• Types of Loans
• Who's Who in the Loan Process
• Repayment Options
• Deferment and Forbearance
• Loan Consolidation
• Cancellation and Forgiveness
• Delinquency & Default
• Locating Your Federal Student Loans
  
  

A federal student loan is a form of financial aid that must be repaid, with interest. It is important to understand the types of federal student loans available, the terms of each loan and your responsibility for repaying the loans.

Federal Stafford Loan Program - There are two types of Federal Stafford Loans: Subsidized and Unsubsidized.

Subsidized Stafford Loan

• This is a need-based loan.
• You must be enrolled at least half­time in an eligible program to qualify.
• Interest on the loan is paid by the federal government while you are in school, during your grace period, and during authorized periods of deferment.
• During periods of forbearance, you will be responsible for interest that accrues on your subsidized loans.
• For loans disbursed prior to July 1, 2006, the interest rate is variable. This variable rate, which cannot exceed 8.25%, is adjusted on July 1 each year. For loans disbursed on or after July 1, 2008, the interest rate will be fixed at 6.0%.
• Repayment of your loans begins six months after you graduate, withdraw from school or drop below half-time status.

Unsubsidized Stafford Loan

• This is not a need-based loan.
• You must be enrolled at least half-time to qualify.
• You are responsible for paying the interest on your loan from the date of disbursement. You can choose to pay the interest while in school or you can choose to defer the interest until principal repayment begins. If you choose to defer the interest, it will be added to the principal amount of your loan.
• For loans disbursed prior to July 1, 2006, the interest rate is variable. This variable rate, which cannot exceed 8.25%, is adjusted on July 1 each year. For loans disbursed on or after July 1, 2006, the interest rate will be fixed at 6.8%.
• Repayment of your loans will begin six months after you graduate, withdraw from school or drop below half-time status.

The Federal Perkins Loan Program is a low-interest loan for students with exceptional financial need.

• This is a need-based loan.
• Generally, you must be enrolled at least half-time to qualify.
• Interest on the loan does not accrue while you are in school, during your grace period, or during authorized periods of deferment.
• The interest rate is fixed at 5%.
• Repayment begins nine months after you graduate, withdraw from school or drop below half-time status.

The Federal PLUS Loan Program for Parents & Graduate Students is available to parents of undergraduate students and students who are pursuing a graduate or professional degree.

• This is not a need-based loan.
• The loan requires a credit check, so a good credit history is required.
• The interest rate is fixed at 8.5%.
• Students can request up to the full cost of education, less the amount of any other financial aid received.
• Graduate students must be awarded the maximum Stafford Loan eligibility to apply for the Grad PLUS Loan.
• Repayment begins 60 days after the final disbursement of the loan.  Graduate students are eligible for in-school deferments. 
• Parents may request that payments be deferred while the student is in school, as well as for a six-month grace period after the student graduates or drops below half-time enrollment.
• Payments may also be deferred if the parent is enrolled in college. 
• Interest continues to accrue during periods of deferment and grace and is capitalized when the loan enters repayment.

The Lender is the source that provides the funding for your Loan. A lender may be a bank, credit union, school, the U.S. Department of Education, etc. Your school will generally provide you with a Preferred Lender List. 

A Secondary Market purchases loans from the original lender.

The Servicer is a company your lender may use to help administer and manage your loans. All payments and correspondence should go through the servicer.

The Guarantor of your loan is the entity that provides a guarantee to your lender that your loan will be repaid.

Stafford Loans

Your Stafford Loans will have a grace period of six months before you enter repayment.  This grace period begins the day after you graduate, withdraw from school or drop below half-time status. Each loan has only one six-month grace period. You can repay all or part of your loans at any time, without penalty.  You have several options to choose from when preparing to pay your student loans.  You may also choose to change your repayment plan. Contact your servicer if you need to change your plan.

Standard repayment requires equal monthly payments at a minimum of $50.  The monthly payment may be higher depending on your loan balance. The maximum repayment period is 10 years.

Graduated repayment begins with smaller monthly payments that will increase over time. This option assumes that your income will also increase enough to cover the larger payments.

 Income sensitive payments are based on a percentage of your gross monthly income and may be adjusted annually. Your payments must be high enough to cover the interest that accrues each month.

Extended repayment is available to borrowers with a first disbursement on or after October 7, 1998 and whose total outstanding principal and interest balance exceeds $30,000. Payments can either be fixed or graduated. The maximum repayment period is twenty-five years.

Sample Stafford Loan Repayment Chart Standard 10-Year Repayment Plan at 8.25%
Total Borrowered	Monthly Payment	Total Repaid
$10,000	$123	$14,718
$15,000	$184	$22,077
$20,000	$245	$29,437
$30,000	$368	$44,155
$50,000	$613	$73,592

 Perkins Loans

Your Perkins Loan will have a grace period of nine months before you enter repayment.  This grace period begins after you graduate, withdraw from school or drop below halftime status. During the grace period, no interest accrues on your loan. You can repay all or part of your loan anytime, without penalty.  The minimum monthly payment is usually $40. The payment amount may be higher depending on your loan balance. The maximum repayment period is 10 years.

PLUS Loans for Parents & Graduate Students

Repayment on Federal PLUS Loans begins 60 days after the final disbursement of the loan.  There is no grace period.  However, graduate students qualify for an in-school deferment so long as while enrolled at least half-time. The maximum repayment period is 10 years.

Your lender understands that you may experience financial difficulty and offers options that temporarily reduce or suspend your monthly payment. If you are having trouble making payments, contact your servicer immediately for assistance in handling your student loan payments.

Deferment is a period of time during which your school or lender temporarily suspends your regular payments. Your deferment eligibility depends on when you received your oldest outstanding student loan.  Deferment examples include in school at least half-time, unemployment, economic hardship, and qualifying military service.  Interest may or may not be charged on your loan during deferment.  In order to receive a deferment, you must request deferment forms from your servicer, complete the forms and return them promptly with all required documentation.  You will have separate forms for each loan type and lender.

Your servicer must determine your eligibility for any of these deferments. Continue making your payments until you receive written notification that you no longer need to do so.

Forbearance is a period of time during which your lender temporarily reduces or suspends your regular payments. You may request a forbearance if you are unable to make your full payment. You are responsible for the interest that accrues during the forbearance period. You may pay the interest as it accrues. Contact your servicer for more information on applying for a forbearance.

Loan consolidation is available if your federal loans are in grace period or in repayment. This program enables you to consolidate several existing federal loans into one new loan with one fixed interest rate, repayment schedule and monthly payment. While loan consolidation can

extend your repayment period and lower your monthly payments, the interest rate and total interest you pay on the loan may be greater than if you did not consolidate your loans. In addition, you may lose certain deferment, forgiveness and borrower benefits by choosing to consolidate your federal loans. Contact your servicer to determine if it is in your best interest to consolidate your federal student loans.

Your loan also may be cancelled if you become totally and permanently disabled.  Loan cancellation due to disability requires certification from a physician and does not become final until after a conditional period of three years.  A loan forgiveness program for teachers serving in designated low-income schools exists for new Stafford and Perkins Loan borrowers after October 1, 1998. The borrower must teach in a low-income school for five consecutive, complete school years to qualify for partial cancellation. In addition, you may be eligible to request a partial cancellation of your Federal Perkins Loan if you work in a specific field.

Notify your servicer immediately if you anticipate difficulty making a payment.  Failure to pay all or part of a payment when due can result in late charges.  Your servicer will report your past-due status to the national credit bureaus and will initiate collection actions against you if you fail to make full, timely payments.  Your Stafford Loan is considered to be in default if you fail to make payments for 270 days. Your Perkins Loan may be considered to be in default if you fail to make a full payment on the due date. Defaulting on your student loan can result in:

• Damage to your credit rating, which could impact your ability to borrow in the future
• Referral of your account to a collection agency
  
• Collection costs
  
• Garnishment of your wages
  
• Withholding of your state or federal tax refunds
  
• Civil lawsuit, including court costs and legal expenses
  
• Loss of deferment and forbearance entitlements
  
• Loss of eligibility for further financial aid

 There are three basic guidelines to follow to avoid delinquency and default:

• Inform your servicer of changes to your name, mailing address or telephone number so that all correspondence is promptly directed to you.
• Read and keep all documents you receive pertaining to your student loans and be sure to understand your loan amount and the payments that will be required.
• If you are experiencing financial hardship and are unable to make your payments, call your servicer for information regarding deferment or forbearance.

www.nslds.ed.gov

 The National Student Loan Data System (NSLDS) is the U.S. Department of Education’s financial aid tracking system.  Borrowers can access this system with the PIN they obtained to file the FAFSA online while in college. If you no longer have your PIN, you may request a new or duplicate PIN at www.pin.ed.gov. Once you are logged into NSLDS, you will be able to see your student loan history, including amounts, lender, and servicer.

 www.loanlocator.org

 You may also use the National Student Clearinghouse’s Web site to access your lender’s name and contact information. You may then contact them to find out detailed loan account information.