-year feature of the MPN. (See Attachment C for additional information on this requirement). Changes of School, Guarantor, and Lender: Students may borrow additional FFEL funds under the same MPN regardless of any changes in school or guarantor, providing that the new school is a multi-year eligible institution and the lender and school are participating in the multi-year feature of the MPN. However, if a student chooses to borrow from a different lender, the student must complete a new MPN for that new lender. An exception to this requirement is provided if the student's lender changes as a result of a merger or acquisition, or if the loans are sold and the acquiring lender assumes the right to offer subsequent loans under the MPN. In those instances the original note can continue to be used by the new lender. All loans made under an MPN are governed by, and enforceable in accordance with, the terms and conditions of the MPN. Statutory or regulatory changes that affect subsequent loans will be disclosed to the borrower by the lender at or before the disbursement of the affected loan. It is possible that a lender will need to file a claim for insurance on one or more but not all loans made under an MPN. Each loan made under an MPN is enforceable and eligible for claim payment based on a true and exact copy of such MPN. |