Direct Loan borrowers who previously signed Master Promissory Notes (MPNs) that contain information about the interest rates that were in effect prior to July 1, 2013 are not required to sign new MPNs to receive the new interest rates on loans first disbursed on or after July 1, 2013.
The Direct Loan Programs new interest rates, that were provided in an attachment to the August 9, 2013 Electronic Announcement, apply to any Direct Subsidized Loan, Direct Unsubsidized Loan, or Direct PLUSLoan for which the first disbursement is made on or after July 1, 2013, regardless of the interest rateinformation provided in the MPN that the borrower signed. The USDE is currently in the process of revisingand updating the Direct Loan Program’s promissory notes to include information about the new interest ratesand will provide information about the revised notes after they have been approved by the Office ofManagement and Budget. In the meantime, the current Direct Subsidized Loan/Direct Unsubsidized Loan MPNand Direct PLUS Loan MPN remain valid for use, and any loan made under the current version, or any earlierversion, of either MPN will be subject to the applicable interest rate formula if the loan’s first disbursement date is on or after July 1, 2013.
Schools are also reminded that if a TEACH Grant is converted to a Direct Unsubsidized Loan, interest is charged from the date the TEACH Grant was first disbursed. If a TEACH Grant is converted to a Direct Unsubsidized Loan, the interest rate that will apply after the conversion will be the interest rate that was in effect for Direct Unsubsidized Loans on the date the TEACH Grant was first disbursed. Although the current version of the TEACH Grant Agreement to Serve states that the interest rate on a Direct Unsubsidized Loan is 6.8%, if a TEACH Grant is converted to a Direct Unsubsidized Loan, the applicable interest rate will be the rate that was in effect for Direct Unsubsidized Loans on the date of the first TEACH Grant disbursement. The TEACH Grant Agreement to Serve will be revised to include updated information about the interest rate for Direct Unsubsidized Loans.