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Responsible Borrowing and Loan Repayment
When you take out a federal student loan, you may not be required to make payments on that loan while you are in school, but you are required to repay the loan – including fees and interest – when you graduate or stop attending school at least half-time. Federal student loans are an excellent resource to help pay your education expenses and a great way to establish a solid financial future. It’s important that you borrow responsibly so you’ll be able to repay your loan. Below includes some resources to help you understand about repayment and your options.
Track Your Borrowing
At any point in your college career and afterwards you can visit the Student Aid Website (login using your FSA ID and password). This website will help you with the following by clicking on Financial Aid Review:
- View all federal loans you have taken out to date (this does not include any private loans you may have taken).
- View your servicer that is handling repayment of your loans along with their contact information.
- View an up-to-date interest accrual.
Note: If you have obtained private loans, you can find out your lender information by checking your personal credit report.
It’s important to keep track of each loan you receive so that you are aware of how much you’ll need to pay each month and in total for your loans as you progress through college. Don’t wait until you graduate or stop attending school to review your student loan debt. If you do wait, you may find you have borrowed more than you can afford to repay or multiple types of loans that require separate monthly payments.
Repayment Estimator can help you understand how much you are looking at when you graduate. You can utilize it with current and exact numbers while also placing in hypothetical numbers of how much more you may borrow.
Forbearance vs. Deferment Options
A period during which your monthly loan payments are temporarily suspended or reduced. Your lender may grant you a forbearance if you are willing but unable to make loan payments due to certain types of financial hardships. During forbearance, principal payments are postponed but interest continues to accrue. Unpaid interest that accrues during the forbearance will be added to the principal balance (capitalized) of your loan(s), increasing the total amount you owe.
A postponement of payment on a loan that is allowed under certain conditions and during which interest does not accrue on Direct Subsidized Loans and Subsidized Federal Stafford Loans. All other federal student loans that are deferred will continue to accrue interest. Any unpaid interest that accrued during the deferment period may be added to the principal balance (capitalized) of the loan(s).
You will need to contact your loan servicer if you want to apply for forbearance. If you borrowed a student loan, you must maintain at least half-time enrollment (minimum of 6 credits) in a semester to continue to be in deferment. Your enrollment is reported monthly to the National Student Clearinghouse for Direct Lending’s use. If you fall below half time for a semester or within the semester, the Financial Aid Office is required by law to notify The Department of Education and provide you Exit Loan Counseling. Direct Lending will place you in your grace period prior to your repayment.
Delinquent vs. Default
You want to work with your lenders if you are potentially going to miss a payment. If you reach delinquent or default status you can be subject to wage holdings, loss of future financial aid and collections.
A loan is delinquent when loan payments are not received by the due dates. A loan remains delinquent until the borrower makes up the missed payment(s) through payment, deferment or forbearance. If the borrower is unable to make payments, he or she should contact his or her loan servicer to discuss options to keep the loan in good standing.
Failure to repay a loan according to the terms agreed to in the promissory note. For most federal student loans, you will default if you have not made a payment in more than 270 days. You may experience serious legal consequences if you default.