[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: 34CFR685.201]



[Page 820-821]

 

                           TITLE 34--EDUCATION

 

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

 

PART 685_WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM--Table of Contents

 

                      Subpart B_Borrower Provisions

 

Sec. 685.201  Obtaining a loan.



    (a) Application for a Direct Subsidized Loan or a Direct 

Unsubsidized Loan. (1) To obtain a Direct Subsidized Loan or a Direct 

Unsubsidized Loan, a student must complete a Free Application for 

Federal Student Aid and submit it in accordance with instructions in the 

application.

    (2) If the student is eligible for a Direct Subsidized Loan or a 

Direct Unsubsidized Loan, the Secretary or the school in which the 

student is enrolled must perform specific functions. Unless a school's 

agreement with the Secretary specifies otherwise, the school must 

perform the following functions:

    (i) A school participating under school origination option 2 must 

create a loan origination record, ensure that the loan is supported by a 

completed Master Promissory Note (MPN), draw down funds, and disburse 

the funds to the student.

    (ii) A school participating under school origination option 1 must 

create a loan origination record, ensure that the loan is supported by a 

completed MPN, and transmit the record and MPN (if required) to the 

Servicer. The Servicer initiates the drawdown of funds. The school must 

disburse the funds to the student.

    (iii) If the student is attending a school participating under 

standard origination, the school must create a loan origination record 

and transmit the record to the alternative originator, which either 

confirms that a completed MPN supports the loan or prepares an MPN and 

sends it to the student. The Servicer receives the completed MPN from 

the student (if required) and initiates the drawdown of funds. The 

school must disburse the funds to the student.

    (b) Application for a Direct PLUS Loan. To obtain a Direct PLUS 

Loan, the parent must complete the application and promissory note and 

submit it to the school at which the student is enrolled. The school 

must complete its portion of the application and promissory note and 

submit it to the Servicer, which makes a determination as to whether the 

parent has an adverse credit history. Unless a school's agreement with 

the Secretary specifies otherwise, the school must perform the following 

functions: A school participating under school origination option 2 must 

draw down funds and disburse the funds. For a school participating under 

school origination option 1 or standard origination, the Servicer 

initiates the drawdown of funds, and the school disburses the funds.

    (c) Application for a Direct Consolidation Loan. (1) To obtain a 

Direct Consolidation Loan, the applicant must complete the application 

and promissory note and submit it to the Servicer. The application and 

promissory note sets forth the terms and conditions of the Direct 

Consolidation Loan and informs the applicant how to contact the 

Servicer. The Servicer answers questions regarding the process of 

applying for a Direct Consolidation Loan and provides information about



[[Page 821]]



the terms and conditions of both Direct Consolidation Loans and the 

types of loans that may be consolidated.

    (2) Once the applicant has submitted the completed application and 

promissory note to the Servicer, the Secretary makes the Direct 

Consolidation Loan under the procedures specified in Sec. 685.220.



(Authority: 20 U.S.C. 1087a et seq., 1091a)



[64 FR 58965, Nov. 1, 1999, as amended at 65 FR 65629, Nov. 1, 2000]