There are certain mandatory forbearances. Examples include borrowers who:
Contact your lender or loan-servicing agent for more information on the mandatory forbearance benefit.
An income-contingent monthly payment will be based on your annual income (and that of your spouse if you’re married), your family size, and the total amount of your Direct Loans.
Borrowers have 25 years to repay under this plan, the unpaid portion will then be forgiven. However, you may have to pay income tax on the amount that is forgiven.
This program takes effect July 1, and graduate and professional student PLUS borrowers in the Direct Loan program are eligible to use the ICR repayment plan. Direct Loan parent PLUS borrowers are not eligible for the ICR repayment plan.
No, you are not permitted to use your Stafford loan funds to pay non school related bills.
The Stafford loan is to be applied toward your cost of tuition, which is why the funds get sent directly to your school. You can not apply those funds toward your cell phone bill, car payment, etc.
I do, however, know someone who received funds from the school (through Stafford) and used them to purchase an iphone, but that is not the intended purpose. That iphone will end up costing her almost double the cost over the next 10-years with interest.
I caution all to be responsible with your Stafford loans funds. Some schools may not safe guard as well as others, but using your funds in an inappropriate manner will literally cost you dearly on the backend.
Of course. No one is going to make you take a loan out you don’t want. You can just send the funds back you don’t need.
You may cancel all or part of your loan at any time by notifying your school before your loan is disbursed, and within certain time frames after your loan has been disbursed. These time frames and procedures for canceling a loan will also be explained in notices that the school is required to send you.
You should never take more funds than you need.
Rehabilitation is the process of bringing a loan out of a default status and removing the default notation on a borrower’s credit report. To rehabilitate a Direct or a FFEL Loan, you must make at least 9 full payments of an agreed amount within 20 days of their monthly due dates over a 10 month period to the U.S. Department of Education.
To rehabilitate a Perkins Loan, you must make 12, on-time, monthly payments of an agreed amount to the Department. Rehabilitation terms and conditions vary for other loan types and can be obtained directly from the loan holders.
To contact the Department of Education regarding loan rehabilitation call 800-621-3115.
Effective Oct. 1, 2007, a FFEL, Direct Loan, or Perkins Loan borrower who is a member of the National Guard or other reserve component of the U.S. Armed Forces (current or retired) and is called or ordered to active duty while enrolled at least half-time at an eligible school, or within six months of having been enrolled at least half-time, is eligible for a deferment during the 13 months following the conclusion of the active duty service, or until the borrower returns to enrolled status on at least a half-time basis, whichever is earlier.
Did you know unsubsidized Stafford loans do not require a student to have financial need? Of course it is also the borrowers responsibility for paying all the interest which accrues as well.
The distinction between the subsidized and unsubsidized Stafford loans is that subsidized Stafford’s are based on financial need, which the government pays the interest on. That way when you get out of school you will only begin making payments on the principle balance(s) you borrowed.
Unsubsidized Stafford loans begin accruing interest while the student is in school and capitalize each quarter.
Being late or behind on your loan payments does not necessarily mean you have fallen into a “default” status.
If you do not make payments, even one, your loan is considered delinquent and late fees can be assessed, but you need to be 270 days past due to earn the not so coveted default title. I think that is pretty fair. You have 9 months before you loan gets turned over to collections to make arrangements with your lender.
If you are struggling with your monthly payment you may want to ask your lender/servicer about making partial payments, changing your payment due date, or if you qualify for an income sensitive repayment plan.
Wednesday Rant!
If I was a student graduating in 2009 with Stafford loan debt the news of the decreased interest rates, which just broke last week and will go into effect this July 1, would anger me to know end.
I liken these rate decreases to a carrot dangling in front of a typical witless rabbit. You and I both know he will never catch his prize but yet he hops, hops, hops desperately in hopes of snatching it. Sure, the Stafford loan rates which dropped to 2% and 2.5% respectively look mouth watering, but most of you won’t get the chance to sink your teeth into them.
Stafford loan rates have been fixed since July 1, 2006, and at much higher levels than today’s current market. In fact, we already know what the rates will be through the 2012-13 academic year, and these fixed interest rates have many up in arms.
It wasn’t all that long ago when all Stafford loan rates were determined by the 91-day T-bill and pegged at certain margins above the three-month treasury yield in late May, which is how the historically low 2% and 2.5% rates were arrived at last week. Today, only the loans which were dispersed prior to July 1, 2006 are effected by the T-bill and subject to the change (they are variable rates). Today’s graduates may have had one or two loans at most from that desirable time frame with the majority of loans being disbursed afterwards.
So when you pick up that paper, visit a website, or see a newsflash on TV about Stafford loan rates dropping to historic lows just know it probably won’t effect you, and if it does it will be in a very small way. It sure would be nice if the rabbit could catch the carrot once in a while.
Five most recent Stafford loan help blog posts:
By definition a preferred lender list is a list of lenders that a college suggests its students consider when taking out federally guaranteed loans. Students who receive a “preferred lender” list from a school should remember that those lists are not legally binding. Borrowers can choose from any federally approved lender and may often find a better deal outside the list.
As some of you may recall a handful of lenders were sanctioned for deceptive loan practices a couple of years ago. Among other things, they were sharing a portion of their loan revenue with the school’s financial aid office, which is a clear code of conduct violation. These financial aid officers were guiding students toward loan products that would offer them kickbacks. Fortunately for students today these unethical practices have come to a halt.
Heavy fines were levied and the Sunshine Act was born. The Sunshine Act protects students and parents from exploitation by private lenders and lenders who offer gifts to colleges as a way to secure loan business.
Keep in mind it is not a violation for a school to have a preferred lender list provided they are not reaping financial gains. So it is up to you if you are enrolled at a FFELP school. You can thumb through the schools preferred list or travel outside that list in search of your own lender to service your Stafford loan and Parent Plus loan.
As G.I.Joe once said, “Now you know. And knowing is half the battle.”
Five most recent Stafford loan help blog posts:
