Responsibilities
When you take out a Student Loan, you have certain responsibilities. Here are some
important ones:
When you sign a promissory
note, you’re agreeing to repay the loan according to the terms of the note.
The note states that except in cases of loan discharge (see perkins loan and stafford
loan), you must repay the loan, even if you don’t complete your education (unless
you couldn’t for a valid reason—because the school closed, for example). Also, you
still must repay your loan if you can’t get a job after you complete the program,
or you don’t like, or don’t receive, the education you paid for. Think about what
your repayment obligation means before you take out a loan. If you don’t repay your
loan on time or according to the terms in your
promissory note, you might go into
default, which has very serious consequences and will affect your credit
rating. You must make payments on your loan even if you don’t receive a bill
or repayment notice. Billing statements (or coupon books) are sent
to you as a convenience, but you’re obligated to make payments even if you don’t
receive any reminders. You must also make monthly payments in the full amount your
repayment plan has established. Partial payments do not fulfill your obligation.
If you apply for a deferment or forbearance, you must continue to make payments
until you’re notified the request has been granted. If you don’t, you might end
up in default. You should
keep a copy of any request form you submit, and you should document all contacts
with the organization that holds your loan. You must notify the loan servicer when
you graduate, withdraw from school, or drop below
half time status; change your name, address, or Social Security Number;
or transfer to another school.
If you borrow a Perkins Loan, either the school that lends you the money will service
your loan or an agency the school employs will.
If you borrow a Direct Loan, the Direct Loan Servicing Center will service your
loan. If you borrow under the FFEL Program, your lender or its servicing agent will
service your loan. During your loan counseling session, you’ll be given the name
of the loan servicer(s). Regardless of the type of loan you borrow, you must receive
entrance counseling before you’re given your first loan disbursement, and you must
receive exit counseling before you leave school. Your school will provide the counseling
and important information about your loan. Your lender will give you additional
information about your loan.
Rights
You have certain rights as a borrower. Listed below are some of them. Before your
school makes your first loan disbursement, you’ll receive the following information
about your loan from your school, lender, and/or the Direct Loan Servicing Center:
- the full amount of the loan;
- the date you must start repaying the loan (based on the anticipated graduation date
recorded on the promissory
note);
- a complete list of any charges you must pay (loan fees) and information on how those
charges are collected;
- information about the yearly and total amounts you can borrow;
- information about the maximum repayment periods and the minimum repayment amount;
- an explanation of default
and its consequences;
- an explanation of available options for consolidating or refinancing your loan;
and
- a statement that you can prepay your loan at any time without penalty.
Your school must notify you (or your parents, for a PLUS Loan) in writing whenever
it credits your account with Stafford Loan, PLUS Loan, or Perkins Loan funds. This
notification must be sent no earlier than 30 days before, and no later than 30 days
after, the school credits your account. You (or your parents, for a PLUS Loan) may
cancel all or a portion of the loan by informing your school within 14 days after
the date your school sends this notice, or by the first day of the payment period,
whichever is later. (Your school can tell you the first day of your payment period.)
If you or your parents receive loan funds directly by check, the funds may be refused
by returning the check.
Before you leave school, you’ll receive the following information about your loan
from your school, lender, and/or the Direct Loan Servicing Center:
- the amount of your total debt (principal and estimated interest), what your interest
rate is, and the total interest charges on your loan;
- if you have FFELs, the name of the lender or agency that holds your loans, where
to send your payments, and where to write or call if you have questions;
- if you have Direct Loans, the address and telephone number of the Direct Loan Servicing
Center;
- an explanation of the fees you might be charged during the repayment period, such
as late charges and collection or litigation costs if you’re delinquent or in default;
- an explanation of available options for consolidating or refinancing your loan;
and a statement that you can prepay your loan without penalty at any time.
If you borrow a Federal Perkins Loan, your school will provide this information
to you. If you borrow a Direct Loan or a FFEL, the Direct Loan Servicing Center
or your lender will provide this information to you, respectively.
If you have Direct or FFEL Stafford Loans, your school will also provide the following
information during exit counseling:
- a current description of your loans, including average monthly anticipated payments;
- a description of applicable deferment, forbearance, and discharge provisions;
- repayment options;
- advice about debt management that will help you in making your payments; and
- notification that you must provide your expected permanent address, the name and
address of your expected employer, and any corrections to your school’s records
concerning your name, Social Security Number, references, and driver’s license number
(if you have one). You have the right to a grace period before your repayment period
begins. (Your parents do not receive a grace period for a PLUS Loan.) Your grace
period begins when you leave school or drop below
half time status.
Your school, lender, and/or the Direct Loan Servicing Center, as appropriate, must
give you a loan repayment schedule that states when your first payment is due, the
number and frequency of payments, and the amount of each payment.
You must be given a summary of deferment and discharge (cancellation) provisions,
including the conditions under which the U.S. Department of Defense might repay
your loan.
If you or your parents borrow under the FFEL Program, you (or your parents, for
a PLUS Loan) must be notified when the loan is sold if the sale results in making
payments to a new lender or agency. Both the old and new lender or agency must provide
this notification and provide the identity of the new lender or agency holding the
loan, the address to which the borrower must make payments, and the telephone numbers
of both the old and new lender or agency.
Loan Deferment Summary
|
Deferment Condition
|
Direct
Loans 1,2
|
FFEL Program
Loans 1,3
|
Perkins
Loans
|
At least half-time study at a postsecondary
school
|
YES
|
YES
|
YES
|
Study in an approved graduate fellowship
program or in an approved rehabilitation
training program for the disabled
|
YES
|
YES
|
YES
|
|
Unable to find full-time employment
|
Up to 3 years
|
Up to 3 years
|
Up to 3 years
|
|
Economic hardship
|
Up to 3 years
|
Up to 3 years
|
Up to 3 years
|
Engages in services listed under discharge/cancellation conditions
(Stafford and Perkins)
|
NO
|
NO
|
YES
|
NOTE: You must formally request a deferment through the procedures established by
the holder of your loan, and you must continue making payments until you’re notified
that the deferment has been granted.
- For PLUS Loans and unsubsidized student loans, only principal is deferred. Interest
continues to accrue.
- Direct Loan borrowers who have outstanding balances on FFEL Loans disbursed prior
to July 1993, might be eligible for additional deferments, provided the outstanding
balance on the FFEL existed when the borrower received his or her first Direct Loan.
- Applies to loans first disbursed on or after July 1, 1993, to borrowers who have
no outstanding FFELs or Federal Supplemental Loans for Students (Federal SLS Program)
on the date they signed their
promissory note. (Note that the Federal SLS Program was repealed beginning
with the 1994-1995 award year.)
- Many Peace Corps volunteers will qualify for a deferment based on economic hardship.
- More information on teaching service deferments can be found on the Internet at
www.studentaid.ed.gov.
At the site, Click on “Repaying,” then click on "Cancellation and Deferment Options
for Teachers."
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