Updated: June 2, 2020

Borrowing Responsibly

Responsibilities, Rights & Loan Deferment

There are a lot of responsibilities when taking out student loans. Below are the most important ones:

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Responsibilities

Signing a promissory note binds you to the payment terms and conditions of the note. The note states that you must repay the loan even if you do not finish your education. Exceptions include loan discharge or if your school closes before you finish your program. Think about what your repayment obligation means before you take out a loan.

If you don’t repay your loan on time or according to the terms in your promissory note, you’ll go into default, which has serious consequences and lowers your credit score.

You must make payments on your loan even if you don’t receive a bill or repayment notice. Billing statements are sent to you as a convenience, but you’re obligated to make payments even if you don’t get a reminder. You also have to make monthly payments in full. Partial payments do not count.

If you apply for a deferment or forbearance, you must continue to make payments until your request is granted. Keep a copy of your request forms and the contact information of the organization that holds your loan. You have to notify the loan servicer when you graduate, withdraw from school, drop below half-time status, change your name, address, Social Security Number or transfer to another school.

If you borrow a federal loan, the Federal Direct Loans Program services your loan. If you borrow a private loan, the lender you borrowed from services your loan. You will get the names of your loan servicer(s) during your loan counseling session. All borrowers have entrance counseling before your first disbursement and exit counseling before graduation. Your school provides counseling and important information about your loan. Your lender has additional information if necessary.

Rights

Before your school makes your first loan disbursement, you’ll receive the following information about borrowing rights and your loan from your school, lender, and/or the Federal Direct Loans Program:

Your school must notify you (or your parents, for a PLUS Loan) in writing whenever it credits your account with Direct or PLUS Loan funds. This notification must be sent no earlier than 30 days before and no later than 30 days after the school credits your account. You or your parents can cancel a portion or all of the loan within 14 days after your school sends the notice, or by the first day of the payment period, whichever is later. Your school will tell you the first day of your payment period. If you or your parents receive loan funds directly by check you can refuse funds by returning the check.

Before you leave school, you’ll receive the following information from your school, lender, and/or the Federal Direct Loans Program:

If you have Direct Loans, your school will provide the following information during exit counseling:

You have the right to a grace period before your repayment period begins. There is no grace period for PLUS Loans. Your grace period begins when you leave school or drop below half-time status.

Your school, lender, and/or the Federal Direct Loans Program, must give you a loan repayment schedule that states when your first payment is due, the number and frequency of payments, and the amount of each payment.

You must be given a summary of deferment and discharge provisions, including the conditions under which the U.S. Department of Defense might repay your loan.

Deferment or Forbearance

You may have the option to request a deferment or forbearnace on your loan. Under either condition, you won't have to make repayments on your loan or may be allowed to make smaller payments for an amount of time, but interest will still acrue during this period.

Students may request deferment on their loans if they are:

Students may be eligible for forbearance if they are:

You must formally request a deferment through the procedures established by the holder of your loan, and you must continue making payments until you’re notified that the deferment or forbearance has been granted.