Is repaying my student loan a serious obligation?
YES! When you borrow money for your education, you sign a promissory note legally obligating you to repay the loan according to stated terms and conditions.
When the time comes for repayment, usually after dropping below 6 credits, withdrawing, or graduating, meeting your student loan obligation promptly helps you earn a good credit rating, which follows you throughout your life.
If you do not repay your loans, you will suffer serious consequences:
- You may not be able to obtain more credit, (i.e. to buy a car or house.)
- You may be turned down for a credit card.
- You will forfeit your tax refunds.
- Your employer can be ordered to garnish your pay (i.e. withhold what you owe from your paycheck.)
- You will be sued and will owe collection fees and attorney fees, in addition to repaying your loan.
Remember, you must repay your student loans, even if:
- You do not graduate or otherwise complete your education.
- You can not find a job after graduation.
- You are not satisfied with the education you received.
What is a grace period?
A grace period is the time period allocated after you finish school or drop below half-time enrollment and before you must begin repayment on your loans. The grace period with a Stafford loan is usually six months. Please review your promissory notes for the grace periods.
What is a student loan deferment?
A deferment is an authorized temporary suspension of repayment and may be granted under certain circumstances. A deferment is not automatic; you must apply, meet the qualifications and make arrangements with the servicer of your loans.
How can I get a deferment?
To apply for a deferment, you must complete a deferment form, which is available from the servicer of your loans. The servicer will notify you in 30 days if you qualify for a deferment. Until notified, you should keep your payments current.
What is a student loan forbearance?
A forbearance allows you to reduce the amount of your student loan payment or temporarily suspend payments. Unlike a student loan deferment, a forbearance is granted at the discretion of the servicer of your loans
During a forbearance period, interest continues to accrue. If you are willing, but not financially able to make payments under the terms of your repayment schedule, you may request a forbearance for the following periods:
- A short period during which you make no payment.
- A period in which you make smaller payments than were originally planned.
You must provide the servicer of your loans with the reason for your forbearance request as well as other required information.
The servicer of your loans can grant you a forbearance, upon receipt of proper documentation, if:
- You are a medical or dental intern.
- Your monthly student loan payments equal or exceed 20 percent of your monthly income.
- You are serving in a national service position.
- You are qualified under the Student Loan Repayment Program administered by the U.S. Department of Defense.
- You are affected by a local or national emergency.
- You are a member of the National Guard or Reserves which is mobilized.
- You reside in an area that is designated a disaster area.
What happens if I miss a loan payment? Will my loan be in default?
A loan can go into default after 150 days of nonpayment for private loans and 270 days of nonpayment for federal loans. One missed payment will not put a loan into default; however, a missed payment appears on your credit record and may affect your ability to obtain additional credit. If you cannot make a payment, you should contact the servicer of your loans and explain your situation. In some cases, you may be eligible for a deferment or forbearance. If you run into financial difficulties while paying back your student loan, the worst thing you can do is miss a payment or be late in making your payments.
Is it easier for me to consolidate my loans?
It may be easier to repay several loans if you consolidate them into a single monthly payment. Consolidation is also available for loans obtained separately by you and your spouse.
Consolidation loan repayment can be extended up to 30 years, instead of the usual 10-year repayment period. Consolidation lowers your monthly payment; however, over the life of your loan you will pay more interest. You also should be aware that in most cases, the interest rate on a consolidation loan will be higher than the rates on your original loans. Please refer to the section on Loan Consolidation for further information.
What repayment options are available?
Besides loan consolidation, these repayment plans are also available;
- Standard Repayment Schedule - Payments are the same each month. Total repayment schedule is 10 years.
- Graduated Repayment Schedule - You make smaller monthly payments early in the repayment schedule and larger payments later in the schedule. Total repayment schedule is 10 years.
- Income-Sensitive Repayment Schedule - Loan payments are based on your monthly income. Total repayment term may be beyond 10 years.
Who is the holder/servicer of my loans?
The holder of your loans is either the financial institution that originally loaned you the money or an institution that purchased your loans. Lenders have the right to sell loans, but they must notify the borrower. Sometimes the loan holder has another organization act as the loan servicer. In this case, the borrower communicates with the loan servicer instead of the holder. For information concerning who the holder of your loans you may be contact: 1-800-4FED-AID or 1-800-433-3243.
You may also access information on your Federal loans on the web through the National Student Loan Data System student access site.
When should I communicate with the servicer of my loans?
While you are in school:
- Inform your servicer of any change in your name, address, telephone number or enrollment status.
When you finish school:
- Inform your servicer when you graduate or if you drop below half-time enrollment.
While you are in repayment:
- Inform your servicer if there is any change in your name, address, or telephone number. Be sure to let the servicer of your loans know if you cannot make a payment or if your payment will be late.
What to do if you have a problem?
If you have a problem, ask for help. Do not just skip payments. If you run into financial difficulties while paying back your student loans, contact the servicer of your loans and explain the situation. The servicer may be willing to re-negotiate the amount of your monthly installments or offer you a financial hardship forbearance. You may be allowed a short period in which no payments are due, or you may be permitted to make lower than usual payments for a time.
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