Federal Stafford Loan Master Promissory Note (Page 6 of 8) in pdf

Loans (while I am in school at least half time, for up

15. Loan Cancellation – I understand that the terms

defined by the Act. In addition, I must meet certain

to 3 years during active duty service in the Armed

of a full or partial loan cancellation depend on when

income requirements and may not receive any

Forces as described in the Grace Period section above,

I request the cancellation.

additional FFELP, Direct, or Federal Perkins Loans

during the grace period after I leave school, or during

during a 3-year conditional discharge period. I may not

At any time before my loan money is disbursed, I may

any period of authorized deferment), it is my

receive a discharge due to total and permanent disability

decline all or part of my loan money by notifying my

responsibility to pay interest on the principal amount of

based on a condition that existed before I applied for

school or lender. No origination fee, guarantee fee or

my loans from the date of disbursement until the loans

that loan, unless a physician certifies that the condition

interest will be charged on the amount of the loan that

are paid in full. For all other periods and for

substantially deteriorated after the loan was made.

is cancelled.

unsubsidized Federal Stafford Loans, it is my

My loan will not automatically be discharged in

responsibility to pay interest on my loans.

If my school credits my loan to my student account,

bankruptcy. In order to discharge a loan in bankruptcy,

I may cancel all or a part of my loan by informing

If I inform my lender that I wish to pay interest as it

I must prove undue hardship in an adversary

my school within 14 days after the date my school

accrues, but I do not submit the payments, my lender

proceeding before the bankruptcy court.

sends me a disbursement notice, or by the first day

may capitalize that interest.

of the school's payment period, whichever is later.

In certain cases, the Act provides for loan discharge

Capitalized interest increases the principal balance

(My school can tell me the first day of the payment

for borrowers who are unable to complete a course

of my loans and the total amount of interest charges

period.) If I cancel all or a portion of my loan as

of study because the institution closes, or borrowers

I must pay. Interest will be capitalized on my loans as

described in this paragraph, my school will return to

whose loan eligibility was falsely certified by the

provided under the Act. Generally, capitalization

my lender the cancelled amount of the loan money

institution. The Act also provides for loan discharge

may occur no more frequently than quarterly.

and the loan fees will be reduced or eliminated in

in the amount of any required refund that my school

However interest that accrues on my unsubsidized

proportion to the amount returned.

failed to make to my lender on my behalf.

Federal Stafford Loans during in-school, grace or

At any time within 120 days of disbursement, I may

deferment periods may only be capitalized at the end

Neither the lender, the guarantor, nor the Department of

pay back all or a part of my loan. The loan fees will

of such periods. In addition, interest may not be

Education vouch for the quality or suitability of the

be reduced or eliminated in proportion to the

capitalized if my lender grants an administrative

academic programs offered by participating schools.

amount returned.

forbearance for up to 60 days in order to collect and

Unless I qualify for loan discharge under the Act, I must

process documentation supporting my request for a

repay the loans even if I do not complete my education,

16. Sale or Transfer of Loans – The lender may sell or

deferment, forbearance, change in repayment plan, or

I am unable to obtain employment in my field of study,

otherwise transfer one or all of my loans without my

consolidation. (See the chart entitled, "Capitalization of

or I am dissatisfied with, or do not receive, the

consent. Should ownership of a loan be transferred, I will

Federal Stafford Loan Interest," for further information

education I paid for with the loans.

be notified of the name, address, and telephone number

on capitalization.)

of the new lender if the address to which I make my

For additional information, I should contact my lender

payments changes. Sale or transfer of my loans does not

The charts entitled Repaying Your Loans allow me to

or guarantor.

affect my rights and responsibilities under such loans. If

estimate the cost of capitalization and estimate the

the lender sells my loans to another originating lender, the

18. Consequences of Default – Default is defined in

effect of capitalization on my monthly payments.

lender may also transfer the right to offer subsequent

detail in my MPN. If I default, the entire unpaid balance

If necessary, I must add two or more estimates of my

loans under the MPN to such purchaser. I always have the

and any accrued collection fees on the applicable loans

payments together to approximate more closely the

right to terminate a lender's ability to make loans to me

will become immediately due and payable. Failure to

total monthly payment.

under this MPN by written notice to the lender.

repay loans made under this MPN may result in any or

I may be able to claim a federal income tax deduction

all of the following:

17. Loan Discharge – My loans will be discharged

for interest payments I make on my FFELP loans. For

Loss of federal and state income tax refunds,

if documentation of my death is submitted to my

further information, I may refer to the IRS Publication

Loss of other federal or state payments,

lender. My loan(s) may also be discharged if a physician

970, which is available at

Legal action against me,

certifies that I am totally and permanently disabled as

Capitalization of Federal Stafford Loan Interest

This chart compares the monthly payments on unsubsidized Federal Stafford Loans where interest is paid while the

What Is Capitalization?

borrower is in school and loans where the interest is capitalized. This example uses the maximum interest rate for

Capitalization is a process whereby a lender adds

Federal Stafford Loans, 8.25%. This is an estimate only. The actual interest capitalized will depend on factors such as

unpaid interest to the principal balance of a loan.

disbursement date, number of disbursements, and the variable interest rate.

You are responsible for paying the interest due on

your loan as described in Item 3 of this Rights and

Responsibilities Statement.

Treatment

Loan

Capitalized

Principal

Monthly

Number

Total

of Interest

Amount

Interest for

to be

Payment

Amount

12 months

Repaid

Payments

Repaid

If you fail to make required interest payments before

the beginning or resumption of principal repayment,

When you pay the interest

$15,000

$184

120

$23,315*

or if you are granted a deferment (on an

unsubsidized Federal Stafford Loan) or forbearance,

When you don’t pay the

$15,000

$1,238

$16,238

$199

120

$23,900

your lender may capitalize such interest as provided

interest

under the Act. The principal balance of your loan will

*Total amount repaid includes $1,238 of interest paid by the borrower before the borrower entered repayment.

increase each time your lender capitalizes unpaid

interest. As a result, you will pay more interest

Result: During repayment, you pay $15 less per month and $585 less over the lifetime of your loan(s) when you pay

charges over the life of the loan. When you leave

the interest as it is charged.

school and begin repaying your loan, your monthly

payment amount will be higher or, if your loan is

subject to the $50 minimum payment, you will make

Contact your lender if you have questions or need more information.

more payments.

Federal Stafford Loan Master Promissory Note Page 6

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