Interest-Only Repayment Option Rate Discount Terms and Conditions

These Terms and Conditions describe the eligibility and policies for the interest rate reduction associated with the interest-only repayment option. "You" refers to the customer. "We" refers to Discover® Bank.

Note: If you choose an in-school repayment loan option during the application process, you are also eligible for the Auto Debit Reward. You can receive the Auto Debit Reward, while enrolled in automatic payments for the agreed in-school payment amount during the in-school and grace periods. Full principal and interest payments will be debited when the loan enters the Repayment Period, as defined in the Promissory Note. See Automatic Payments & Auto Debit Reward Terms and Conditions for eligibility and enrollment information.

Interest Rate Discount

You will receive an interest rate discount (0.35%) if, during the application process, you selected the interest-only repayment option and make interest-only payments during the in-school and grace periods. If you are applying for a Bar Exam or Residency loan, you must be enrolled in school at least half-time at the time you submit your application to be eligible for the interest-only repayment option and discount.

The interest rate discount will be applied to your loan with an interest-only repayment option once the loan is disbursed.

If your loan entered the Repayment Period before June 16, 2024, you must have paid off unpaid accrued interest on your loan prior to the start of the Repayment Period to continue receiving the interest rate discount during the Repayment Period. If your unpaid accrued interest at the start of the Repayment Period exceeds 60 days of accrued interest, you may not receive the interest rate discount during the Repayment Period. Sixty days of accrued interest will be calculated based on your original loan amount and the greater of your interest rate reflected on your Final Disclosure or at the end of your Grace Period (excluding any interest rate discount benefits).

For loans that entered the Repayment Period between January 1, 2024 and June 16, 2024, and were ineligible to retain the interest rate discount for the Repayment Period, the interest rate discount will be re-instated on a go-forward basis from June 16, 2024.

For loans entering the Repayment Period on or after June 16, 2024, you are no longer required to pay off unpaid accrued interest on your loan prior to the start of the Repayment Period to continue receiving the interest rate discount during the Repayment Period.

Any unpaid accrued interest on your loan before it enters the Repayment Period will be capitalized and added to the principal balance of your loan. This may increase the principal balance of your loan, the amount of your monthly payment and the total cost of your loan.

Interest-Only Repayment Option Exceptions

If you fail to make timely monthly interest payments, your loan will be placed in a suspension period of up to six months at a time, which will increase the amount you pay over the life of the loan.

Effective June 16, 2024, loans entering a payment suspension period will retain the 0.35% interest rate discount.

When the suspension ends, you will again be required to make monthly interest payments on your loan. If your interest-only loan enters a deferment period, following entry into the Repayment Period, you will again be required to make your monthly interest-only payments.

You can make payments while your loan is on a payment suspension. You may also call us to cancel the payment suspension at any time if you are able to resume your scheduled monthly payments before your payment suspension ends.

Changes to These Terms and Conditions

These Terms and Conditions are subject to change without notice. We may change them at any time including, but not limited to, changing criteria or imposing additional conditions.

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