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Borrowing Responsibly

Responsibilities, Rights & Loan Deferment

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

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:

  • The full amount of the loan.
  • Your repayment date (based on the anticipated graduation date recorded on the promissory note.)
  • A complete list of charges and loan fees, and information on how those charges are collected.
  • Information about yearly and total borrowing amounts.
  • Information about the maximum repayment period and the minimum repayment amount.
  • An explanation of default and its consequences.
  • An explanation of refinancing and consolidation options.
  • A statement that you can prepay your loan at any time without penalty.

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:

  • Your total debt, including principal and estimated interest, your interest rate, and the total interest charges on your loan.
  • The name of the lender or agency that holds your loans, where to send your payments, and where to write/call for questions.
  • An explanation of the late fees, collection costs or litigation costs if you are delinquent or in default.
  • An explanation of available options for consolidating or refinancing your loan including a statement that you can prepay your loan without penalty at any time.

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

  • A current description of your loans, including average monthly anticipated payments.
  • A description of applicable deferment, forbearance, and discharge provisions.
  • Repayment options.
  • Budgetary advice about how to manage your payments.
  • Notification that you must provide your expected permanent address, the name and address of your expected employer, and any corrections to your school’s records concerning your name, Social Security Number, references, and driver’s license number (if you have one).

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:

  • Recieving government benefits or fall 150% below the poverty line.
  • Currently being treated for cancer.
  • Enrolled in an approved graduate fellowship program.
  • Enrolled at least half-time at an eligible college or career school.
  • On active duty military service.

Students may be eligible for forbearance if they are:

  • Experiencing financial difficulties, medical expenses or change in employment.
  • Serving in the AmeriCorps in a position for which they recieved a national service award.
  • Serving in a medical or dental internship or residency program, and meet specific requirements.
  • An active member of the National Guard.
  • Performing a teaching service that qualifies them for Teacher Loan Forgiveness.

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.

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Last Reviewed: September 2020