1845-0007_SupportingStatement_30-Day_20190712 rev

Supporting Statement

Information Collection for the William D. Ford Federal Direct Loan Program (Direct Loan Program) Promissory Notes:

• Direct Subsidized Loan and Direct Unsubsidized Loan Master Promissory Note

• Direct PLUS Loan Master Promissory Note and Direct PLUS Loan Endorser Addendum

• Direct Consolidation Loan Application and Promissory Note and Related Forms

OMB No. 1845-0007

A. Justification

1. Explain the circumstances that make the collection of information necessary. Identify any legal or administrative requirements that necessitate the collection. Attach a copy of the appropriate section of each statute and regulation mandating or authorizing the collection of information.

Direct Subsidized Loan and Direct Unsubsidized Loan Master Promissory Note
Direct PLUS Loan Master Promissory Note and Direct PLUS Loan Endorser Addendum

Section 455(i) of the Higher Education Act of 1965, as amended (the HEA) requires the U.S. Department of Education (the Department) to develop, print, and distribute a standard promissory note to schools that participate in the William D. Ford Federal Direct Loan Program (Direct Loan Program).

The standard promissory note for Federal Direct Stafford/Ford Loans (Direct Subsidized Loans) and Federal Direct Unsubsidized Stafford/Ford Loans (Direct Unsubsidized Loans) is the Direct Subsidized Loan and Direct Unsubsidized Loan Master Promissory Note (Subsidized/Unsubsidized MPN). The standard promissory note for Federal Direct PLUS Loans (Direct PLUS Loans) is the Direct PLUS Loan Master Promissory Note (PLUS MPN).

The Subsidized/Unsubsidized MPN and the PLUS MPN were developed by the Department in accordance with §432(m)(1)(D) of the HEA, which requires the Department to develop and use master promissory notes for loans made under the Direct Loan program. A master promissory note is a promissory note under which a borrower may receive loans for a single academic year or multiple academic years (see 34 CFR 685.102(b)).

The Direct Loan Program regulations at 34 CFR 685.201(a)(2)require a borrower to complete a Subsidized/Unsubsidized MPN before receiving a Direct Subsidized or Direct Unsubsidized loan. Regulations at 34 CFR 685.201(b)(1) and (b)(2) require parent or graduate and professional student borrowers to complete a PLUS MPN before receiving a Direct PLUS Loan.

Under §428B(a)(1)(A) of the HEA, one of the eligibility requirements to receive a Direct PLUS Loan is that a parent or a graduate or professional student borrower must not have an adverse credit history, as determined by regulations issued by the Department. The Direct Loan Program regulations allow a parent or a graduate or professional student who has an adverse credit history to receive a Direct PLUS Loan if the individual obtains an endorser who does not have an adverse credit history (34 CFR 685.200(b)(5) and 34 CFR 685.200(c)(1)(vii)(A)(2)). The Endorser Addendum to the PLUS MPN (PLUS Endorser Addendum) is the means by which an endorser agrees to repay a Direct PLUS Loan if the borrower does not repay the loan. If an applicant for a Direct PLUS Loan is determined to have an adverse credit history and obtains an endorser, only one loan can be made under the PLUS MPN. To obtain a subsequent Direct PLUS Loan, the borrower must complete a new PLUS MPN.

Direct Consolidation Loan Application and Promissory Note and related forms

The Student Loan Reform Act of 1993, enacted on August 10, 1993, established the Direct Loan Program under Title IV, Part D, of the HEA. This legislation authorized the Federal Direct Consolidation Loan Program, which allows eligible borrowers to consolidate certain federal education loans into a Direct Consolidation Loan. A Direct Consolidation Loan may allow a borrower to extend the period for repaying a loan, and in some cases may provide the borrower with a lower fixed interest rate. In addition, borrowers with loans made under the Federal Family Education Loan (FFEL) Program may consolidate their loans into a Direct Consolidation Loan to take advantage of certain benefits and repayment options that are available only in the Direct Loan Program. The regulations governing Direct Consolidation Loans are contained in 34 CFR 685.220.

The Direct Loan regulations at 34 CFR 685.202(c) and 34 CFR 685.220(e) require a borrower who wishes to receive a Direct Consolidation Loan to submit a completed Direct Consolidation Loan Application and Promissory Note (Consolidation Note) to the Department. The processing of a borrower’s consolidation application involves the three forms that are described in Item 2 of this Supporting Statement.

All promissory notes and related forms

The Subsidized/Unsubsidized MPN is currently approved under OMB No. 1845-0007. The PLUS MPN and PLUS Endorser Addendum are currently approved under OMB No. 1845-0068. The Direct Consolidation Loan Application and Promissory Note and related forms are currently approved under OMB No. 1845-0053. For greater simplicity and to make it easier to maintain consistency among the various promissory notes, the Department is consolidating the three current collections into a single collection under OMB No. 1845-0007.

In this Supporting Statement, we use the term “promissory note” to refer collectively to the Subsidized/Unsubsidized MPN, the PLUS MPN, and the Consolidation Note.

The Department is requesting a revision of the currently approved promissory notes and related forms. The proposed changes include the following:

• Streamlining the forms by eliminating duplicative and obsolete information.

• Reordering items to present information in a more logical order.

• Using “plain language” to present information more clearly.

• Revising the borrower information section of the PLUS MPN and the instructions for completing the PLUS MPN to more clearly indicate who qualifies as a "parent" for purposes of obtaining a Direct PLUS Loan on behalf of a dependent undergraduate student.

• Adding information about the new cancer treatment loan deferment established under Title III of the Department of Education Appropriations Act, 2019 (Pubic Law 115-245).

• Updating information about the borrower defense to repayment loan discharge provision to reflect changes made by final regulations published on November 1, 2016 (81 FR 75926).

2. Indicate how, by whom, and for what purpose the information is to be used. Except for a new collection, indicate the actual use the agency has made of the information received from the current collection.

The Department will continue to use the information collected on the promissory notes and PLUS Endorser Addendum to process and service loans made under the Direct Loan Program and, for Direct PLUS Loans, to determine the eligibility of the borrower and endorser. Each promissory note serves as a borrower’s legally binding promise to repay all loans made under that promissory note. The Endorser Addendum serves as the endorser’s legally binding promise to repay a Direct PLUS Loan if the borrower does not repay the loan.

In addition to the Consolidation Note, there are three additional Direct Consolidation Loan forms that will continue to be used as follows:

• Additional Loan Listing Sheet. This is simply an extension of the Note that may be used by an applicant if there is insufficient space on the Note to list all of the loans that the applicant does or does not want to consolidate.

• Instructions. This form explains how to complete the Consolidation Note.

• Request to Add Loans. This form may be used by borrowers to add additional loans to a Direct Consolidation Loans after the application and promissory note has been submitted, or up to 180 days after a Direct Consolidation Loan has been made.

• Loan Verification Certificate (LVC). The LVC is used to confirm that a borrower’s loans are eligible for consolidation, and to verify the current payoff amount of each loan. Once a borrower’s application and promissory note has been processed, ED sends an LVC to the loan holder or loan servicer of each loan that the borrower wants to consolidate. After completing the LVC, the loan holder/servicer returns the form to ED. Most loan holders/servicers provide the LVC information to ED electronically via our website or a batch process.

Borrowers may complete and submit the promissory notes online at the Department’s StudentAid.gov website, or may complete and return paper promissory notes.

3. Describe whether, and to what extent, the collection of information involves the use of automated, electronic, mechanical, or other technological collection techniques or forms of information technology, e.g. permitting electronic submission of responses, and the basis for the decision of adopting this means of collection. Also describe any consideration given to using technology to reduce burden.

The Department makes maximum use of available information technology to process promissory notes and related forms.

Subsidized/Unsubsidized MPN

Schools electronically receive data provided by the student on the Free Application for Federal Student Aid (FAFSA) and create loan records based on the FAFSA data and additional data provided by the school. This process allows most of the information requested in the Borrower Information section of the MPN to be preprinted, thus reducing burden on borrowers.

Borrowers have the option of completing the Subsidized/Unsubsidized MPN through an entirely electronic process, using a personal identification number (PIN) provided by the Department. The Department will continue to offer this option with the revised form. The electronic process uses an HTML (hypertext markup language) version of the paper Subsidized/Unsubsidized MPN and stores the HTML version as the authoritative copy of the form. The text and data elements on the HTML version are identical to the text and data elements on the paper form.

Since the introduction of the electronic MPN option during the 2001-2002 program year, the percentage of Subsidized/Unsubsidized MPNs that are completed electronically has steadily increased. Currently, more than 99% of Subsidized/Unsubsidized MPNs are completed electronically.

PLUS MPN

A school may use information reported on the Free Application for Federal Student Aid (FAFSA) by a graduate or professional student borrower or by the student for whom a parent is borrowing a Direct PLUS Loan to complete portions of the PLUS MPN before the form is given to the borrower to sign. This reduces burden by eliminating the need for the borrower to provide the same information again. Similarly, schools electronically transmit information collected on the PLUS MPN to the Department. That information is then used by the Department to preprint borrower and/or student information on the PLUS Endorser Addendum if an applicant for a Direct PLUS Loan is determined to have an adverse credit history.

Borrowers have the option of completing the PLUS MPN through an entirely electronic process, using a personal identification number (PIN) provided by the Department. This process is essentially the same as the electronic process that is available to Direct Subsidized and Direct Unsubsidized loan borrowers. The electronic process for Direct PLUS Loans uses an HTML (hypertext markup language) version of the paper PLUS MPN and stores the HTML version as the authoritative copy of the form. The text and data elements on the HTML version are identical to the text and data elements on the paper PLUS MPN. Currently, more than 99% of Direct PLUS Loan MPNs are completed electronically.

The Department also gives Direct PLUS Loan endorsers the option of completing the PLUS Endorser Addendum through an entirely electronic process that is modeled on the electronic process for the PLUS Loan MPN, as described above. Currently, approximately 96% of Direct PLUS Loan endorsers complete the PLUS Endorser Addendum electronically.

Consolidation Note and related consolidation forms:

The Consolidation Note, LVC, and Request to Add Loans are all available on our website in PDF format for respondents to download in PDF format, complete, and submit to us. In addition, respondents may complete the Note and the LVC electronically. Approximately 99% of Direct Consolidation Loan applicants complete and submit the Consolidation Note electronically on our website.

For borrowers who complete and submit the Note electronically on the Department’s website, and in some cases for borrowers who download the Note in PDF format from our website, the Department prepopulates the Borrower Information section, the Loans I Want to Consolidate section, and the Loans I Do Not Want to Consolidate section using existing information about the borrower and the borrower’s loans in our loan servicing systems and/or the National Student Loan Data System (NSLDS). The instructions for completing the Consolidation Note inform borrowers that some of the information in these sections may have been completed for them. Prepopulating portions of the form significantly reduces burden on applicants, since they only have to review the preprinted information for completeness and accuracy and make any necessary changes (e.g., correcting information or indicating that they do not want to consolidate a loan listed in the Loans I Want to Consolidate section).

All loan holders/servicers have the option of completing the LVC electronically. They may do this (1) by completing and returning an LVC for each applicant via our website for loan holders/servicers or (2) by completing and returning LVCs for multiple applicants through a batch process. Both electronic processes reduce burden for loan holders/servicers by providing a more convenient, efficient and expedient way to complete and return the required LVCs. Approximately 90% of LVCs are completed electronically.

4. Describe efforts to identify duplication. Show specifically why any similar information already available cannot be used or modified for use for the purposes described in Item 2 above.

Except as explained in Item 3, above, there is no information available from other sources that can be used for the purposes described in Item 2.

5. If the collection of information impacts small businesses or other small entities (Item 8b of IC Data Part 2), describe any methods used to minimize burden.

No small businesses are affected by this information collection.

6. Describe the consequences to Federal program or policy activities if the collection is not conducted or is conducted less frequently, as well as any technical or legal obstacles to reducing burden.

Without this collection of information, borrowers would not be able to receive Direct Loan Program loans. The Subsidized/Unsubsidized and PLUS MPNs minimize the frequency of data collection by allowing a borrower who has completed an initial MPN to receive subsequent loans for up to 10 years without signing another MPN, if the borrower is attending a school that is authorized to make multiple loans under the MPN and chooses to do so. The MPN also reduces burden for borrowers attending schools that are not authorized to use the multi-year feature of the MPN (or that choose not to do so), since they may receive subsequent loans during the same academic year without having to sign a new MPN.

The PLUS Endorser Addendum must be completed each time a borrower who is determined to have an adverse credit history obtains an endorser for a Direct PLUS Loan.

The Consolidation Note and the LVC will be completed by an applicant or a loan holder/servicer one time for each Direct Consolidation Loan. The Request to Add Loans will be completed by a borrower only when the borrower wants to request that one or more loans not included on the original Consolidation Note be added to the borrower’s Direct Consolidation Loan, either before the loan is made or within 180 days of the date the loan is made. If the information requested on the Direct Consolidation Loan forms were not collected, borrowers would not be able to take advantage of the benefits offered by Direct Consolidation Loans, as described in Item 1 of this supporting statement.

7. Explain any special circumstances that would cause an information collection to be conducted in a manner:

• requiring respondents to report information to the agency more often than quarterly;

• requiring respondents to prepare a written response to a collection of information in fewer than 30 days after receipt of it;

• requiring respondents to submit more than an original and two copies of any document;

• requiring respondents to retain records, other than health, medical, government contract, grant-in-aid, or tax records for more than three years;

• in connection with a statistical survey, that is not designed to produce valid and reliable results than can be generalized to the universe of study;

• requiring the use of a statistical data classification that has not been reviewed and approved by OMB;

• that includes a pledge of confidentiality that is not supported by authority established in statute or regulation, that is not supported by disclosure and data security policies that are consistent with the pledge, or that unnecessarily impedes sharing of data with other agencies for compatible confidential use; or

• requiring respondents to submit proprietary trade secrets, or other confidential information unless the agency can demonstrate that it has instituted procedures to protect the information’s confidentiality to the extent permitted by law.

The collection of this information will be conducted in a manner that is consistent with the guidelines in 5 CFR 1320.5(d)(2), with one exception. The LVC must be completed and returned by the loan holder/servicer within 10 business days of the date received. This deadline is established in 34 CFR 685.220(f)(1)(i).

8. If applicable, provide a copy and identify the date and page number of publication in the Federal Register of the agency’s notice, required by 5 CFR 1320.8(d), soliciting comments on the information collection prior to submission to OMB. Summarize public comments received in response to that notice and describe actions taken by the agency in response to these comments. Specifically address comments received on cost and hour burden.

Describe efforts to consult with persons outside the agency to obtain their views on the availability of data, frequency of collection, the clarity of instruction and record keeping, disclosure, or reporting format (if any), and on the data elements to be recorded, disclosed, or reported.

Consultation with representatives of those from whom information is to be obtained or those who must compile records should occur at least once every 3 years – even if the collection of information activity is the same as in prior periods. There may be circumstances that may preclude consultation in a specific situation. These circumstances should be explained.

The Department consulted with schools and other members of the financial aid community in developing the original promissory notes and related forms. We solicited public comments on the draft revised forms through a notice published in the Federal Register on February 19, 2019 (84 FR 4747). Two individuals, both identifying themselves as financial aid administrators, submitted comments on the Direct Loan promissory notes and related forms.

The first commenter, noting that an MPN can be used to make loans for up to 10 years, suggested that we find a way to add additional schools to the MPN. We believe the commenter is recommending that if a borrower receives loans under a previously signed MPN at a school other than the school that was identified on the MPN when the borrower received his or her first loan under that MPN, the new school’s information should be added to the MPN. We note that this information is already captured in our Common Origination and Disbursement (COD) system. If a borrower receives loans at more than one school under the same MPN, the COD system identifies each of the schools and the associated loans.

The second commenter had two recommendations. First, the commenter recommended that we replace the concept of an MPN that can be used to make multiple loans with a process that would require borrowers to acknowledge their total student loan debt each time they take out a new loan. Second, the commenter suggested that borrowers of unsubsidized loans should be required to pay the interest that accrues during periods when no loan payments are required on a monthly or quarterly basis, unless they choose to let the interest accrue. The commenter believed that requiring borrowers to pay interest as it accrues on unsubsidized loans would reduce total repayment costs for both student and parent borrowers. We appreciate the commenter’s suggestions and will take them into consideration as we continue to explore various options for helping to ensure that student and parent borrowers are better informed of their student loan debt and repayment responsibilities.

Although we have not made any changes to the promissory notes and related forms in response to the two public comments that were received, based on further internal review we have made a number of minor, non-substantive wording changes to improve clarity in certain areas. These changes are reflected in the revised drafts that will be posted for a second public comment period.

9. Explain any decision to provide any payment or gift to respondents, other than remuneration of contractors or grantees.

No payments or gifts will be provided to respondents.

10. Describe any assurance of confidentiality provided to respondents and the basis for the assurance in statute, regulation, or agency policy.

The promissory notes and PLUS Endorser Addendum include a Privacy Act Notice that (1) informs the borrower or endorser of the statutory authority for the information collection; (2) explains that disclosure of the information is voluntary, but is required in order to receive a benefit under the Direct Loan Program; and (3) identifies the third parties to whom the information may be disclosed, and explains the circumstances under which such disclosures may occur.

11. Provide additional justification for any questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private. The justification should include the reasons why the agency considers the questions necessary, the specific uses to be made of the information, the explanation to be given to persons from whom the information is requested, and any steps to be taken to obtain their consent.

The MPN does not require a borrower to provide any information that would be considered sensitive.

12. Provide estimates of the hour burden of the collection of information. The statement should :

• Indicate the number of respondents, frequency of response, annual hour burden, and an explanation of how the burden was estimated. Unless directed to do so, agencies should not conduct special surveys to obtain information on which to base hour burden estimates. Consultation with a sample (fewer than 10) of potential respondents is desirable. If the hour burden on respondents is expected to vary widely because of differences in activity, size, or complexity, show the range of estimated hour burden, and explain the reasons for the variance. Generally, estimates should not include burden hours for customary and usual business practices.

• If this request for approval covers more than one form, provide separate hour burden estimates for each form and aggregate the hour burdens in item 16 of IC Data Part 1.

• Provide estimates of annualized cost to respondents of the hour burdens for collections of information, identifying and using appropriate wage rate categories. The cost of contracting out or paying outside parties for information collection activities should not be included here. Instead, this cost should be included in Item 14.

The Department estimates the total annual number of respondents for this information collection to be 7,305,814, calculated as follows:

Subsidized/Unsubsidized MPN Respondents	5,027,286
PLUS MPN and PLUS Endorser Addendum Respondents	1,380,923
Consolidation Note and related forms respondents	897,605
Total respondents	7,305,814

The Department estimates the total annual number of responses for this information collection to be 9,862,685 calculated as follows:

Subsidized/Unsubsidized MPN Responses	5,027,286
PLUS MPN and PLUS Endorser Addendum Responses	1,380,923
Consolidation Note and related forms Responses	3,454,476
Total responses	9,862,685

The Department estimates the total annual reporting burden for this collection to be 4,021,534, calculated as follows:

Subsidized/Unsubsidized MPN hour burden	2,513,643
PLUS MPN and PLUS Endorser Addendum hour burden	690,462
Consolidation Note and related forms hour burden	817,560
Total hour burden	4,021,665

Calculations of the estimates for each of the individual promissory notes and related forms are shown below.

Subsidized/Unsubsidized MPN

The estimated time required to complete the Subsidized/Unsubsidized MPN is 0.5 hours (30 minutes). Based on one response per respondent, this equates to a total estimated annual reporting burden of 2,513,643 hours.

PLUS MPN and PLUS Endorser Addendum

There are an estimated 1,302,427 respondents for the PLUS MPN and 78,496 respondents for the PLUS Endorser Addendum, for a total of 1,380,923 respondents. The estimated time required to complete an MPN or Endorser Addendum is 0.5 hours hour (30 minutes). Based on one response per respondent, this equates to a total estimated annual reporting burden of 690,462 hours.

Consolidation Note and Related Forms

The total estimated annual reporting hour burden for this collection is approximately 817,429 hours. This represents the total of the burden estimates for the hour burden for the Note, the LVC, and the Request to Add Loans. We calculated the burden estimate for each form as follows:

Note (includes Additional Loan Listing Sheet)

Respondents		852,957
Responses		x 1
Hours per response		x 0.5 (30 minutes)
Annual reporting burden		426,479 hours

LVC

Respondents		2,000
Responses		2,558,871
Hours per response		x 0.15 (9 minutes)
Annual reporting burden		383,831 hours

NOTE: Each Direct Consolidation Loan application averages three different loan holders/servicers. This means that an average of three LVCs will be generated for each Direct Consolidation Loan, for a total of 2,558,871 responses (3 x 852,957 = 2,558,871). There are approximately 2,000 loan holders/servicers.

Request to Add Loans

Respondents		42,648 (5% of the # of respondents for the Note)
Responses		x 1
Hours per response		x 0.17 (10 minutes)
Annual reporting burden		7,250 hours

13. Provide an estimate of the total annual cost burden to respondents or record keepers resulting from the collection of information. (Do not include the cost of any hour burden shown in Items 12 and 14.)

• The cost estimate should be split into two components: (a) a total capital and start-up cost component (annualized over its expected useful life); and (b) a total operation and maintenance and purchase of services component. The estimates should take into account costs associated with generating, maintaining, and disclosing or providing the information. Include descriptions of methods used to estimate major cost factors including system and technology acquisition, expected useful life of capital equipment, the discount rate(s), and the time period over which costs will be incurred. Capital and start-up costs include, among other items, preparations for collecting information such as purchasing computers and software; monitoring, sampling, drilling and testing equipment; and acquiring and maintaining record storage facilities.

• If cost estimates are expected to vary widely, agencies should present ranges of cost burdens and explain the reasons for the variance. The cost of contracting out information collection services should be a part of this cost burden estimate. In developing cost burden estimates, agencies may consult with a sample of respondents (fewer than 10), utilize the 60-day pre-OMB submission public comment process and use existing economic or regulatory impact analysis associated with the rulemaking containing the information collection, as appropriate.

• Generally, estimates should not include purchases of equipment or services, or portions thereof, made: (1) prior to October 1, 1995, (2) to achieve regulatory compliance with requirements not associated with the information collection, (3) for reasons other than to provide information or keep records for the government, or (4) as part of customary and usual business or private practices.

Total Annualized Capital/Startup Cost:      

Total Annual Costs (O&M):      

______

Total Annualized Costs Requested:      

There are no annual capital/startup costs to respondents, nor are there any annual costs to respondents associated with operating or maintaining systems or purchasing services.

14. Provide estimates of annualized cost to the Federal government. Also, provide a description of the method used to estimate cost, which should include quantification of hours, operational expenses (such as equipment, overhead, printing, and support staff), and any other expense that would not have been incurred without this collection of information. Agencies also may aggregate cost estimates from Items 12, 13, and 14 in a single table.

There is no annual cost to the Federal government associated with the paper versions of the promissory notes or PLUS Endorser Addendum, as the Department does not print and distribute the paper versions of the forms. The small number of borrowers who wish to complete the paper versions of the forms may download and print the documents.

It is not possible to provide annualized costs associated with the implementation of the electronic versions of the forms. The terms of the Department’s contract with the entity that is responsible for performing this function (and other functions) does not provide for itemization of costs associated with specific functions.

15. Explain the reasons for any program changes or adjustments to #16f of the IC Data Part 1 Form.

The Department is reporting a program change due to the statutory addition of the new cancer treatment deferment which is being included in the loan terms. While the Department is combining three previously separated information collections in to one collection, there is no anticipated increase in the number of summed respondents at 7,305,814, summed responses at 9,862,685 for summed burden hours at 4,021,665.

16. For collections of information whose results will be published, outline plans for tabulation and publication. Address any complex analytical techniques that will be used. Provide the time schedule for the entire project, including beginning and ending dates of the collection of information, completion of report, publication dates, and other actions.

The results of this information collection will not be published.

17. If seeking approval to not display the expiration date for OMB approval of the information collection, explain the reasons that display would be inappropriate.

The Department is not seeking this approval.

18. Explain each exception to the certification statement identified in the Certification of Paperwork Reduction Act.

The Department is not requesting any exceptions to the “Certification for Paperwork Reduction Act Submissions” of OMB Form 83-I.