- What is a Stafford Loan?
- What is the difference between the Subsidized and Unsubsidized Stafford Loan?
- Why do I have to wait 30 days to get my loan when I applied early?
- What is EFT? Should I use it?
- It's likely I'll have to borrow every year to pay for my college expenses. How much should I borrow so that I can afford to pay it back?
- What if I am a loan borrower and my educational or career plans change, or something happens after I am out of school and working?
- What happens if I don't pay back my loan?
- How can I find out my credit history?
- I know I make too much money to qualify. Do I still have to complete the FAFSA to get a student loan?
- Can I get forbearance on my Stafford student loan?
- What is the Federal Parent Loan for Undergraduate Students (PLUS)?
- What should I do if I have defaulted on my Stafford student loan?
1. What is a Stafford Loan?
The Federal Stafford Loan is a private lender, state/private guaranteed loan backed by the federal government. Interest rates are low.
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2. What is the difference between the Subsidized and Unsubsidized Stafford Loan?
With a Subsidized Stafford, the interest is paid by the government while you are in school. The interest on the Unsubsidized Stafford is not paid by the government while you are in school. You have the option of paying the interest or deferring it until after you stop attending school, at which time it will be added to the principal of the loan.
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3. Why do I have to wait 30 days to get my loan when I applied early?
This regulation applies to first-time borrowers to ensure that enrollment has been consistent before the loan amount is disbursed.
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4. What is EFT? Should I use it?
EFT is Electronic Funds Transfer, which is used by lenders to transfer Stafford and PLUS loan proceeds from the lenders to the schools without the need for individual checks. This method of disbursing loan funds does speed up the time between receiving funds in the Financial Aid Office and the student actually having access to the funds.
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5. It's likely I'll have to borrow every year to pay for my college expenses. How much should I borrow so that 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, you can use the criteria lenders use when they consider an applicant's ability to repay: the total monthly payment for all debts should not exceed 8% of your gross monthly salary.
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6. What if I am a loan borrower and my educational or career plans change, or something happens after I am 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 payments, or to make smaller payments. This is called a forbearance. The promissory note for each loan you borrow outlines the specific terms under which you may be granted a deferment. Contact your lender for more information.
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7. What happens if I don't pay back my loan?
Not paying back your student loan can have serious consequences. If you 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 cannot get any additional federal student aid until make satisfactory arrangements to repay your loan. Also, the lender may notify credit bureaus of your default. Being delinquent or being in default can affect your credit rating, which will make it difficult to obtain credit cards, car loans and/or a home mortgage loan.
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8. How can I find out 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 to finance a part of your family share. Check the report closely for accuracy and resolve any erroneous information prior to applying for educational loans.
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9. I know I make too much money to qualify. Do I still have to complete the FAFSA to get a student loan?
Yes, even if you think that you or your parents earned too much money last year to qualify for some type of financial aid, you still need to complete the FAFSA, some programs do not require demonstrated need, but the financial information from the FAFSA is still required.
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10. Can I get forbearance on my Stafford student loan?
A Forbearance is an option that lenders or services can offer that permits the reduction of payments, an extension of time, or the temporary cessation of payments. You will need to contact your lender or provider to see if you qualify.
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11. What is the Federal Parent Loan for Undergraduate Students (PLUS)?
The Federal Parent Loan for Undergraduate Students (PLUS) is for parents of dependent students only. PLUS is a non need-based federal loan available through a lender who participates in this program. Awards cannot exceed the cost of attendance per academic year, minus other aid.
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12. What should I do if I have defaulted on my Stafford student loan?
There are 3 options provided by federal regulations to help borrowers, on default on their Stafford student loans to restore the privileges they enjoyed before the loan went into default.
- To Reinstate Eligibility: You must make arrangements with the holder of your loan to make six voluntary consecutive, on time payments. The amount you will have to pay will be determined by the amount of your debt and your individual economic circumstances. Once this done, you will have reinstated your eligibility to apply for federal student aid. Reinstatement allows one-time eligibility. If you fail to maintain your repayment terms, you will never be eligible for reinstatement until the loan is paid in full, rehabilitated, or consolidated.
- Rehabilitation: Loan rehabilitation allows you to remove your loan from default. You must make arrangements with the holder of your loan to make consecutive, on-time voluntary monthly payments for a minimum of one year (12 consecutive months). After rehabilitation, you loan will no longer be considered in default. Your eligibility to apply for federal student financial aid programs will be fully restored. All the deferment and forbearance benefits you enjoyed, on your loan before it entered default, will be reinstated and your negative credit history will be deleted.
- Consolidation: Loan consolidation allows you to combine several loans, even loans of different types, into a single account with new repayment options. If you wish to consolidate your loans, you should contact a participating lender for a Consolidation loan application. If you consolidation application is approved, all your loans will be combined into a new loan – the Consolidated loan – that will be serviced by a regular lender. You will be eligible to apply for federal student financial aid programs if you return to school, and you will be eligible for all the benefits of your new consolidation loan, including deferments and forbearance.
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