Adjustable Interest Rate and Monthly Payment Changes

A. Change Dates

The interest rate I will pay changes every three months and is set on the 15th, or proceeding business day, in the months of March, June, September and December, and is effective on the 1st of the following month. The date on which my interest rate changes is called a “Change Date.”

B. The Index

Beginning with the Disbursement Date and following each Change Date, my adjustable interest rate will be based on an Index that is calculated and provided to the general public by an administrator (the “Administrator”). The “Index” is a benchmark, known as the three-month U.S. dollar (USD) London Interbank Offered Rate (LIBOR) index. The Index is currently published in, or on the website of, The Wall Street Journal. The most recent Index value is called the “Current Index,” provided that if the Current Index is less than zero, then the Current Index will be deemed to be zero for purposes of calculating my interest rate.

If the Index is no longer available, it will be replaced in accordance with Section (G) below.

C. Calculation of Changes

Before each Change Date, the Note Holder will calculate my new interest rate by adding 1.50 or 2.50 percentage points (1.50% or 2.50%) (the “Margin”) dependent upon my state of legal residence or the location of the school I am attending to the Current Index. The Margin may change if the Index is replaced in accordance with Section (G)(2)(ii) below. The Note Holder will then round the result of the Margin plus the Current Index to the nearest one-eighth of one percentage point (0.125%). Subject to the limits stated in Section (D) below, this rounded amount will be my new interest rate until the next Change Date.

The Note Holder will then determine the amount of the monthly payment that would be sufficient to repay the unpaid principal that I am expected to owe at the Change Date in full on the Maturity Date at my new interest rate in substantially equal payments. The result of this calculation will be the new amount of my monthly payment.

D. Limits on Interest Rate Changes

The interest rate I am required to pay at the first Change Date will not be greater than 10% or less than 0%. My interest rate will never be greater than 10% or less than 0%.

a. If I am a North Dakota resident and this Loan is used to refinance my private student or educational loans, my interest rate will not increase more than 1% annually starting on the date my Loan is made. The annual maximum interest rate is reset each year on the anniversary of the date my Loan was made and is based on the interest rate in effect on the last day of the current 12-month period.

E. Effective Date of Changes

My new interest rate will become effective on each Change Date. I will pay the amount of my new monthly payment beginning on the first monthly payment date after the Change Date until the amount of my monthly payment changes again.

F. Notice of Changes

The Note Holder will deliver or mail to me a notice of any changes in my adjustable interest rate before the effective date of any change. The notice will include the amount of my monthly payment, any information required by law to be given to me and also the title and telephone number of a person who will answer any question I may have regarding the notice.

G. Replacement Index and Replacement Margin

The Index is deemed to be no longer available and will be replaced if any of the following events (each, a “Replacement Event”) occur: (i) the Administrator has permanently or indefinitely stopped providing the Index to the general public; or (ii) the Administrator or its regulator issues an official public statement that the Index is no longer reliable or representative.

  1. Secured Overnight Financing Rate (SOFR) as the Replacement Index for USD LIBOR. On March 5, 2021, the Financial Conduct Authority (“FCA”), the regulatory supervisor of USD LIBOR’s administrator (“IBA”), announced in a public statement the future cessation or loss of representativeness of the 3-month USD LIBOR tenor setting, anticipated to occur on June 30, 2023. On the earlier of (i) the date that the 3-month USD LIBOR tenor setting has either permanently or indefinitely ceased to be provided by IBA or (ii) has been announced by the FCA pursuant to public statement or publication of information to be no longer representative or (iii) federal or state law replaces USD LIBOR with SOFR, the 3-month SOFR Index will replace the three-month USD LIBOR index for all purposes hereunder and under any Loan Document without any amendment to, or further action or consent of any other party to this Agreement or any other Loan Document. The 3-month SOFR Index shall be calculated on a quarterly basis. SOFR Averages and a SOFR Index are published by the Federal Reserve Bank of New York and available at https://www.newyorkfed.org/markets/reference-rates/sofr-averages-and-index.
  2. Replacement Index and Replacement Margins in the Event SOFR Does Not Exist. If a Replacement Event occurs, the new index (“Replacement Index”) will be SOFR, unless SOFR does not exist at the time the Replacement Event occurs, in which case the Note Holder will select a different index as the Replacement Index and may, if needed under subsection (ii) also select a new margin (the “Replacement Margin”), in accordance with the following:

i. If a Replacement Index has been selected or recommended for use in consumer products including, private student or educational loans, by the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, or a committee endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York at the time of a Replacement Event, the Note Holder will select that index as the Replacement Index.

ii. If a Replacement Index has not been selected or recommended for use in consumer products under Section (G)(2)(i) at the time of a Replacement Event, the Note Holder will make a reasonable good faith effort to select a Replacement Index and a Replacement Margin that, when added together, the Note Holder reasonably expects will minimize any change in the cost of the Loan, taking into account the historical performance of the Index and the Replacement Index.

The Replacement Index and Replacement Margin, if any, will be operative immediately upon a Replacement Event and will be used to determine my interest rate and monthly payments on Change Dates that are more than 20 days after a Replacement Event. The Index and Margin could be replaced more than once during the term of my Note, but only if another Replacement Event occurs. After a Replacement Event, all references to the “Index” and “Margin” shall be deemed to be references to the “Replacement Index” and “Replacement Margin.”

The Note Holder will also give me notice of my Replacement Index and Replacement Margin, if any, and such other information required by applicable law and regulation.