Federal student loans: Q&A

Federal student loans: Q&A

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This month, The Arbiter is getting all the deets on student loans. Comment on this article, post on our facebook, or tweet us your questions about your financial aid, and we’ll answer them here.

Here are the questions we’ve received so far, with answers provided by Diana Fairchild, Interim Director of Financial Aid, and Maureen Sigler, Senior Financial Aid Counselor.

1.     When is the deadline for finalizing financial aid for the semester?

If you are referring to spring semester, the financial aid needs to be “disbursed” or routed through your BroncoWeb account before the last day of classes … with only a few exceptions. The last day of classes deadline is what drives the other deadlines. Your deadline will depend on what you need to do to finalize your financial aid. If you only need to accept student loans, two weeks prior to the end of the semester will be enough time to finalize your aid for the semester. If you need to process a Satisfactory Academic Progress Appeal, or submit other paperwork, the deadline is closer to April 1 because it will take more time to review the information submitted, award financial aid, and release the aid to BroncoWeb.

A word of warning, though, there are situations where a Pell Grant or other financial aid is required to be reduced after the semester has ended! Receiving one or more grades of F is what is most apt to trigger a reduction of aid after the semester.

One more tip: Even though fall semester has ended, financial aid can still be awarded to students who meet eligibility requirements. We can do so because fall and spring semesters are part of the same financial aid year. At Boise State, the financial aid year is basically the same as the academic year.

2.     I’ve heard a lot in the news about how loan rates can change from year to year. How can that affect me?

Put simply, the higher the interest rate on a loan, the more it costs you to borrow that money. Different loans have different interest rates.  For example, look at the different interest rates for Federal Direct loans (provided by the federal government) listed below.

The current federal law says that the 3.4 percent subsidized loan interest rate will expire June 30, 2013 and will return to a 6.8 percent interest rate for any new loans offered July 1, 2013 or later. The low 3.4 percent rate was scheduled to expire in 2012, but on the last day, the U.S. Congress voted to continue the low rate for one more year.

Many students also take out alternative loans, provided by private lenders, such as banks. These loans are more expensive than federal student loans and require a credit check and may require a co-signer.  Finally, some students take out Direct to Consumer loans, which are the most expensive of all the loans.  Students need to be very cautious about pursuing these loans.

3. Can I pay on my loans while I’m still in school?

Yes–you can definitely pay on your loans while you are still in school. In fact, you are strongly encouraged to at least pay the interest accumulating on unsubsidized student loans. The best place to start is to establish an online account with your federal student loan servicer. You should have received notices from them every time you accept a loan and it is ready to be released to you. Through your online account you can make voluntary payments and can monitor the balances and interest you are incurring for each loan.

4. How do I see how much I owe on my loans?

You can go to the National Student Loan Data System (NSLDS) to get information about your federal student loans.  NSLDS is the U.S. Department of Education’s central database for student aid. NSLDS receives data from schools, guaranty agencies, the Direct Loan program, and other Department of ED programs. NSLDS Student Access provides a centralized, integrated view of Title IV loans and grants so that recipients of Title IV Aid can access and inquire about their Title IV loans and/or grant data.  Students can log on with their financial aid pin number at: http://studentloans.gov and click on “My Financial Aid History.”

5. How do I determine my interest rate?

Interest rates on direct loans and Perkins are fixed, and remain the same over the life of the loan.  However, the loan rate may change on subsequent loans.  You can see the interest rate for each of your existing loans by viewing your financial aid history at: http://studentloans.gov

6. Can I only accept a portion of the loans I’m offered? Or do I have to take the full amount?

Yes, you can accept only a portion of the loans that you are offered. In fact, we encourage you to do so. We advise students to sit down and determine how much loan they will need, and take only as much as you need. Keep in mind, whatever loan amount you accept will be disbursed in two equal payments; half in the fall and half in the spring (typically).  So you if determine that you will need $1500 for the semester, you will want to accept $3,000 in loans.  If you later determine that you need more money, you can ask that additional loan money be reinstated. For information on how to accept less in loans than what has been offered, the Boise State Financial Aid web site offers a Timely Tip with screen shots and instructions.

7. How is my repayment plan determined?

Although you may select or be assigned a repayment plan when you first begin repaying your student loan, you can change repayment plans at any time.  Contact your loan servicer if you would like to discuss repayment plan options or change your repayment plan. You can get information about all of the federal student loans you have received and find the loan servicer for your loans using the National Student Loan Data System (NSLDS). This website has some great information on the different repayment plans:  http://studentaid.ed.gov/repay-loans/understand/plans

8. When it’s time to start paying back my loans, how do I know? Will someone contact me?

You share responsibility for keeping your contact information up to date with your loan services. When you drop below half-time enrollment, your college will notify you of the expectation to complete the online Loan Exit Counseling session. Your loan servicer will also contact you based on the information they have on record. Actually, you can complete the online Exit Loan Counseling session at any time you are enrolled. The purpose of the online counseling is simply to provide information about your specific loans and what happens when it is time for you to start repaying the loans.

9. What happens if I can’t afford payments on my loans?

You will want to contact your loan servicer as soon as possible. You may be able to change your repayment plan to one that will allow you to have a longer repayment period or to one that is based on your income. Also ask your loan servicer about your options for a deferment or forbearance or loan consolidation.

10. I’ve heard there are options to have my loans forgiven. What are they?

There are limited circumstances that might lead to your loans being forgiven, canceled, or discharged.  Those include total and permanent disability, death, and in very rare cases, bankruptcy.

However, there are some programs that will forgive all or a portion of your federal student loans.  They are:

Teacher Loan Forgiveness

If you are a teacher and also a new borrower (i.e., you did not have an outstanding balance on a Direct Loan or FFEL Program loan on Oct. 1, 1998, or on the date you obtained a Direct Loan or FFEL Program loan after Oct. 1, 1998) and have been teaching full-time in a low-income elementary or secondary school or educational service agency for five consecutive years, you may be able to have as much as $17,500 of your subsidized or unsubsidized loans forgiven. Your PLUS loans cannot be included.

Public Service Loan Forgiveness

If you are employed in certain public service jobs and have made 120 payments on your Direct Loans (after Oct. 1, 2007), the remaining balance that you owe may be forgiven. Only payments made under certain repayment plans may be counted toward the required 120 payments. You must not be in default on the loans that are forgiven.

Perkins Loan Cancellation and Discharge

The following Federal Perkins Loan Program cancellations apply to individuals who perform certain types of public service or are employed in certain occupations.  For each complete year of service, a percentage of the loan may be canceled. The total percentage of the loan that can be canceled depends on the type of service performed. Depending on the type of loan you have, and when that loan was taken out, you may be eligible to cancel part of or your entire loan if you have served as one of the following:

  • Volunteer in the Peace Corps or ACTION program (including VISTA)
  • Nurse or medical technician
  • Law enforcement or corrections officer
  • Head Start worker
  • Child or family services worker
  • Professional provider of early intervention services
  • Teacher – full-time teaching at a low-income school, or for teaching in certain subject areas.
  • Member of the U.S. armed forces (serving in area of hostilities)

There is no standard application form for Perkins Loan cancellations. Contact the Financial Aid Office for more information.

11. Can I pay more than the monthly amount I’m billed for so my loans will be paid off sooner?

You can make payments before they are due or pay more than the amount due each month. You will want to contact your loan servicer to make sure the money is applied to your principal balance. Interest is charged on the principal. Paying a little extra each month can reduce the interest you pay and reduce your total cost of your loan over time.