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Before you or your parents borrow, make sure you understand
all the terms of the loan. The following questions and
answers will give you a basic understanding of FFELs
and Direct Loans.
OTHER THAN INTEREST, IS THERE A CHARGE FOR THESE LOANS?
You or your parents will pay a fee of up to 4 percent,
deducted proportionately from each loan disbursement.
A portion of this fee goes to the federal government
to help reduce the
cost of the loans. Also, if you or your parents don’t
make loan payments as scheduled, you might be charged
late fees and collection costs.
HOW ARE THE LOANS REPAID?
There are several ways to repay the loan. The choices
are:
- a 10-year plan with a minimum monthly payment
of $50;
- a graduated plan with a monthly payment that starts
out low and then increases gradually during the repayment
period;
- an extended plan that allows you to repay your
loan over a longer period; or
- a plan that bases the monthly payment amount on
how much money you make. (Direct PLUS Loan borrowers
are not eligible to repay their loans under this plan.)
WHAT IF SOMEONE HAS TROUBLE REPAYING?
Under certain circumstances, you can receive a deferment
or forbearance on your loan. During a deferment, no payments
are required. If you have a subsidized loan, the federal
government will pay the interest that accumulates during
the deferment. If your loan is unsubsidized, you’ll
be responsible for the interest on the loan during the
deferment. Your parents will be responsible for the interest
on their PLUS Loan if they have a deferment.
No borrower can receive a deferment if the loan is in
default (that is, if he or she has not repaid the loan
according to its terms).
During forbearance, payments are postponed or reduced,
or they might be extended. The government does not pay
any interest during forbearance; you’re responsible
for
paying it on your student loan, and your parents are responsible
for paying it on their PLUS Loan.
Deferment and forbearance periods don’t count as
part of the repayment period. For more details on deferments
and forbearances, see The Student Guide, 2003-2004, which
also explains our loan programs and the loan application
process in greater detail. You can access the Guide online
at www.ed.gov/prog_info/SFA/StudentGuide
You can also get a
paper copy of The Student Guide; check with your college
or career school or call our Federal Student Aid Information
Center 1-800-4-FED-AID (1-800-433-3243).
CAN THE LOANS EVER BE CANCELED?
A FFEL or Direct Loan can be canceled only under the following
conditions:
- The borrower dies, or the student dies on whose
behalf a parent borrowed.
- The borrower becomes totally and permanently disabled.
- The student is a full-time teacher for five consecutive
years in a designated elementary or secondary school
serving students from low-income families. (This provision
does not apply to PLUS Loan borrowers.)
- The loan is discharged in bankruptcy (however, cancellation
is possible only if the bankruptcy court rules that
repayment would cause undue hardship).
- The student’s school closes before the student
completes the program.
- The school falsely certifies the loan.
In addition, if a school
does not make a required return of loan funds to the lender,
a portion of the FFEL or Direct Loan—up to the amount
the school was required to return—
can be canceled.
Even if you drop out of the program of study at the school,
don’t like the school or the program of study, or
don’t obtain employment after completing the program
of study, these loans must be repaid. No cancellation
is available for these
reasons
.
Repayment assistance (not a cancellation, but another
way to repay) might be available if you serve in the military.
For more information, contact your recruiting officer.
Another type of repayment assistance (again, not a cancellation)
is available through the U.S. Department of Health and
Human Services’ Nursing Education Loan Repayment
Program (NELRP). This program will help repay student
loans for registered nurses in exchange for their service
in eligible facilities located in areas experiencing a
shortage of nurses. For more information, call NELRP,
toll-free, at 1-866-813-3753 or visit www.bhpr.hrsa.gov/nursing/loanrepay.htm
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