[Code of Federal Regulations]

[Title 34, Volume 3]

[Revised as of July 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 34CFR682.205]



[Page 650-653]

 

                           TITLE 34--EDUCATION

 

 CHAPTER VI--OFFICE OF POSTSECONDARY EDUCATION, DEPARTMENT OF EDUCATION

 

PART 682_FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM--Table of Contents

 

                      Subpart B_General Provisions

 

Sec. 682.205  Disclosure requirements for lenders.



    (a) Initial disclosure statement. (1) A lender must disclose the 

information described in paragraph (a)(2) of this section to a borrower, 

in simple and understandable terms, before or at the time of the first 

disbursement on a Federal Stafford or Federal PLUS loan. The information 

given to the borrower must prominently and clearly display, in bold 

type, a clear and concise statement that the borrower is receiving a 

loan that must be repaid.

    (2) The lender shall provide the borrower with--

    (i) The lender's name;

    (ii) A toll-free telephone number accessible from within the United 

States that the borrower can use to obtain additional loan information;

    (iii) The address to which correspondence with the lender and 

payments should be sent;

    (iv) Notice that the lender may sell or transfer the loan to another 

party and, if it does, that the address and identity of the party to 

which correspondence and payments should be sent may change;

    (v) The principal amount of the loan;

    (vi) The amount of any charges, including the origination fee if 

applicable, and the insurance premium, to be collected by the lender 

before or at the time of each disbursement on the loan, and an 

explanation of whether those charges are to be deducted from the 

proceeds of the loan or paid separately by the borrower;

    (vii) The actual interest rate;



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    (viii) The annual and aggregate maximum amounts that may be 

borrowed;

    (ix) A statement that information concerning the loan, including the 

date of disbursement and the amount of the loan, will be reported to a 

national credit bureau;

    (x) An explanation of when repayment of the loan is required and 

when the borrower is required to pay the interest that accrues on the 

loan;

    (xi) The minimum and maximum number of years in which the loan must 

be repaid and the minimum amount of required annual payments;

    (xii) An explanation of any special options the borrower may have 

for consolidating or refinancing the loan;

    (xiii) A statement that the borrower has the right to prepay all or 

part of the loan at any time, without penalty;

    (xiv) A statement describing the circumstances under which repayment 

of the loan or interest that accrues on the loan may be deferred;

    (xv) A statement of availability of the Department of Defense 

program for repayment of loans on the basis of military service, as 

provided for in 10 U.S.C. 2171;

    (xvi) The definition of ``default'' found in Sec. 682.200, and the 

consequences to the borrower of a default, including a statement 

concerning likely litigation, a statement that the default will be 

reported to a national credit bureau, and statements that the borrower 

will be liable for substantial collection costs, that the borrower's 

Federal and State income tax refund may be withheld to pay the debt, 

that the borrower's wages may be garnished or offset, and that the 

borrower will be ineligible for additional Federal student financial 

aid, as well as for assistance under most Federal benefit programs;

    (xvii) An explanation of the possible effects of accepting the loan 

on the student's eligibility for other forms of student financial 

assistance;

    (xviii) An explanation of any costs the borrower may incur in the 

making or collection of the loan; and

    (xix) In the case of a Stafford or SLS loan, other than an SLS loan 

made under Sec. 682.209 (e) or (f) or a loan made to a borrower 

attending a school that is not in a State, a statement that the loan 

proceeds will be transmitted to the school for delivery to the borrower; 

and

    (xx) A statement of the total cumulative balance, including the loan 

applied for, owed to that lender, and an estimate of, or information 

that will allow the borrower to estimate, the projected monthly payment 

amount based on that cumulative outstanding balance.

    (3) With the exception of paragraphs (a)(2)(i) through (a)(2)(iii), 

(a)(2)(v) through (a)(2)(vii), and (a)(2)(xx) of this section, a 

lender's disclosure requirements are met if it provides the borrower 

with either--

    (i) The borrower's rights and responsibilities statement approved by 

the Secretary under paragraph (b) of this section; or

    (ii) The plain language disclosure approved by the Secretary under 

paragraph (g) of this section for subsequent loans made under a Master 

Promissory Note.

    (b) Separate statement of borrower rights and responsibilities. In 

addition to the disclosures required by paragraph (a) of this section, 

the lender must provide the borrower with a separate written statement, 

using simple and understandable terms, at or prior to the time of the 

first disbursement, that summarizes the rights and responsibilities of 

the borrower with respect to the loan. The statement must also warn the 

borrower about the consequences described in paragraph (a)(2)(xvi) of 

this section if the borrower defaults on the loan. The Borrower's Rights 

and Responsibilities statement approved by the Secretary satisfies this 

requirement.

    (c) Disclosure of repayment information. (1) The lender must 

disclose the information described in paragraph (c)(2) of this section, 

in simple and understandable terms, in a statement provided to the 

borrower at or prior to the beginning of the repayment period. In the 

case of a Federal Stafford or Federal SLS loan, the disclosures required 

by this paragraph must be made not less than 30 days nor more than 240 

days before the first payment on the loan is due from the borrower. If 

the borrower enters the repayment period without the lender's knowledge, 

the



[[Page 652]]



lender must provide the required disclosures to the borrower immediately 

upon discovering that the borrower has entered the repayment period.

    (2) The lender shall provide the borrower with--

    (i) The lender's name, a toll-free telephone number accessible from 

within the United States that the borrower can use to obtain additional 

loan information, and the address to which correspondence with the 

lender and payments should be sent;

    (ii) The scheduled date the repayment period is to begin;

    (iii) The estimated balance, including the estimated amount of 

interest to be capitalized, owed by the borrower as of the date upon 

which the repayment period is to begin, or the date of the disclosure, 

whichever is later;

    (iv) The actual interest rate on the loan;

    (v) An explanation of any fees that may accrue or be charged to the 

borrower during the repayment period;

    (vi) The borrower's repayment schedule, including the due date of 

the first installment and the number, amount, and frequency of payments;

    (vii) Except in the case of a Consolidation loan, an explanation of 

any special options the borrower may have for consolidating or 

refinancing the loan and of the availability and terms of such other 

options;

    (viii) The estimated total amount of interest to be paid on the 

loan, assuming that payments are made in accordance with the repayment 

schedule; and

    (ix) A statement that the borrower has the right to prepay all or 

part of the loan at any time, without penalty.

    (d) Exception to disclosure requirement. In the case of a Federal 

PLUS loan, the lender is not required to provide the information in 

paragraph (c)(2)(viii) of this section if the lender, instead of that 

disclosure, provides the borrower with sample projections of the monthly 

repayment amounts assuming different levels of borrowing and interest 

accruals resulting from capitalization of interest while the student is 

in school. Sample projections must disclose the cost to the borrower of 

principal and interest, interest only, and capitalized interest. The 

lender may rely on the PLUS promissory note and associated materials 

approved by the Secretary for purposes of complying with this section.

    (e) Borrower may not be charged for disclosures. The lender must 

provide the information required by this section at no cost to the 

borrower.

    (f) Method of disclosure. Any disclosure of information by a lender 

under this section may be through written or electronic means.

    (g) Plain language disclosure. The plain language disclosure text, 

as approved by the Secretary, must be provided to a borrower in 

conjunction with subsequent loans taken under a previously signed Master 

Promissory Note. The requirements of paragraphs (a) and (b) of this 

section are satisfied for subsequent loans if the borrower is sent the 

plain language disclosure text and an initial disclosure containing the 

information required by paragraphs (a)(2)(i) through (iii), (a)(2)(v), 

(a)(2)(vi), (a)(2)(vii), and (a)(2)(xx) of this section.

    (h) Notice of availability of income-sensitive repayment option. (1) 

At the time of offering a borrower a loan and at the time of offering a 

borrower repayment options, the lender must provide the borrower with a 

notice that informs the borrower of the availability of income-sensitive 

repayment. This information may be provided in a separate notice or as 

part of the other disclosures required by this section. The notice must 

inform the borrower--

    (i) That the borrower is eligible for income-sensitive repayment, 

including through loan consolidation;

    (ii) Of the procedures by which the borrower can elect income-

sensitive repayment; and

    (iii) Of where and how the borrower may obtain more information 

concerning income-sensitive repayment.



[[Page 653]]



    (2) The promissory note and associated materials approved by the 

Secretary satisfy the loan origination notice requirements provided for 

in paragraph (h)(1) of this section.



(Approved by the Office of Management and Budget under control number 

1845-0020)



(Authority: 20 U.S.C. 1077, 1078, 1078-1, 1078-2, 1078-3, 1082, 1083(a))



[57 FR 60323, Dec. 18, 1992, as amended at 58 FR 9119, Feb. 19, 1993; 59 

FR 25745, May 17, 1994; 60 FR 30788, June 12, 1995; 64 FR 18976, Apr. 

16, 1999; 64 FR 58625, Oct. 29, 1999; 64 FR 58965, Nov. 1, 1999]