Student Loan FAQs

General Questions about Loans

How do I choose the right student loan for me?
You have many options when it comes to student loans for higher education. A few things to keep in mind:

• Fill out the Free Application for Federal Student Aid (or FAFSA). Without it, you won’t have access to federal student loans – many of which are not based on need or your income.
• Always use federal loans first, such as the Perkins, Stafford, and PLUS loans. They carry lower, fixed interest rates and often have more favorable terms than private (or alternative) loans.
• If you need to use private loans, consider all of the costs. Private loans can have origination fees, different ways of compounding interest, and higher interest rates or APRs.
• Know your credit score. The lower your score, the higher your rate will likely be on a private loan. Most student borrowers will need a credit-worthy co-signer to be approved for a private student loan. Most private loans have variable interest rates (meaning they will fluctuate over time), while government-backed (or federal) loans have fixed interest rates and more lenient repayment terms.

Investigate your loan options carefully by considering the following:

• Total cost of the loan (after all of the interest and fees are taken into account)
• APR or annual percentage rate
• Borrower benefits (such as cash back or interest rate reductions for making on-time payments)
• Monthly payment
• Deferment options

I haven't heard from the lender I selected, and I applied for a loan a while ago. Can you help me?
We recommend that you follow up with the lender directly for the status of your loan application. Often, the application for a student loan is delayed because of missing information on the application. Confirm that you have provided the following information, if requested, on the application:

• Proof of enrollment (letter from school, tuition bill, school certification)
• Proof of income (w-2, full tax returns, or copy of paystub)
• Signature verification (license, state identification, or military identification)
• Copy of the student’s visa (for international students who apply with a U.S. citizen or permanent resident as the co-signer)
• Credit agreement / promissory note / e-signature

If you are still having trouble, please contact us with the name of the lender or student loan you chose and when you submitted the application and we will try our best to connect you to the lender.

What are my repayment options?
Most student loans have a few options for when you can start repayment. If you are enrolled more than half-time, you usually do not have to make payments on the loan while you are in school. If the loan is in just a parent’s (or guardian’s) name, you often do have to repay the loan taken out for your child, unless you are also in school yourself. After you leave your program or graduate, your loan may include a grace period of anywhere from 3 months to a year during which you do not have to make repayments. Depending on the type of loan, interest may or may not accrue during both the in-school and grace periods.

When you first take out a loan, your lender may let you choose from three types of repayment options:

• No Deferment – where you must start repayment right away, even while still in school
• Interest-Only Payments – where you only make interest payments while you are in school
• Full Deferment – where you wait until you finish or leave school before payments begin

Check with your lender for details on these and other options for repayment.

What information do I need to apply for a loan?
In order to complete an application for a private student loan with most lenders, you will need the following information:

• Your full name, social security number and date of birth
• Your permanent address and the number of years you have lived there (no P.O. boxes)
• The amount of your monthly rent or house payment
• Your home phone number
• Your current occupation and position
• The name of your employer and how long you have been employed by them
• The business phone number of your employer
• Your gross annual income
• The contact information for a reference (name, address, home/business phone number)
• The name of your school (or the school the student for whom the loan is for is attending)
• The social security number, contact and employment information for your co-signer (if applicable)

Applying for federal student loans may require somewhat less information, but does require completion of the FAFSA.

What are my rights and responsibilities as a borrower?
For federal student loans, before you receive the first loan disbursement, you have the right to specific information about your loan from your school, lender, and/or the Direct Loan Servicing Center. That information includes the full amount of the loan and the interest rate, the date you start repayment, a complete list of any charges or loan fees and information on how those charges are collected, information about the yearly and total amounts you can borrow, the maximum repayment periods and the minimum repayment amount, an explanation of default and its consequences, an explanation of available options for consolidating your loans, and a statement that you can prepay your loan(s) without penalty at any time.

When you take out any kind of loan, you have an obligation to repay it in full and on time. If you don't repay your loan on time or according to the terms in your promissory note, you might go into default, which has serious consequences and will affect your credit score. You must make payments on your loan even if you don't receive a bill or repayment notice. You must also make monthly payments in the full amount that your repayment plan has established.

You must notify your loan servicer for a student loan when you or the student whose name the loan is in graduates, withdraws from school, drops below half-time status, changes name, address, or Social Security Number, or transfers to another school.

Your lender will give you additional information, or read more from our Resource Center.

When do I need to fill out the FAFSA? Is there a deadline?
You should fill out the FAFSA as soon as you can after January 1st of each year. Because the FAFSA asks for tax information from the previous calendar year, you may want to wait until your family has all of the necessary paperwork or has filed their income taxes. You can file the FAFSA before filing your income taxes using estimates, but you will need to go back later and correct any discrepancies.

The only deadline for filling out the FAFSA is June 30th at the end of the school year for which you are filing. In other words, for the 2009-2010 school year, the FAFSA will be available on January 1, 2009. You can file the FAFSA anytime between then and June 30, 2010. However, many states and schools allocate funds on a first-come, first-served basis, and some states have deadlines for filing the FAFSA to be eligible for certain kinds of aid. Please visit the Department of Education’s Student Aid on the Web for more information.

What happens if I cannot repay my loans?
Lenders will not forgive loans simply because the borrower could not find gainful employment or did not plan their budget well enough to include loan repayments. Generally speaking, a borrower has to have – and prove – mitigating circumstances in order to have their loan payments postponed or forgiven altogether. These instances are rare.

Two options that are sometimes available for postponing repayment of your student loans are deferment (when you can postpone repaying your loan principal and, in some cases, interest) and forbearance (when principal and/or interest payments may be suspended)

Deferments are not granted automatically – you must apply for a deferment and provide documentation to support your request. Deferments are commonly granted for:

• students who are enrolled in undergraduate or graduate school
• disabled students who are participating in a rehabilitation training program
• unemployment
• economic hardship

Likewise, a forbearance is not automatically granted and required documented proof of extreme financial hardship or other unusual circumstances. For more information about deferments and forbearances, contact the financial aid office at the school that issued the loan or the original lender or current servicer of your loan.

Note that neither deferment nor forbearance is a given. Still, if you are concerned that you will not be able to repay your loan, you should definitely contact your lender to inquire about the possibility of deferment or forbearance. Make sure to make this inquiry before you miss payments. In most cases, if you default on your loan, you are no longer eligible for a deferment or forbearance.