Navigating the world of student loans isn’t easy. Luckily, with a little bit of research and patience on your part, there are ways to make the process easier. Below, we’ve posted the answers to some of the more common questions borrowers may have regarding federal Stafford and PLUS Loans. Considering the recent changes to student loans and who may provide them, even those who believe they’re fairly knowledgeable about federal student loans may benefit from the information.
How are loans repaid?
There are several ways to repay your loan. Your 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
- a plan that bases the monthly payment amount on how much money you make
Your parents can repay a PLUS Loan using either of the first two plans. Under the Direct Loan Program, you or your parents can also choose a plan with a minimum monthly payment amount of $50 and a repayment period of more than 10 years.
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 accrues 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 during a deferment. No borrower can receive a deferment if his or her loan is in default (that is, if he or she doesn't repay the loan according to its terms).
During forbearance, payments are postponed or reduced. The government does not pay the interest; you are responsible for paying it on your student loan, and your parents are responsible for paying it on their PLUS Loan. Neither deferment nor forbearance periods count as part of the repayment period.
For more details on deferments and forbearance, see The Student Guide from the Federal Student Aid Information Center, which also explains loan programs and the loan application process in greater detail. You can access the guide online at:
http://studentaid.ed.gov/students/publications/student_guide/index.html
You can also get a paper copy of The Student Guide. Check with your college or career school or call the Federal Student Aid Information Center:
1-800-4-FED-AID or 1-800-433-3243
A FFEL or Direct Loan (including a PLUS Loan) can be canceled under the following conditions:
- The borrower dies, or the student on whose behalf a parent borrowed dies
- The borrower becomes totally and permanently disabled
- The loan is discharged in bankruptcy (in rare cases)
- 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 Direct Loan — up to the amount the school was required to return — may be canceled.
Even if you don't complete 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) may be available if you serve in the military. For more information, contact your recruiting officer.
Before you or your parents borrow, make sure you understand all of the terms of the loan. The following questions and answers will give you a basic understanding of federal student loans
Other than interest, is there a charge for loans?
You or your parents will pay a fee of up to 4% deducted proportionately from each disbursement of a loan. 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 when they're scheduled, you might be charged late fees and collection costs.