Common Loan Questions

What is a Direct Loan?

The Direct Loan is funded by the federal government. Interest rates are low and repayment of principle typically isn't required until six months after a student graduates or drops below half-time enrollment. Generally, they are among the best student loans available for paying educational costs.

What is the difference between the Subsidized and Unsubsidized Loan?

With the Subsidized, the interest is paid by the government while you are in school. You are responsible for the interest on the Unsubsidized. You have the option of paying the interest while enrolled or deferring it until after you leave school, at which time it will be added to the principle of the loan.

It's likely I'll have to borrow every year to pay for my college expenses. How much should I borrow so that I know I can afford to pay it back?

Planning ahead is essential to managing debt. If you plan to borrow each year you are in school, estimate the total amount you will borrow. Then use a sample loan repayment table to calculate how much you will have to pay each month. To decide how much to borrow, as a guide you can use the criteria lenders use when they consider an applicant's ability to repay. They expect that the total monthly payment for all debts should not exceed 8% of your gross monthly salary. So check on your major as to the average starting salaries seen by recent graduates, estimate what living expenses will be like for you and the difference should be a good estimate of maximum borrowing you will want to stay below.

What if my educational or career plans change, or something happens after I'm out of school and working?

A change in career goals, the loss of a job, or other unexpected changes in your situation could make repaying your loan more difficult than you expected. In some cases, and at the lender's option, you may be permitted to temporarily stop making your payments, or your lender may accept smaller payment than scheduled. This is called a forbearance. In addition, for some loans, you may defer repayments temporarily which may help. The promissory note for each loan you borrow outlines the specific terms under which you may be granted a deferment.

What happens if I don't pay back my loan?

Not paying back your student loan can have serious consequences. If you become 270 days behind on your payments and go into default your lender can require you to repay the entire amount immediately, including all interest plus collection and late payment charges. The lender can sue you and can ask the federal government for help in collecting from you. The Internal Revenue Service may withhold your income tax refund and apply it toward your loan. You can not get any additional federal student aid from any school in the nation until you make satisfactory arrangements to repay your loan. Also the lender may notify credit bureaus of your default. This may affect your credit rating which will make it difficult to obtain credit cards, home and/or car loans.

If I borrow from more than one loan program, I may have to pay several different lenders at the same time. May I consolidate my payments?

If you've borrowed from more than one type of loan program, you may be able to consolidate some of the loans and use one payment plan to repay the loans. In general, federal loans may be consolidated into one new loan at an interest rate of the weighted average of the original interest rates of the loans being consolidated. The length of the extension depends on the total amount of the loans consolidated. PLUS Loans are not eligible for consolidation.

How can I find out about my credit history?

Since approval of some non-need-based student loans and most parent loans is based upon credit history, you may want to order a credit report if you will need these loans to finance part of your education. Check the report closely for accuracy and resolve any erroneous information prior to applying for educational loans.

The following agencies can provide you with a credit report:

Equifax Credit Information Services: (800) 685-1111
Experian: (888) 397-3742
Trans Union Corporation: (770) 396-7011