Common Manual Update Correction

To assure that your Common Manual remains current, please record this document on your LPM/LPB index and retain it in Appendix E of your manual.

Correction to Required Notices for the Master Promissory Note

The May 28, 1999, loan program memorandum L99-7 language for Required Notices for the Master Promissory Note (MPN) inadvertently omitted pertinent text that confirmation and notification are required for subsequent loans made using the multi-year feature of the MPN. Specifically, paragraph 2 under the subheading Required Notices for the Master Promissory Note, sentence 2, has been corrected to include the word "subsequent." Please replace the Required Notices for the Master Promissory Note section of the previously published common bulletin language with the following update:

Required Notices for the Master Promissory Note

Current Common Manual policy describes required notices and authorizations for loans made using a common Stafford or PLUS application and promissory note. Subsection 6.3.C. has been expanded to incorporate the Stafford Master Promissory Note (MPN) provisions.

For Stafford loans made using an MPN, notification and confirmation requirements apply.  The school and lender must ensure and document that a process is in place for providing either confirmation or notification for subsequent loans made using the multi-year feature.   A notification or confirmation process informs the student of the proposed loan types and amounts being awarded for the loan period and should increase the borrower’s understanding of his or her loan obligations.  The notification or confirmation process may be part of, or may supplement, the existing required notices and disclosures described in subsection 6.3.C.  Although the initial disclosure constitutes a notification action, it must be supplemented by another notification or confirmation process by the parties described below.

Notification is a process by which the school, lender, or guarantor notifies the borrower of the proposed loan types and amounts. The borrower is required to act only if he or she wants to reject or adjust the types or amounts of the loan. Confirmation is a process by which the school, lender, or guarantor (on behalf of the school or lender) advises the borrower of the proposed loan types and amounts. The borrower is required to act to confirm the loan type or request a specific loan amount. A school, lender, or guarantor (on behalf of the school or lender) may establish confirmation for the entire loan or may request that the student confirm each disbursement of the loan.

For Stafford loans made using an MPN, the school is not required to obtain a separate borrower authorization statement to permit the transfer of loan proceeds received by EFT or master check to the student’s account. The authorization is included on the MPN and the 30-day restriction for collection of the authorization does not apply.