Financial Aid Overview

Managing Your Student Loan

Reporting Changes

Many borrowers mistakenly believe they don't have to worry about managing their student loans until they graduate or leave school. If you transfer schools, drop credits, or extend your studies, you are responsible for keeping your loan in good standing and reporting changes to your lender.

Avoid problems by immediately notifying your lender and current school in writing if you:

• Change your address or telephone number. (Don't assume that filing an address change with the post office is enough.)
• Change your name.
• Transfer to a new school.
• Drop below half-time enrollment, withdraw, or graduate.
• Change your anticipated graduation date.

Key Points

• CONTACT your lender in writing when you change your name, address, enrollment status, or school.
• ALWAYS keep copies of all correspondence relating to your loans for future reference.
• AVOID unexpected early repayment by informing your lender if you transfer schools, even if you don't take out another loan, or change the date you expect to complete your studies.
• You can check your student loan balance online at The National Student Loan Data System at www.nslds.ed.gov and at www.kheaa.com.

Take advantage of opportunities that may be available to you through:

• Repayment options.
• Deferment.
• Forbearance.
• Consolidation.

Things to Know About Repayment

Unless otherwise advised by the school, lenders use the anticipated graduation date listed on your most recent loan application to place your loan into repayment. Schools periodically report student enrollment; however, it is your responsibility to notify your lender of any enrollment change. Do not wait for your lender to contact you. If you graduate, leave school, or drop below half-time enrollment, call your lender to arrange a repayment schedule.

Under the standard, graduated, or income-sensitive repayment options, you generally have up to 10 years from the date the first payment is due to repay each Federal Stafford and PLUS Loan. Your minimum monthly payment will be set by the lender and depends on how much you owe and the repayment plan selected. If you have no outstanding balance on student loans made before October 7, 1998, and owe more than $30,000 in student loans, you qualify for an extended repayment plan. Under that plan, you can take up to 25 years to pay, depending on how much you owe. You should also consider consolidating your student loans. Depending on your balance, consolidation can extend the repayment period for up to 30 years.

You should remember that:

• A loan must be repaid. It is not a grant. Signing the promissory note is a legal and binding promise to repay a loan. You must repay your loan even if you are dissatisfied with the education, do not graduate, or do not find a job.
• A grace period is the time between when you leave school or drop below half-time study and the time you are obligated to begin repaying your loan-usually six months, depending on the type of loan.
• It is up to you to know when repayment begins. Your lender will provide a repayment schedule which lists repayment terms and conditions. Please notify your lender of any change to your address. Your loan(s) can default without your knowledge if your lender is unable to contact you. The consequences of defaulting on your student loan are very serious. Avoid defaulting on your loan by keeping in contact with your lender.

Beginning Repayment

When you start repaying your loan(s), keep these tips in mind:

• Repayment is your responsibility.
• You should contact your lender to arrange repayment of your loan.
• You should know when your first payment is due.
• You should explore alternative repayment options with your lender.
• Repayment plans can be changed once a year.

Repayment Options

Four repayment options are available:

• Standard Repayment is the traditional option. Payments are set in a fixed amount to repay the debt within the maximum repayment period. The monthly payments may be adjusted each year to reflect the change in interest rates. A minimum payment of $50 applies in most cases.
• Graduated Repayment lets your installment payments change (usually increasing) over the repayment period.
• Income-sensitive Repayment is available if you provide the lender with information on the expected total gross monthly income you receive from all sources. Unless you consolidate your loans with your spouse, this doesn't include your spouse's income. Documentation must be provided annually for the lender to adjust your payment amounts accordingly.
• Extended Repayment is available if you had no outstanding balance on loans made before October 7, 1998, and you owe more than $30,000 in student loans. Payments are fixed annual or graduated amounts repaid over a period not to exceed 25 years.

Deferments

A deferment is a time period in which no payments are due. For subsidized loans, interest that accrues during deferment is paid on your behalf by the federal government; for unsubsidized loans, you must pay the interest during these periods. It's your responsibility to request a deferment and to provide the lender with documents that support your eligibility. If you show that you are eligible for a deferment and provide the required documentation, your lender must give you the deferment.

Eligibility varies by deferment type-not all types apply to all borrowers. The most common deferments and circumstances under which you can apply are:

• In-school or Student Deferment for periods of full-time and half-time study at an eligible school.
• Summer Bridge Deferment Extension for periods when you have attended school in the spring and are planning to reenroll in the fall.
• Unemployment Deferment for periods when you are conscientiously seeking but unable to find full-time employment. (Full-time employment is defined as at least 30 hours of work each week that's expected to last at least three months.)
• Graduate Fellowship Deferment for periods of study under an eligible graduate fellowship program.
• Rehabilitation Training Program Deferment for periods while you participate in a qualified rehabilitation training program.
• Temporary Total Disability Deferment for periods when you are temporarily totally disabled or unable to secure or continue employment because you're caring for a dependent or spouse who's temporarily totally disabled.
• Military Deferment for periods of active duty in the U.S. Armed Forces (Army, Navy, Air Force, Marine Corps, and Coast Guard).
• Economic Hardship Deferment for periods when you earn less than minimum wage or exceed a federally defined debt-to-income ratio.
• Parental Leave Deferment for periods when you are pregnant or caring for your newborn or newly adopted child.
• Working Mother Deferment for periods during which mothers of preschool-age children are entering or reentering the work force.

Forbearance

If you're unable to make scheduled payments, lenders may allow you to temporarily stop making payments as long as you intend to repay the loan. This is a forbearance. During a forbearance, interest continues to accrue. You may request a forbearance to allow for:

• A short period of time during which you make no payments.
• An extension of time for making payments.
• A period during which you make smaller payments than were originally scheduled.

You should explain your circumstances to the lender or servicer, who will determine whether to grant a forbearance. Forbearances are granted at the discretion of the lender.

Debt Consolidation

Paying back your student loans can sometimes be overwhelming, especially if you got loans from more than one lender or have more than one type of loan. If you do, that means having to keep track of making several payments each month.

It doesn't have to be that hard.

You may qualify for a Federal Consolidation Loan, which will combine all your student loans into one lump sum with one lender. That means you only have to make one payment each month — and the payment may be less than half of what you would have to pay if you don't combine your loans. You can also take longer to pay back your loans.

Interest rates are based on a weighted average of the interest rates on the loans you're consolidating, rounded to the next highest 1/8%. The maximum interest rate is usually 8.25%, and the rate is fixed for the life of your loan.

You also have your choice of three payment plans: level, graduated, and income sensitive.

Under the level plan, you make the same payment each month while you're repaying your Consolidation Loan.

With the graduated plan, the first two years you pay only the interest on the loan. After that, you pay more each month to pay off the loan.

Under the income-sensitive plan, payments are based on how much you make. The payment must at least cover the interest that accumulates each month.

How long you have to repay your loan depends on how much you owe.

You can get an idea of how much your monthly payments will be by using the chart below. Find the length of time you will be repaying your loan, based on the list above showing how much you owe. Multiply the dollar amount below by every $1,000 you owe. The chart is based on an 8% interest rate.

10 years 12 years 15 years 20 years 25 years 30 years

$12.13 $10.82 $ 9.56 $ 8.36 $ 7.72 $ 7.34

So, if you owe $15,000 in student loans, you have 15 years to repay your loan. Based on the chart above, your payment would be 15 x $9.56, or $143.40 a month. It may be a little less or a little more, since there's some rounding involved.

Here is additional information you need to know about consolidating your student loans.

What loans can I consolidate?
Just about any federal student loan, including Stafford Loans, Perkins Loans, and PLUS Loans. You can also consolidate Federal Insured Student Loans (FISL), Health Education Assistance Loans (HEAL), Health Professions Student Loans (HPSL), Loans for Disadvantaged Students (LDS), and Federal Nursing Student Loans.

If you have a Perkins Loan, though, you need to take a close look at whether you want to give up the low fixed-interest rate. Interest rates on Consolidation Loans change each year. Some years you may pay a lower interest rate than you do on a Perkins Loan. Other years you may pay a higher interest rate.

If you have a HEAL Loan, the interest rate on that part of your Consolidation Loan may be more than 8.25%.

Can I consolidate with my spouse?
Yes. If you do, you and your spouse will make only one payment each month. However, if you and your spouse consolidate all your loans, you both are responsible for repaying the Consolidation Loan. That's true even if you separate or get a divorce. Another thing to consider is that you both must meet deferment or discharge conditions to qualify. For example, if you die, your spouse must still pay off the amount of the loans that were yours.

What if I'm behind on my payments?
You still may be able to consolidate your student loans if you're behind on your payments. But you must already have made arrangements to repay the loan or you have to repay your loans under an income-sensitive repayment plan. You should contact the holder of your loan immediately.

You may even be able to consolidate your loans if you're already in default. You should contact your loan holder to find out how.

The best time to consolidate your loans, however, is six to eight weeks before your grace period expires. The grace period is the six months between the time you finish school and the time you have to start repaying your student loans.

What about deferments and forbearances?
It depends. If you consolidate by yourself, you can get a deferment if you meet the conditions. If you consolidate with your spouse, though, you both have to qualify for a deferment in order not to make payments. If you both don't qualify, one of you will still have to make the payments on the Consolidation Loan.

You can also get a forbearance if you meet the conditions. You'll have to check with your lender to see if you qualify.

Applications
You should only apply with one lender at a time. If you only have loans from one lender, you have to apply for a Consolidation Loan from that lender unless they don't offer an income-sensitive payment plan. If you have student loans from more than one lender, you can choose the lender you want.

Don't Let a Defaulted Student Loan Cloud Your Future

Although most student loan borrowers repay their loans on schedule, others can't because of high debt, emergencies, and other circumstances. Defaulting on student loan repayment can have serious consequences, such as:

• You will be denied additional student loans, grants, and other aid.
• All national credit bureaus will be notified of the default, severely damaging your credit rating.
• Some of your wages may be taken directly from your employer to pay your defaulted loan(s).
• Your federal and state income tax refunds or other monies owed to you may be taken to pay your defaulted loan(s).
• Collection charges of 25 percent may be added to your loan debt.
• You may be sued.

Avoid the consequences of a defaulted loan by taking advantage of the opportunities available to you. Be sure to contact your lender whenever you have a problem or question.

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