How to apply for a student loan
How to repay student loans
How to have one low monthly school loan payment
Defaulting on a student loan
Repaying your student loans
What you need to know
about repaying student loans...
After you graduate, leave school, or drop below half-time enrollment,
you have a period of time before you have to begin repayment. This
ďgrace periodĒ will be six months for a Federal (FFEL) or Direct
Stafford Loan. nine months for Federal Perkins Loans (If youíre
a parent reading this and you have a FFEL or Direct PLUS Loan, you
donít have a grace periodórepayment generally must begin within
60 days after the loan is fully disbursed.)
If youíve attended
college or received other education beyond high school, and you
received federal student loans from the US Department of Education
(ED) along the way - Youíre now about to deal with paying them back.
Youíll need to know how to manage your student loan debt to avoid
There are several available repayment options so you can successfully
repay your debt. Federal student loans are real loans, just like
car loans or mortgage loans. You canít just get out of repaying
a student loan if your financial circumstances become difficult,
unless you qualify for bankruptcy. But, itís very difficult to have
federal student loans discharged in bankruptcy; this happens only
rarely. Also, you canít cancel your student loans if you didnít
get the education you expected, didnít get the job you expected,
or didnít complete your education, unless you leave school for a
reason that qualifies you for a discharge of your loan - Remember,
your student loans belong to you; you have to pay them back.
A Consolidation Loan
allows you to combine all the federal student loans you received
to finance your college education into a single loan.
New Provisions Permitting Borrowers to Enter Repayment Early Under
the Higher Education Act of 1965, as amended and the Department's
regulations, a borrower can request a repayment schedule that provides
for repayment to commence at a date that is earlier than six months
after the date the borrower ceases to carry at least one-half the
normal full time academic workload.
If the lender grants the request, the loan enters the repayment
period and the borrower waives any applicable grace period. This
is the case even if the borrower is currently enrolled in school.
Such a borrower will be eligible to obtain a consolidation loan
to repay the loan on which early conversion to repayment was granted,
assuming all other eligibility criteria are met. As stated above,
the borrower waives any applicable grace period, now and in the
To apply for a Direct Loan Consolidation or an FFEL Consolidation
the borrower must contact the lender and complete an application.
Most lenders provide borrowers with the ability to apply on-line
or request an application over the telephone. Once an application
is completed and submitted, the lender will request information
from the borrowerís other lenders or from its own system to determine
the amounts outstanding on the borrowers loans. The borrower will
then receive notification about the consolidation loan, normal consumer
disclosures, the amount owed, and if appropriate, where to make
Consolidation loans have
fixed interest rates that are based on the weighted average of the
interest rates on the loans being consolidated. A lender can provide
a new consolidation loan borrower with the lowest statutory weighted
average interest rate for loans by using the lower of the weighted
average of the interest rates on the loans being consolidated as
of July 1 or the date the lender received the borrower's consolidation
loan application. The lender should apply a consistent method of
determining when an application is received.
Options for Determining Federal Consolidation Loan Interest Rates
and Permitting Borrowers to Enter Repayment Early
If the lender determines that the borrower is still enrolled, the
lender can put the loan that will now be in repayment, into an in-school
deferment status at the borrower's request. The interest rate on
the loan would be the deferment rate. If the borrower consolidates
the Stafford Loan, the deferment interest rate should be used in
calculating the weighted average interest rate on the consolidation
your student loan, you have some choices in repayment plans (for
FFEL and Direct Loans) that can make repaying easier and help you
avoid delinquency or default. If youíre delinquent, it means youíre
late making a scheduled loan payment (most often, youíre 30 days
or more late). Default, explained in more detail (see default page),
generally means youíre 270 days or more late in making a loan payment.
(Note that for Federal Perkins Loans, however, default is defined
as the failure to make an installment payment when due or the failure
to comply with other terms of your promissory note or written repayment
Although default is more serious than delinquency, even delinquency
can be reported to credit bureaus. A delinquency notation remains
part of your financial history and could affect your credit rating.
Repaying your loan on time will help you establish and maintain
a good credit rating, which is crucial when you want to buy a car
or a house, or even if you want to rent an apartment. Sometimes,
your credit rating can even affect whether youíll be selected for
a particular job. Itís important to keep paying on your student
Defaulting on your Student Loans
If you default, it
means you failed to make payments on your student loan according
to the terms of your promissory note, the binding legal document
you signed at the time you took out your loan. In other words, you
failed to make your loan payments as scheduled. Your school, the
financial institution that made or owns your loan, your loan guarantor,
and the federal government all can take action to recover the money
you owe. Here are some consequences of default:
National credit bureaus can be notified of your default, which will
harm your credit rating, making it hard to buy a car or a house.
You would be ineligible for additional federal student aid if you
decided to return to school.
Loan payments can be deducted from your paycheck.
State and federal income tax refunds can be withheld and applied
toward the amount you owe.
You will have to pay late fees and collection costs on top of what
you already owe.
You can be sued.
How to Apply for a Student Loan
U.S. Department of Education -
Gather the documents you
Start with your Social Security Number, driver's license, income
tax return, bank statements and investment records.
Print a FAFSA on the Web Worksheet
Write in your answers and gather your parent's information then
transfer the data to FAFSA on the Web.
Plan how to sign your FAFSA
Sign electronically with a U.S. Department of Education Personal
Identification Number (PIN) or by mailing in a signature page.
Apply for a PIN now!
Speed up the process by signing your FAFSA electronically with your
PIN. Your parent can sign electronically too.
Check your eligibility for federal student aid.
Note important deadlines
To meet the Federal Student
Financial Aid deadline:
Apply as early as possible
beginning January 1st of each year.
Schools and states have their own deadlines. Contact them for exact
loans bear biggest part
of budget-cutting plan
(AP) -- As Congress moves to slash $40 billion in spending,
no program will take a bigger hit than college loans, where
almost $13 billion would be cut over five years.
students, the upshot is mixed. Excessive government payments
to banks would be halted, freeing up some dollars for new
grants, larger loan limits and reduced loan fees.
overall, the student loan program would endure the largest
cut in its history, and most of the money would not be pumped
back into education. Instead, under a plan the House approved
Monday, the money would be counted only toward reducing the
a time when the entire country believes we need to make higher
education more affordable, Congress is trying to balance the
budget on the backs of students," said Jasmine Harris, legislative
director for the United States Student Association.
your monthly payments by up to 58%.
There's no credit check or fees.
who take out loans on behalf of their students would pay higher
interest rates. And other parts of the college package could
indirectly drive up costs for students, if banks pass on new
expenses or offer less attractive loans as their profit margin
don't want to say the news is all bad. It's a decidedly mixed
bag," said Terry Hartle, senior vice president of the American
Council on Education, the largest coalition of colleges and
higher education groups in the nation.
on balance, one comes to the conclusion that this is a sad
step in the history of the student loan program," Hartle said.
$12.7 billion in college cuts are part of an effort, led by
conservative Republican lawmakers, to show discipline with
the public's money. But Democrats say GOP leaders only want
to pay for tax cuts, all the while eroding the ability of
parents to pay for college.
timing of Senate action was unclear. Colleges and university
associations scrambled Monday, urging the Senate to reject
the bill as the Congress tried to end its 2005 work.
higher education, the single biggest cut appears to be in
the profits of lenders.
current law, banks get to keep the excess money when the amounts
that students pay in interest exceed the rate of return that
the government has guaranteed. That would end. Lenders would
have to refund the difference to the government, meaning billions
were able to reduce spending through changes in the way lenders
operate," said Mike Enzi, R-Wyo., the chairman of the Senate
education committee. "But at the same time, we shielded the
direct impact to students, and actually increased student
your monthly payments by up to 58%.
There's no credit check or fees.
interest rate for parent loans would increase to a fixed rate
of 8.5 percent in July. It is now a variable rate and had
been set to move to a fixed rate of 7.9 percent.
the interest on students loans would also move to a fixed
rate of 6.8 percent in July, up from its current variable
rate of 4.7 percent. But that change was already set to happen
under law, and the deficit-reduction bill does not alter that
plan. Student groups tend to support a fixed rate as a protection
against unstable, rising interest rates.
limits would increase from $2,625 to $3,500 for first-year
students, and from $3,500 to $4,500 for second-year students.
The total borrowing limit allowed for undergraduates would
remain at $23,000. Lawmakers aimed for a compromise of letting
students borrow more at the start of college, reflecting current
needs, without sanctioning a bigger overall debt.
bill would offer grants to poorer, high-achieving students
in the first two years of college and older undergraduates
studying math, science or high-demand foreign languages.
Boehner, R-Ohio, the chairman of the House education committee,
said the bill "offers significant new benefits to students
pursuing a college education."
critics said the size of those benefits doesn't come close
to offsetting the cuts.
Bob Shireman, director of The Institute for College Access
and Success: "Overall, there will be less money out there
for helping students pay for higher education. And it's not
being returned to the system, except in some small ways."
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