Page images
PDF
EPUB

time active service starting after June 30, 1970, in the U.S. Army, Navy, Air Force, Marine Corps, or Coast Guard.

(2) The cancellation rate is 121⁄2 percent of the original loan principal, plus the interest on the unpaid balance, for each complete year of consecutive service.

(b) Cancellation on a Direct loan. (1) An institution must cancel up to 50 percent of a Direct loan for service as a member of the U.S. Army, Navy, Air Force, Marine Corps, or Coast Guard in an area that qualifies for special pay under section 310 of Title 37 of the U.S. Code.

(2) The cancellation rate is 121⁄2 percent of the original loan principal, plus the interest on the unpaid balance, for each complete year of qualifying service.

(c) The Secretary considers a borrower's loan deferment under § 674.34 to run concurrently with any period for which a cancellation for military service is granted.

(20 U.S.C. 425(b)(3) and 1087ee)

§ 674.57 Cancellation for death or disability.

(a) Death. An institution must cancel the unpaid balance of a borrower's Defense or Direct loan, including interest, if the borrower dies. The lending institution cancels the loan on the basis of a death certificate or other evidence of death that is conclusive under State law.

(b) Permanent and total disability. (1) An institution must cancel the unpaid balance of a Defense or Direct loan, including interest, if the borrower becomes permanently and totally disabled after receiving the loan. The lending institution decides whether to cancel the loan based on medical evidence supplied by the borrower or his or her representative.

(2) Permanent and total disability is the inability to work and earn money because of an impairment that is expected to continue indefinitely result in death.

or

(c) No Federal reimbursement. No Federal reimbursement will be made to an institution for cancellation of loans due to death or disability.

(d) Retroactive. Cancellation for death or disability applies retroactive

ly to all Defense and Direct loans whenever made.

(20 U.S.C. 425 and 1087dd and section 130(g)(2) of the Educational Amendments of 1976, Pub. L. 94-482)

§ 674.58 No cancellation for prior service-No repayment refunded-Cancellations not considered taxable income. (a) No portion of a loan may be cancelled for teaching, Head Start, or military service if the borrower's service is performed before the date he or she signs the promissory note.

(b) No repayment may be refunded unless it was made because of institutional error.

(c) The amount of a loan and interest on a loan which is cancelled under Subpart D shall not be considered taxable income for purposes of the Internal Revenue Code of 1954.

(20 U.S.C. 425 and 1087ee; Pub. L. 96-374, Section 448(e), 94 Stat 1443)

[merged small][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small]
[blocks in formation]

for the collection of any amount not paid when due].

I further understand and agree that:

General

I. All sums advanced under this note are drawn from a fund created under Part E of Title IV of the Higher Education Act of 1965, hereinafter called the Act and are subject to the Act and the Federal Regulations issued under the Act. The terms of this note must be interpreted in accordance with the Act and Federal Regulations, copies of which are to be kept by the Lending Institution.

Repayment

II. (1) Interest shall accrue from the beginning of the repayment period and shall be at the ANNUAL PERCENTAGE RATE OF THREE PERCENT (3%)* on the unpaid balance except that no interest shall accrue during any period described in paragraph III (3). (A), (B) and (C).

(Bracketed clause must be included if the institution uses paragraph II(4))

(2) [Except as provided in paragraph II (4)] I promise to repay the principal, and the interest which accrues on it, over a period beginning 6 months after the date I cease to be at least a half-time student at an institution of higher education or at a comparable institution outside the United States approved for this purpose by the United States Secretary of Education (hereinafter called the Secretary), and ending, unless paragraph II(3) or III (3) (deferment) applies, 10 years later.

I may, however, request that the repayment period start on an earlier date.

I promise to repay the principal and interest over the course of the repayment period in EQUAL monthly, bimonthly or quarterly installments, as determined by the Lending Institution. However, if I request, repayments may be made in GRADUATED INSTALLMENTS determined in accordance with schedules approved by the Lending Institution and the Secretary. In either case, a schedule of repayment shall be attached to and made part of this note.

(3) Notwithstanding paragraph II(2), if I qualify as a low-income individual during the repayment period, the lending institution may, at my request, extend the repayment period for up to an additional 10 years or adjust any repayment schedule to reflect my income, or both.

(Bracketed paragraphs may be included at option of institution)

*For loans made after June 30, 1981, the annual percentage rate increases to four percent (4%).

80-113 0-82--27

[(4) If the repayment schedule established under paragraph II(2) provides for repayment of principal and interest at a rate of less than $30 per month, I shall repay the total amount of this loan plus the interest thereon at the rate of $30 per month, which shall include repayment of principal and interest.

If I receive or have received National Direct or Defense Student Loans from other lending institutions, I shall repay this note at a monthly rate equal to not less than the amount by which $30 exceeds the total monthly rate of principal and interest repaid on the other loans.

A schedule of repayment will be attached to and made part of this note.

The Lending Institution may permit me to pay less than the rate of $30 per month for a period of not more than one year where necessary to avoid hardship to me unless that action would extend the repayment period in paragraph 2 of this article.]

III. This note is also subject to the following conditions:

Prepayment

(1) I may at my option and without penalty prepay all or any part of the principal, plus the accrued interest thereon, at any time. Amounts I repay in the academic year in which the loan was made will be used to reduce the amount of the loan and will not be considered a prepayment. If I repay more than the amount due for any repayment period, the excess will be used to prepay principal unless I designate it as an advance payment of the next regular installment.

Default

(2)(A) If I fail to meet a scheduled repayment of any installment, the entire unpaid indebtedness including interest due and accrued thereon, plus any applicable penalty charges, will, at the option of the Lending Institution, become immediately due and payable.

(B) Further, I understand that if I default on my loan repayments and the loan is referred to the Secretary for collection, the Secretary may disclose that I have defaulted, along with other relevant information, to credit bureau organizations.

Deferment

(3) Interest will not accrue, and installments need not be paid

(A) while I am enrolled and in attendance as at least a half-time student at an institution of higher education or at a comparable institution outside the United States approved for this purpose by the Secretary or (B) for a period not in excess of 3 years during which time I am

(i) on full-time active duty as a member of the Armed Forces of the United States

(Army, Navy, Air Force, Marine Corps, or Coast Guard),

(ii) in service as a Volunteer under the Peace Corps Act, or

(iii) a VISTA volunteer under Title IPart A of the Domestic Volunteer Service Act,

(iv) a full-time volunteer in a tax-exempt organization performing service comparable to the service performed by Peace Corps or ACTION agency volunteers,

(v) temporarily totally disabled as established by an affidavit of a qualified physician,

(vi) unable to secure employment because I am providing care required by my spouse who is so disabled, or

(vii) an officer on full-time active duty in the Commissioned Corps of the U.S. Public Health Service.

(C) for a period not in excess of two years during which time I am serving in an internIship which is required in order that I may receive professional recognition required to begin my professional practice or service.

(D) The Lending Institution may, upon my application, defer or reduce any scheduled repayments if, in its opinion, extraordinary circumstances, such as prolonged illness or unemployment, prevent me from making such repayments. However, interest will continue to accrue.

Cancellation for Teaching

(4) I am entitled to have the entire amount of this loan plus the interest thereon cancelled if I undertake service.

(A) as a full-time teacher in a public or other non-profit elementary or secondary school which is in a school district of a local educational agency which is eligible for funds under Title I of the Elementary and Secondary Education Act of 1965 and which has been designated by the Secretary in accordance with the provisions of Section 465(a)(2) of the Higher Education Act as a school with a high enrollment of students from low-income families, or

(B) as a full-time teacher of handicapped children (including mentally retarded, hard of hearing, deaf, speech impaired, visually handicapped, seriously emotionally disturbed, orthopedically impaired, children with specific learning disabilities, or other health impaired children who by reason thereof require special education and related services) in public or other nonprofit elementary or secondary school system.

This loan will be cancelled at the following rates: 15 percent of the total principal amount of the loan plus interest on the unpaid balance will be cancelled for the first and second complete academic years of that teaching service; 20 percent of the total principal amount plus interest on the unpaid balance for the third and fourth

complete academic years of that teaching service; and 30 percent of the total principal amount plus interest on the unpaid balance for the fifth complete academic year of that teaching service.

Head Start Cancellation

(5) I am entitled to have the entire amount of this loan plus the interest thereon cancelled if I undertake service as a fulltime staff member in a Head Start program if

(A) that Head Start program is operated for a period which is comparable to a full school year in the locality, and

(B) my salary is not more than the salary of a comparable employee of the local educational agency.

Cancellation will be at the rate of 15 percent of the total principal amount plus the interest on the unpaid balance for each complete school year or the equivalent of service in a Head Start program.

Head Start is a preschool program carried out under section 222(a)(1) of the Economic Opportunity Act of 1964.

Military Cancellation

(6) If I serve as a member of the Armed Forces of the United States, up to 50 percent of the principal amount of this loan plus the interest thereon will be cancelled at the rate of 121⁄2 percent of the total principal amount plus interest on the unpaid balance for each complete year of service in an area of hostilities that qualifies for special pay under section 310 of title 37 of the United States Code.

Death and Disability Cancellation

(7) If I should die or become permanently and totally disabled, the entire amount of this loan plus the interest thereon shall be cancelled.

Address Change

(8) I am responsible for informing the Lending Institution of any change or changes in my address.

Penalty Charge

(Bracketed paragraphs may be included at option of institution)

[(9) If I fail to make timely payment of all or any part of a scheduled installment, or if I am eligible for deferment or cancellation under paragraphs III (3), (4), (5), or (6), but fail to submit the appropriate request on time, I promise to pay the charge assessed against me by the Lending Institution.

No charge may exceed (1) where the loan is repayable in monthly installments, $1 for the first month or part of a month by which the installment or evidence is late, and $2 for each month or part of a month thereafter; or (2) in the case of a loan which is re

[blocks in formation]

ing Institution shall supply a copy of this note to me.

Signature of endorser

Permanent Address

(Street or Box Number, City, State, and Zip Code)

Date

Monthly:

1st past due

2d past due

3d past due

4th past due

19——

APPENDIX C-EXAMPLE FOR COMPUTING PENALTY CHARGES 6 MONTHS

[blocks in formation]

5th past due

6th past due

Total, all payments.

Bimonthly:

1st past due.

2d past due

3d past due

Total, all payments.

Quarterly:

1st past due

2d past due.

Total, all payments.

[blocks in formation]
[blocks in formation]
« PreviousContinue »