William D.

Ford Federal Direct Loan Program

Direct Subsidized Loans and Direct Unsubsidized Loans Plain Language Disclosure
1. General information. You are receiving a student loan to help Loans during all other periods (starting on the day after your grace
cover the costs of your education. This Plain Language Disclosure period ends), including forbearance periods.
(Disclosure) summarizes information about your loan. Please read this We charge interest on Direct Unsubsidized Loans during all periods
Disclosure carefully and keep a copy in a safe place. In this (starting on the day your loan is paid out). This includes periods while
Disclosure, the words “we,” “us,” and “our” refer to the U.S. Department you are enrolled in school, during your grace period, and during
of Education. If you have questions about your loan, contact our Direct deferment and forbearance periods. Therefore, you will pay more
Loan Servicing Center. The Direct Loan Servicing Center’s telephone interest on Direct Unsubsidized Loans than on Direct Subsidized
number and address are shown on correspondence you will receive Loans.
related to your loan. If you do not pay the interest that is charged to you during in-school,
You must repay this loan, even if you are unhappy with your education, grace, deferment, and forbearance periods, we will add it to the unpaid
do not complete it, or cannot find work in your area of study. Borrow amount of your loan. This is called capitalization. Capitalization
only the amount you can afford to repay, even if you are eligible to increases the unpaid amount of your loan, and we will then charge
borrow more. interest on the increased amount.
By accepting your loan proceeds, you are certifying, under penalty of 8. Loan fee. We charge a loan fee on your loan of up to 3% of the
perjury, that if you have been convicted of, or have pled nolo principal amount of the loan. This fee will be subtracted
contendere or guilty to, a crime involving fraud in obtaining federal proportionately from each disbursement of your loan.
student aid funds under Title IV of the Higher Education Act of 1965, as 9. Repayment incentive programs. A repayment incentive is a
amended, you have completed the repayment of those funds to the benefit that we offer to encourage you to repay your loan on time.
U.S. Department of Education, or to the loan holder in the case of a Under a repayment incentive program, the interest rate we charge on
Title IV federal student loan. your loan may be reduced. Some repayment incentive programs
2. Master Promissory Note (MPN). You are receiving a loan under an require you to make a certain number of payments on time to keep the
MPN that you signed previously. You may receive additional loans reduced interest rate. There are two repayment incentive programs
under that MPN for up to 10 years if you continue to attend school and that may be available to you (Interest Rate Reduction for Electronic
if your school is authorized to use the multi-year feature of the MPN Debit Account Repayment and Up-Front Interest Rebate). These
and chooses to do so. If your school is not authorized to use the multi- repayment incentive programs are described in the Borrower’s Rights
year feature of the MPN or chooses not to do so, or if you do not want and Responsibilities Statement. The Direct Loan Servicing Center can
to receive more than one loan under the same MPN, you must sign a provide you with more information on other repayment incentive
new MPN for each loan. If you do not want to receive more than one programs that may be available.
loan under the same MPN, you must notify your school or the Direct 10. Disbursement of loan money. Generally, your school will
Loan Servicing Center in writing. disburse (pay out) your loan money in more than one installment,
3. Loan terms and conditions. This Disclosure summarizes usually at the beginning of each academic term (for example, at the
information about your loan. Please refer to your MPN and the beginning of each semester or quarter). If your school does not use
Borrower’s Rights and Responsibilities Statement that you received terms, it will generally disburse your loan in at least two installments,
previously for the complete terms and conditions of your loan. If you one at the beginning of the period of study for which you are receiving
need another copy of the Borrower’s Rights and Responsibilities the loan and one at the midpoint of that period of study. Your school
Statement, contact the Direct Loan Servicing Center. Unless we tell may disburse your loan money by crediting it to your student account,
you otherwise in this Disclosure, your MPN and the Borrower’s Rights or may give it to you directly by check or other means. The Direct
and Responsibilities Statement control the terms and conditions of your Loan Servicing Center will notify you each time your school disburses a
loan. Loans made under your MPN are subject to the Higher portion of your loan.
Education Act of 1965, as amended, and federal regulations. Any 11. Canceling your loan. Before your loan money is disbursed, you
changes to the law or regulations apply to loans in accordance with the may cancel all or part of your loan at any time by notifying your school.
effective date of the changes. After your loan money is disbursed, there are two ways to cancel all or
4. Use of loan money. You may use your loan money only to pay for part of your loan:
educational expenses (for example, tuition, room, board, books) at the
school that determined you were eligible to receive the loan. • Within 14 days after the date your school notifies you that it has
5. Information you must report. While you are still in school, you credited loan money to your account at the school, or by the first
must notify your school if you (i) change your local address, permanent day of your school’s payment period, whichever is later (your
address, or telephone number; (ii) change your name (for example, school can tell you the first day of the payment period), you may
maiden name to married name); (iii) do not enroll at least half-time for tell your school that you want to cancel all or part of the loan
the enrollment period certified by the school; (iv) do not enroll at the money that was credited to your account. Your school will return
school that determined you were eligible to receive the loan; (v) stop the cancelled loan amount to us. You do not have to pay interest
attending school or drop below half-time enrollment; (vi) transfer from or the loan fee on the part of your loan that you tell your school to
one school to another school; or (vii) graduate. cancel within these timeframes. If you received an up-front
You must also notify the Direct Loan Servicing Center of any of the interest rebate on your loan, the rebate does not apply to the part
above changes at any time after you receive your loan. In addition, of your loan that you tell your school to cancel. Your loan will be
you must notify the Direct Loan Servicing Center if you (i) change adjusted to eliminate any interest, loan fee, and rebate amount
employers or if your employer’s address or phone number changes; or that applies to the amount of the loan that was cancelled. If you
(ii) have any other change in status that affects your loan (for example, ask your school to cancel all or part of your loan outside the
if you received a deferment but no longer meet the eligibility timeframes described above, your school may process your
requirements for that deferment). cancellation request, but it is not required to do so.
6. Amount you may borrow. There are limits on the amount you may • Within 120 days of the date your school disbursed your loan
borrow each academic year (annual loan limits) and in total (aggregate money (by crediting the loan money to your account at the school,
loan limits), as explained in the Borrower’s Rights and Responsibilities by paying it directly to you, or both), you may return all or part of
Statement. You cannot borrow more than these limits. your loan to us. Contact the Direct Loan Servicing Center for
7. Interest. Loans with a first disbursement date on or after July 1, guidance on how and where to return your loan money. You do
2006 have a fixed interest rate of 6.8%. Loans with a first not have to pay interest or the loan fee on the part of your loan
disbursement date prior to July 1, 2006 have a variable rate that is that you return within 120 days of the date that part of your loan is
adjusted each year on July 1 but will never be more than 8.25%. We disbursed. If you received an up-front interest rebate on your
will notify you annually of the actual interest rate for each loan that you loan, the rebate does not apply to the part of your loan that you
receive. return. Your loan will be adjusted to eliminate any interest, loan
We do not charge interest on Direct Subsidized Loans while you are fee, and rebate amount that applies to the amount of the loan that
enrolled in school at least half time, during your grace period, and you return.
during deferment periods. We charge interest on Direct Subsidized
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 William D. Ford Federal Direct Loan Program
Direct Subsidized Loans and Direct Unsubsidized Loans Plain Language Disclosure
12. Grace period. You will receive a 6-month grace period on assistance under most federal benefit programs. You will lose eligibility
repayment that starts the day after you stop attending school or drop for loan deferments.
below half-time enrollment. You do not have to begin making 17. Credit bureau notification. We will report information about your
payments on your loan until after your grace period ends. loan to one or more national credit bureaus. This information will
13. Repaying your loan. You must repay each loan that you receive include the disbursement dates, amount, and repayment status of your
according to the repayment schedule provided by the Direct Loan loan (for example, whether you are current or delinquent in making
Servicing Center. You must begin repaying your loan after your grace payments).
period ends. The amount of time you have to repay your loan (the 18. Deferment and forbearance (postponing payments). If you
repayment period) will vary from 10 to 25 years, depending on the meet certain requirements, you may receive a deferment that allows
repayment plan that you choose and the total amount you have you to temporarily stop making payments on your loan. For example,
borrowed. For Direct Subsidized Loans and Direct Unsubsidized you may receive a deferment while you are attending school at least
Loans that enter repayment on or after July 1, 2006, you may choose half time or for up to 3 years while you are unemployed. For a
one of the following repayment plans: complete list of deferments, refer to the Borrower’s Rights and
Standard Repayment Plan. Refer to the Borrower’s Rights and Responsibilities Statement that you received previously. Effective July
Responsibilities Statement for the terms and conditions of this plan. 1, 2006, for loans with a first disbursement made on or after July 1,
Graduated Repayment Plan. If you choose this plan, your payments 2001, an additional deferment is available for a period of up to three
will usually be lower at first, and will then increase over time. No single years during which a borrower is serving on active duty during a war or
payment will be more than 3 times greater than any other payment. other military operation or national emergency, or performing qualifying
Under this plan, you must repay your loan in full within 10 years (not National Guard duty during a war or other military operation or national
including periods of deferment and forbearance) from the date the loan emergency. We do not charge interest on Direct Subsidized Loans
entered repayment. If your loan has a variable interest rate, we may during deferment periods. However, we do charge interest on Direct
need to adjust the number or amount of your payments to reflect Unsubsidized Loans during deferment periods.
changes in the interest rate. If you cannot make your scheduled loan payments but do not qualify
Extended Repayment Plan. You may choose this plan only if (1) you for a deferment, we may give you a forbearance. A forbearance
had no outstanding balance on a Direct Loan Program loan as of allows you to temporarily stop making payments on your loan,
October 7, 1998 or on the date you obtained a Direct Loan Program temporarily make smaller payments, or extend the time for making
loan on or after October 7, 1998, and (2) you have an outstanding payments. For example, we may give you a forbearance if you are
balance on Direct Loan Program loans that exceeds $30,000. If you temporarily unable to make scheduled loan payments because of
are eligible for and choose this plan, you will make monthly payments financial hardship or illness. We may also give you a forbearance
based on fixed annual or graduated repayment amounts and will repay under other conditions as described in the Borrower’s Rights and
your loan in full over a period not to exceed 25 years (not including Responsibilities Statement. We charge interest on both Direct
periods of deferment and forbearance) from the date your loan entered Subsidized Loans and Direct Unsubsidized Loans during forbearance
repayment. The maximum period of time you have to repay your loans periods.
will vary depending on the amount of your outstanding loan debt. Your To request a deferment or forbearance, contact the Direct Loan
payments must be at least $50 per month and will be more, if Servicing Center.
necessary, to repay the loan within the required time period. If your 19. Loan discharge. We may discharge (forgive) all or part of your
loan has a variable interest rate, we may need to adjust the number or loan if (i) you die, and we receive an original or certified copy of your
amount of your payments to reflect changes in the interest rate. death certificate; (ii) you are totally and permanently disabled, and you
Income Contingent Repayment Plan. Refer to the Borrower’s Rights meet certain other requirements during a 3-year conditional discharge
and Responsibilities Statement for the terms and conditions of this period; (iii) your loan is discharged in bankruptcy; (iv) you were unable
plan. to complete your course of study because your school closed; (v) your
These plans are designed to give you flexibility in meeting your school falsely certified your eligibility; (vi) your school did not pay a
obligation to repay your loan. You may change repayment plans at any refund of your loan money that it was required to pay under federal
time after you have begun repaying your loan. You may make loan regulations; or, effective July 1, 2006, (vii) a loan in your name was
payments before they are due, or pay more than the amount due each falsely certified as a result of a crime of identity theft.
month, without penalty. When you have repaid a loan in full, the Direct We may forgive a portion of any loans you received under the Direct
Loan Servicing Center will send you a notice telling you that you have Loan or Federal Family Education Loan (FFEL) program after
paid off your loan. You should keep this notice in a safe place. October 1, 1998 if you teach full-time for 5 consecutive years in certain
14. Late charges and collection costs. We may require you to pay a low-income elementary and/or secondary schools and meet certain
late charge of not more than six cents for each dollar of each late other qualifications, and if you did not owe a Direct Loan or FFEL
payment if you do not make any part of a payment within 30 days after program loan as of October 1, 1998, or as of the date you obtain a loan
it is due. We may also require you to pay other charges and fees after October 1, 1998. Contact the Direct Loan Servicing Center for
involved in collecting your loan. specific eligibility requirements.
15. Demand for immediate repayment. The entire unpaid amount of In some cases, you may assert, as a defense against collection of your
your loan becomes due and payable (on your MPN this is called loan, that your school did something wrong or failed to do something
“acceleration”) if you (i) receive loan money but do not enroll at least that it should have done. You can make such a defense against
half-time at the school that determined you were eligible to receive the repayment only if what your school did or did not do would give rise to
loan; (ii) use your loan money to pay for anything other than a legal cause of action under applicable state law. If you believe that
educational expenses at the school that determined you were eligible you have a defense against repayment of your loan, contact the Direct
to receive the loan; (iii) make a false statement that causes you to Loan Servicing Center.
receive a loan that you are not eligible to receive; or (iv) default on your 20. Loan consolidation. You may consolidate (combine) one or more
loan. of your eligible federal education loans into one loan. Consolidation
16. Default. You are in default on your loan if you (i) do not repay the allows you to extend the period of time that you have to repay your
entire unpaid amount of your loan if we require you to do so; (ii) have loans, and to combine several loan debts into a single monthly
not made a payment on your loan for at least 270 days; or (iii) do not payment. This may make it easier for you to repay your loans.
comply with other terms and conditions of your loan, and we conclude However, you will pay more interest if you extend your repayment
that you no longer intend to honor your obligation to repay your loan. period through consolidation, since you will be making payments for a
longer period of time. Contact the Direct Loan Servicing Center for
If you default on your loan, we will report your default to national credit
more information about loan consolidation.
bureaus. We may sue you, take all or part of your federal tax refund,
and/or garnish your wages so that your employer is required to send us
part of your salary to pay off your loan. We will require you to pay
reasonable collection fees and costs, plus court costs and attorney
fees. You will lose eligibility for other federal student aid and
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