Frequently Asked Questions About

Master Promissory Note
Gramm-Leach-Bliley Information

Master Promissory Note (MPN)

• What is the effective date of the new MPN?
• There is not a place for “loan amount” on the new MPN. What backup
  documents should I use to disclose the amount(s) borrowed?
• After the new MPN is effective (November 1, 2004), do I have to provide
  it to borrowers in an electronic format?
• Can I use the MPN as a single-award year note or can it only be used as a multi-award year note?
• A borrower signs the MPN and a disbursement is made within 12 months
  of the signature date. Then 12 or more additional months go by without
  another disbursement. Is the note still valid or does the borrower need to
  sign a new MPN?
• I understand the MPN is good for 10 years. However, what happens if a
  borrower gets a $2,000 loan, goes into repayment, pays the debt off, and comes back to school all within a 10 year period? Can he still borrow additional funds under the original MPN as long as the 10 years is not up?
• With regard to the previous question, if the borrower has paid his loan in
  full, wouldn’t the paid in full MPN already have been returned to the
  borrower?
• After implementing the new MPN, can I add disbursements from the previous note to the MPN rather than close the previous note?
• Regarding the above question, does this mean that I should set up the subsequent loan (disbursements) as a separate loan?
• Is the information included in 674.16(a) only required to be disclosed for the very first disbursement to a student or is it required before making the first disbursement for each award year?
• My school is part of a multi-campus State university system. In order to comply with [674.16(a)(1)(vii)], will we be responsible for sending the borrower a statement of cumulative balance owed to any and all schools he or she may have attended within the university system prior to making the first disbursement of a Perkins Loan from our university?
• Now that the use of electronic signatures has been approved for Federal Perkins loan MPNs, can I require that all of my borrowers use electronic signature?
• How long must an electronically signed MPN be retained?
• How does a borrower ‘electronically’ sign the MPN?
• How does your company plan to accommodate electronic signatures?
• The new MPN does not provide an area to record additional disbursements for multiple award years when the multi-year MPN is used. How will those additional awards be documented and signed for?
• What changes must I make to my new loans and advances creation as the result of the implementation of the Federal Perkins MPN?

What is the effective date of the new MPN?
Schools can begin using the MPN for award years beginning on or after July 1, 2003. However, effective November 1, 2004, schools are required to use the new MPN.

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There is not a place for “loan amount” on the new MPN. What backup
documents should I use to disclose the amount(s) borrowed?
Award letters will provide the student with the first notification of the amount available to them. A Truth-in-Lending disclosure will be included as part of the online MPN. For multi-year MPNs, a Total Loan Indebtedness disclosure will be presented to borrowers after the first year in which they received their first Perkins award.

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After the new MPN is effective (November 1, 2004), do I have to provide it to borrowers in an electronic format?
No. The new MPN is available in electronic format, but schools may choose to use a paper MPN.

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Can I use the MPN as a single-award year note or can it only be used as a multiaward year note?
Yes, the annual note use of the MPN is the same as the previous single-award year note. The borrower signs a Perkins MPN each award year. The multi-year feature of the MPN is new. The borrower signs just once when
the loan is first made under the MPN. The signed Perkins MPN covers all loans that the school makes to the borrower until it expires (10 years), or the borrower requests in writing that he/she does not want any further loans made under the MPN.

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A borrower signs the MPN and a disbursement is made within 12 months of the signature date. Then 12 or more additional months go by without another disbursement. Is the note still valid or does the borrower need to sign a new MPN?
No. The borrower does not need to sign another MPN because the MPN is
valid for 10 years after the signature date. The only exception would be if
the school receives written notification from the borrower requesting that no further loans be made under the MPN.

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I understand the MPN is good for 10 years. However, what happens if a borrower gets a $2,000 loan, goes into repayment, pays the debt off, and comes back to school all within a 10 year period? Can he still borrow additional funds under the original MPN as long as the 10 years is not up?
Yes. See Q & A #5.

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With regard to the previous question, if the borrower has paid his loan in full, wouldn’t the paid in full MPN already have been returned to the borrower?
Not necessarily. If your institution chooses to use the MPN as a 10-year note, you have the option to retain the original MPN in case the borrower does return to your institution for additional funds. Section CFR 674.19(e)(4)(iii) was amended to read, “After the loan obligation is satisfied, the institution shall return the original or a true and exact copy of the note marked "paid in full" to the borrower, or otherwise notify the borrower in writing that the loan is paid in full, and retain a copy for the prescribed period."

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After implementing the new MPN, can I add disbursements from the previous note to the MPN rather than close the previous note?
No. From OE: “When transitioning to the MPN, or for an Perkins or NDSL
made on or after November 1, 2004, schools should close previous notes and make subsequent loan on the MPN.”

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Regarding the above question, does this mean that I should set up the subsequent loan (disbursements) as a separate loan?
Since the terms and conditions of the loan have not changed, there is really no need to set up a separate loan. However, it may be easier for schools to keep track of the 10-year expiration date by setting up subsequent disbursements made under the MPN as a separate loan.

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Is the information included in 674.16(a) only required to be disclosed for the very first disbursement to a student or is it required before making the first disbursement for each award year?
Clarification from the Department of Education indicates the following:
“Each Perkins Loan received under an MPN is a separate and distinct loan. The disclosure information must be provided to the borrower annually, before the first disbursement of each new Perkins Loan awarded under the MPN.”

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My school is part of a multi-campus State university system. In order to comply with [674.16(a)(1)(vii)], will we be responsible for sending the borrower a statement of cumulative balance owed to any and all schools he or she may have attended within the university system prior to making the first disbursement of a Perkins Loan from our university?
No. Generally, in a State university system the branch campuses are separate, free-standing institutions that are a part of a larger system. Each branch campus is only responsible for providing the borrower with the cumulative balance owed to that institution.

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Now that the use of electronic signatures has been approved for Federal Perkins loan MPNs, can I require that all of my borrowers use electronic signature?
No. The ‘Electronic Signatures in Global and National Commerce Act (E-SIGN), Public Law No. 106-229, requires that the consumer affirmatively consent to receive documents in an electronic form. If the consumer declines to participate in electronic records, the consumer has the right to receive paper records at no cost.

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How long must an electronically signed MPN be retained?
The electronically signed multi-year MPN remains valid for a period of 10 years from the date the borrower signed it or the date the school received the signed MPN. The MPN must be accessible for a period of three years after all of the loans disbursed under the MPN have been paid in full or otherwise closed. The
single-year MPN must also be accessible for a period of three years after the loan
disbursed under it becomes paid in full or otherwise closed.

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How does a borrower ‘electronically’ sign the MPN?
There are several processes that may be used as electronic signature on an MPNor other covered transaction. These include:

• a shared secret, such as a PIN;

Dear Colleague Letter CB-03-13 - Electronic Version of Master Promissory Note
http://www.ifap.ed.gov/dpcletters/CB0313.html

Dear Colleague Letter CB-03-14 - Implementation Guidance on Master Promissory Note
http://www.ifap.ed.gov/dpcletters/CB0314.html

Dear Colleague Letter GEN-01-06 – Use of Electronic Signatures in the Federal Student LoanPrograms
http://www.ifap.ed.gov/dpcletters/gen0106.html

Gramm-Leach-Bliley Act

Gramm-Leach-Bliley Act (GLB) Safeguard Policy
One of the requirements of GLB is that service providers utilized by colleges and universities comply with the safeguard provisions included in the Act. Campus Partners meets the requirements through the establishment of its Information Security Policy that describes the processes and procedures in place to address both the logical and physical security of its servicing system. A copy of this policy is available below.

Information Security Policy

Gramm-Leach-Bliley Act Compliance
Many of our customers have recently asked us, "What do I have to do to comply with the Safeguard Rules that have been established by the Federal Trade Commission (FTC). I thought that Gramm-Leach-Bliley stated that we were exempt because of FERPA?"

It is correct that schools and institutions are covered by FERPA, as it relates to the Gramm-Leach-Bliley Act (16 CFR Part 313) that deals with privacy issues related to personal information. However, the Safeguard Rules (16 CFR Part 314) are an extension of the Gramm-Leach-Bliley Act and deal with safeguarding systems and an institution’s security around those systems.
The new regulations require that you "develop, implement, and maintain a comprehensive information security program that contains reasonable administrative, technical, and physical safeguards of the information that is available to your institutions."

These new regulations take effect May 23, 2003. In order to accomplish the provisions of the Safeguard Act, the regulations direct that you:

• Designate an employee(s) to coordinate your information security program.
• Identify reasonably foreseeable internal and external risks to the security, confidentiality, and integrity of customer information.
• Assess the sufficiency of any safeguards in place to control these risks.

The regulations state that when considering the risk associated with each area of your operations that you include such areas as:

• Employee training and management;
• Information systems, including network and software design and information storage, transmission and disposal; and
• Detecting, preventing, and responding to attacks, intrusions, or other system failures.

Although these regulations sound rather cumbersome, many of you already have these items in place as part of your institutions’ Information Security Policy.

The Information Security Program required by these regulations should be a combination of your Information Security Policy, your departmental operating procedures, and any institutional policies that are in place regarding access to personal or classified information. The combination of these items will describe how your institution maintains control over the systems and information resident within those systems.

In addition, there is a requirement that service providers utilized by colleges and universities also comply with these Safeguard provisions. Campus Partners meets these requirements through the establishment of its Information Security Policy that describes the processes and procedures in place to address both logical and physical security of its servicing system, System IIISM. Also, as part of the annual SAS-70 audit performed on our Campus-based and Private loan portfolios, an independent third-party reviews and tests the controls in place relative to System III and its data. Campus Partners will not share information related to your students without the written permission of your institution.

FTC Rules on Safeguarding Customer Information in PDF format