Frequently Asked Questions

Q.

What is a Deferment?

A.

 Allows a borrower to stop making scheduled payments temporarily upon meeting certain conditions.  If the loan is a subsidized Stafford/Direct loan, the federal government pays the interest.  If the loan is an unsubsidized Stafford/Direct loan, the borrower is responsible for paying interest that accrues during eligible deferment periods.  The borrower can pay the interest or it will be capitalized back to the principal of the loan. Some reasons for deferment include In-school, Rhabilitation Training, Graduate Fellowship Program, Unemployment, Economic Hardship and Military. Click here for more information.

Q.

What is Forbearance?

A.

 Allows a borrower temporary release from making payments, or a temporary reduction in payment amounts.  Forbearance is less favorable than a deferment for your subsidized loan (s) because you are responsible for paying any interest that accrues on your loan during the forbearance period.  You may pay the accruing interest, or add it to the loan principal (this is called “capitalizing”) and pay it later when the forbearance ends.  Remember, however, that capitalization means you will be paying interest on interest – the total cost of your loan repayment will be considerably higher. Click here and here for more information.

Q.

What is Loan Consolidation?

A.

 A loan consolidation offers a borrower with multiple loans or high balances the opportunity to consolidate those loans into a single payment and, in many instances, schedule the consolidated loans to be repaid over a longer period, thus reducing your monthly payments to a manageable amount.  Remember, consolidation will spread the loan payments out over a longer period of time which will mean you are paying a larger amount back based on the interest that may accrue.  Contact your lender to find out the advantages and disadvantages that consolidation may have on your total debt. Click here and here for more information. You can also find additional information here.

Q.

Do I have Repayment Options?

A.

 Yes, you have options available on how you repay your student loan(s).  You can request one of the following options from your lender/servicer if you are having difficulty repaying your student loan(s):

Standard Repayment – The borrower pays a fixed amount throughout the entire payment history. The minimum payment is $50 with a repayment period of 10 years.

Graduated Repayment – The loan repayment schedule starts out at a lower rate and gradually increases. This option is based on the premise your income will increase over a period of time.

Income Sensitive / Income Contingent – The borrower’s repayment schedule is based solely on income. Payments are adjusted annually based on expected income.

Extended Repayment – A repayment schedule where borrowers make fixed payments of at least $50 a month over a period not to exceed 25 years. To take advantage of this option the outstanding principal must be $30,000 or more.

Income-Based Repayment (IBR) – Federal loan borrowers (except Parent PLUS loans) are allowed to make payments that total only 15% of the outcome from the Adjusted Gross Income (AGI) minus 150% of the poverty line for the family size. For a subsidized Stafford loan, interest will be paid by the federal government up to a maximum of three years. Borrowers must requalify each year for IBR. The borrower may change back to a standard plan at any time which may extend the payment period beyond 10 years.

Q.

How can I review my loan history?

A.

 You can access your loan history for all loans at any time through the National Student Loan Data Base System or you can contact your lender/servicer to obtain the information for a particular loan.

Q.

I have loans with different lenders what will happen when I go into repayment?

A.

 You will be responsible for repaying each lender/servicer separately and payments will be based on the total amount you have borrowed.  You may want to think about loan consolidation if you have high balances.  This would allow you to develop a sensible budget. Click here for more information

Q.

What happens when I withdraw from school?

A.

 Your loan(s) become due in six months from the date of your actual withdrawal. However you may want to talk to your school about a leave of absence or check with your lender/servicer about deferments or forbearance once you enter repayment. If you return back to school at least half-time (6 credit hrs) before the end of six months, you will maintain your in-school status and will not enter repayment. If you return back to school at least half-time (6 credit hrs) after the end of your six month grace period, you must request and in-school deferment from your lender/servicer. You will enter your repayment period after your authorized deferment ends

Q.

What happens if I enrolled less than 6 credit hours (less than half-time)?

A.

 Your loan(s) become due six months from the date you drop below 6 credit hours (less than half-time). To avoid going into repayment maintain enrollment of 6 or more credit hours.

Q.

What if I am Unemployed?

A.

 An unemployment deferment is available to individuals who are conscientiously seeking, but unable to find, full-time employment in the United States. For these purposes, full-time employment is defined as at least 30 hours of work per week that is expected to last at least three months.

Q.

What happens when I transfer to another college if I have a student loan?

A.

 You are responsible for notifying your lender/servicer you have transferred to another institution.  You will need to request the Registrar’s Office or the office responsible for verifying attendance to certify your attendance after the first day of classes.  You must provide them with the name and address of your lender for the enrollment form to be submitted to your lender.  Find out the procedure for your new institution.  If you completed the entire session (quarter/semester) the information will be reported at the beginning of the new session.  Your loan(s) become due six months from the date you cease attendance.  If you return back to school at least half-time (6 credit hrs) before the end of six months, you will maintain your in school status and will not enter repayment.  Remember if your enrollment doesn’t begin until after the end of your six months grace period, you enter your repayment to avoid having multiple lenders which cause multiple payments, stick with the same lender.

Q.

What Happens If I Don’t Pay on My Student Loan?

A.

 If you miss your regular student loan payments and do not contact your lender/servicer to make alternative arrangements to repay your loans, your loans will be considered delinquent.  Your life will be interrupted with letters offering help and information at first, but they turn demanding and get to be a hassle if you continue to miss payments.  If you continue in a delinquent status for 270 days (for monthly payments) or 330 days (for less frequent payments) without resolving the issue with your lender or servicer, the guarantor of your loan will conclude that you no longer intend to repay the loan and will place it in a default status.

Q.

What Happens If I Defaulted on My Student Loan?

A.

 The consequences of defaulting on your student loan can be severe. Here are some of the things that could happen:
  • You can be sued for the amount you owe, and you will have to pay court costs and attorneys fees.
  • Your credit rating will be damaged, which means in the future you may not be able to get a credit card or borrow money to buy a car or home.
  • Any income tax refunds due you could be automatically redirected to pay on your   loan debt.
  • Your wages may be garnished.
  • Your account may be referred to a collection agency, and you will be responsible for    paying collection charges.
  • You cannot receive further federal financial aid until your default situation is resolved.
  • You could be denied assistance from federal benefit programs.
  • You will be ineligible for deferments.
  • You may be denied a professional license. If you already have a professional license, it could be suspende

Q.

How Can I Get Out of Default?

A.

 If you have defaulted on your student loan, there is a way to rehabilitate it. You must make a request to your guarantor to rehabilitate your loan.  A rehabilitated loan is sold out of default to a participating lender.  When you rehabilitate your loan, you can remove the negative credit rating caused by the default, fully re-establish the benefits of the loan (such as your right to receive deferments and forbearance) and receive nine more years to pay off your balance. Your loan balance at the time of rehabilitation must be at least $500 to be eligible for this program. A defaulted student loan can be rehabilitated only one time!

Q.

What Are Some Tips to Help Keep Me Out of Default?

A.
  • Make your loan payments on time.
  • Set up your loan for direct withdrawals from your bank account.
  • Take advantage of any repayment benefits offered by your lender or servicer.
  • Notify the holder or servicer immediately if you change your address, name, or any contact information.
  • Keep copies of all records related to your student loans.