(a) Required disclosure before disbursement Each eligible lender, at or prior to the time such lender disburses a loan that is insured or guaranteed under this part (other than a loan made under section
1078–3 of this title), shall provide thorough and accurate loan information on such loan to the borrower in simple and understandable terms. Any disclosure required by this subsection may be made by an eligible lender by written or electronic means, including as part of the application material provided to the borrower, as part of the promissory note evidencing the loan, or on a separate written form provided to the borrower. Each lender shall provide to each borrower a telephone number, and may provide an electronic address, through which additional loan information can be obtained. The disclosure shall include
(1) a statement prominently and clearly displayed and in bold print that the borrower is receiving a loan that must be repaid;
(2) the name of the eligible lender, and the address to which communications and payments should be sent;
(3) the principal amount of the loan;
(4) the amount of any charges, such as the origination fee and insurance premium, collected by the lender at or prior to the disbursal of the loan and whether such charges are deducted from the proceeds of the loan or paid separately by the borrower;
(5) the stated interest rate on the loan;
(6) the yearly and cumulative maximum amounts that may be borrowed;
(7) an explanation of when repayment of the loan will be required and when the borrower will be obligated to pay interest that accrues on the loan;
(8) a statement as to the minimum and maximum repayment term which the lender may impose, and the minimum annual payment required by law;
(9) a statement of the total cumulative balance, including the loan applied for, owed by the
student to that lender, and an estimate of the projected monthly payment, given such cumulative balance;
(10) an explanation of any special options the borrower may have for loan consolidation or other refinancing of the loan;
(11) a statement that the borrower has the right to prepay all or part of the loan, at any time, without penalty, a statement summarizing circumstances in which repayment of the loan or interest that accrues on the loan may be deferred, and a brief notice of the program for repayment of loans, on the basis of military service, pursuant to section 902 of the Department of Defense Authorization Act, 1981 (
10 U.S.C.
2141 note, );
(12) a definition of default and the consequences to the borrower if the borrower defaults, including a statement that the default will be reported to a credit bureau or credit reporting agency;
(13) to the extent practicable, the effect of accepting the loan on the eligibility of the borrower for other forms of
student assistance; and
(14) an explanation of any cost the borrower may incur in the making or collection of the loan.
(b) Required disclosure before repayment Each eligible lender shall, at or prior to the start of the repayment period of the
student borrower on loans made, insured, or guaranteed under this part, disclose to the borrower by written or electronic means the information required under this subsection in simple and understandable terms. Each eligible lender shall provide to each borrower a telephone number, and may provide an electronic address, through which additional loan information can be obtained. For any loan made, insured, or guaranteed under this part, other than a loan made under section
1078–2 or
1078–3 of this title, such disclosure required by this subsection shall be made not less than 30 days nor more than 240 days before the first payment on the loan is due from the borrower. The disclosure shall include
(1) the name of the eligible lender, and the address to which communications and payments should be sent;
(2) the scheduled date upon which the repayment period is to begin;
(3) the estimated balance owed by the borrower on the loan or loans covered by the disclosure as of the scheduled date on which the repayment period is to begin (including, if applicable, the estimated amount of interest to be capitalized);
(4) the stated interest rate on the loan or loans, or the combined interest rate of loans with different stated interest rates;
(5) the nature of any fees which may accrue or be charged to the borrower during the repayment period;
(6) the repayment schedule for all loans covered by the disclosure including the date the first installment is due, and the number, amount, and frequency of required payments;
(7) an explanation of any special options the borrower may have for loan consolidation or other refinancing of the loan and of the availability and terms of such other options, except that such explanation is not required when the loan being made is a consolidation loan under section
1078–3 of this title;
(8) except as provided in subsection (e) of this section, the projected total of interest charges which the borrower will pay on the loan or loans, assuming that the borrower makes payments exactly in accordance with the repayment schedule; and
(9) a statement that the borrower has the right to prepay all or part of the loan or loans covered by the disclosure at any time without penalty.
(c) Cost of disclosure and consequences of nondisclosure Such information shall be available without cost to the borrower. The failure of an eligible lender to provide information as required by this section shall not
(1) relieve a borrower of the obligation to repay a loan in accordance with its terms,
(2) provide a basis for a claim for civil damages, or
(3) be deemed to abrogate the obligation of the Secretary under a contract of insurance or reinsurance, or the obligation of a guaranty agency under a contract of guaranty. Nothing in this section shall be construed as subjecting the lender to the Truth in Lending Act [
15 U.S.C.
1601 et seq.] with regard to loans made under this part. The Secretary may limit, suspend, or terminate the continued participation of an eligible lender in making loans under this part for failure by that lender to comply with this section.
(d) Separate statement
Each eligible lender shall, at the time such lender notifies a borrower of approval of a loan which is insured or guaranteed under this part, provide the borrower with a separate paper which summarizes (in plain English) the rights and responsibilities of the borrower with respect to the loan, including a statement of the consequences of defaulting on the loan and a statement that each borrower who defaults will be reported to a credit bureau. The requirement of this subsection shall be in addition to the information required by subsection (a) of this section.
(e) Special disclosure rules on SLS loans and PLUS loans and unsubsidized loans Loans made under sections
1078–1,2
1078–2, and
1078–8 of this title shall not be subject to the disclosure of projected monthly payment amounts required under subsection (b)(8) of this section if the lender, in lieu of such disclosure, provides the borrower with sample projections of monthly repayment amounts assuming different levels of borrowing and interest accruals resulting from capitalization of interest while the borrower is in
school. Such sample projections shall disclose the cost to the
student of capitalizing
(1) principal and interest; and
(2) interest only.
