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.
(ii)
A toll-free telephone number accessible from within the United States that the borrower can use to obtain additional loan information;
(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;
(vi)
The amount of any charges, including the origination fee if applicable, and the Federal default fee, 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 or paid by the lender;
(ix)
A statement that information concerning the loan, including the date of disbursement and the amount of the loan, will be reported to each nationwide consumer reporting agency;
(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, and a description of the types of repayment plans available;
(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 § 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 each nationwide consumer reporting agency, 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 during repayment or in the collection of the loan including any fees the borrower may be charged;
(xix)
In the case of a Stafford or student PLUS loan, a statement that the loan proceeds will be transmitted to the school for delivery to the borrower;
(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;
(xxi)
For unsubsidized Stafford or student PLUS borrowers, an explanation that the borrower may pay the interest while in school and, if the interest is not paid by the borrower while in school, when and how often the interest will be capitalized;
(xxii)
For parent PLUS borrowers, an explanation that the parent may defer payment on the loan while the student on whose behalf the parent borrowed is enrolled at least half-time and, if the parent does not pay interest while the student is in school, when and how often interest will be capitalized, and that the parent may be eligible for a deferment on the loan if the parent is enrolled at least half-time;
(xxiii)
A statement summarizing the circumstances in which a borrower may obtain forbearance on the loan; and
(xxiv)
A description of the options available for forgiveness of the loan and the requirements to obtain that forgiveness.
(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 and that the default will be reported to each nationwide consumer reporting agency. The Borrower's Rights and Responsibilities statement approved by the Secretary satisfies this requirement.
(c) Repayment information—
(1) Disclosures at or prior to repayment.
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 PLUS loan, the disclosures required by this paragraph must be made not less than 30 days nor more than 150 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 lender must provide the required disclosures to the borrower immediately upon discovering that the borrower has entered the repayment period.
(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, or a deferment under § 682.210(v), if applicable, is to end;
(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, a deferment under § 682.210(v), if applicable, is to end, or the date of the disclosure, whichever is later;
(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 based on the repayment schedule selected by the borrower;
(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 if interest has been paid, the amount of interest paid;
(ix)
A statement that the borrower has the right to prepay all or part of the loan at any time, without penalty;
(x)
Information on any special loan repayment benefits offered on the loan, including benefits that are contingent on repayment behavior, and any other special loan repayment benefits for which the borrower may be eligible that would reduce the amount or length of repayment; and at the request of the borrower, an explanation of the effect of a reduced interest rate on the borrower's total payoff amount and time for repayment;
(xi)
If the lender provides a repayment benefit, any limitations on that benefit, any circumstances in which the borrower could lose that benefit, and whether and how the borrower may regain eligibility for the repayment benefit;
(xii)
A description of all the repayment plans available to the borrower and a statement that the borrower may change plans during the repayment period at least annually;
(xiii)
A description of the options available to the borrower to avoid or be removed from default, as well as any fees associated with those options; and
(xiv)
Any additional resources, including nonprofit organizations, advocates and counselors, including the Department of Education's Student Loan Ombudsman, the lender is aware of where the borrower may obtain additional advice and assistance on loan repayment.
(3) Required disclosures during repayment.
In addition to the disclosures required in paragraph (c)(1) of this section, the lender must provide the borrower of a FFEL loan with a bill or statement that corresponds to each payment installment time period in which a payment is due that includes in simple and understandable terms—
(v)
The aggregate amount paid by the borrower on the loan, and separately identifying the amount the borrower has paid in interest on the loan, the amount of fees the borrower has paid on the loan, and the amount paid against the balance in principal;
(vi)
A description of each fee the borrower has been charged for the most recent preceding installment time period;
(vii)
The date by which a payment must be made to avoid additional fees and the amount of that payment and the fees;
(viii)
The lender's or servicer's address and toll-free telephone number for repayment options, payments and billing error purposes; and
(ix)
A reminder that the borrower may change repayment plans, a list of all of the repayment plans that are available to the borrower, a link to the Department of Education's Web site for repayment plan information, and directions on how the borrower may request a change in repayment plans from the lender.
(4) Required disclosures for borrowers having difficulty making payments.
The lender shall provide a borrower who has notified the lender that he or she is having difficulty making payments with—
(i)
A description of the repayment plans available to the borrower, and how the borrower may request a change in repayment plan;
(ii)
A description of the requirements for obtaining forbearance on the loan and any costs associated with forbearance; and
(iii)
A description of the options available to the borrower to avoid default and any fees or costs associated with those options.
(5) Required disclosures for borrowers who are 60-days delinquent in making payments on a loan.
(i)
The lender shall provide to a borrower who is 60 days delinquent in making required payments a notice of—
(B)
The minimum payment the borrower must make, as of the date of the notice, to avoid default, including the payment amount needed to bring the loan current or payment in full;
(C)
A description of the options available to the borrower to avoid default, including deferment and forbearance and any fees and costs associated with those options;
(E)
Any additional resources, including nonprofit organizations, advocates and counselors, including the Department of Education's Student Loan Ombudsman, the lender is aware of where the borrower may obtain additional advice and assistance on loan repayment.
(ii)
The notice must be sent within five days of the date the borrower becomes 60 days delinquent, unless the lender has sent such a notice within the previous 120 days.
(d) Exception to disclosure requirement.
In the case of a Federal Unsubsidized Stafford loan or 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 borrower or student on whose behalf the loan is made 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 Stafford and PLUS promissory notes 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 and income-based repayment options.
(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 and, except for parent PLUS borrowers and Consolidation Loan borrowers whose Consolidation Loan paid off one or more parent PLUS Loans, income-based repayment plans. 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 and may be eligible for income-based repayment, including through loan consolidation;
(ii)
Of the procedures by which the borrower can elect income-sensitive or income-based repayment; and
(iii)
Of where and how the borrower may obtain more information concerning income-sensitive and income-based repayment plans.
(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.
(i) Separate disclosure for Consolidation loans.
At the time the lender provides a Consolidation loan application to a prospective borrower, it must disclose to the prospective borrower, in simple and understandable terms—
(1)
Whether consolidation will result in a loss of loan benefits, including, but not limited to, loan forgiveness, cancellation, deferment, or a reduced interest rate on FFEL or Direct Loans repaid through consolidation;
(2)
If a borrower is repaying a Federal Perkins Loan with the Consolidation loan, that the borrower will lose—
(i)
The interest-free periods available on the Perkins Loan while the borrower is enrolled in-school at least half-time, in the grace period, or in a deferment period; and
(ii)
The cancellation benefits on the Perkins Loan. The lender must provide to the borrower a list of the Perkins Loan cancellation benefits that would not be available on the Consolidation loan.
(4)
The borrower's options to prepay the Consolidation loan, to pay the loan on a shorter repayment schedule, and to change repayment plans;
(7)
That applying for the Consolidation loan does not obligate the borrower to agree to take the Consolidation loan, and the process and deadline by which the borrower may cancel the Consolidation loan.
(j) Disclosure procedures when a borrower's address is not available.
If a lender receives information indicating it does not know the borrower's current address, the lender is excused from providing disclosure information under this section unless it receives communication indicating a valid borrower address before the 241st day of delinquency, at which point the lender must resume providing the installment bill or statement, and any other disclosure information required under this section not previously provided.
(Approved by the Office of Management and Budget under control number 1845-0020)