Responsibilities
When you take out a student loan, you have certain responsibilities. Here are a few of them:
When you sign a promissory note, you are agreeing to repay the loan according to the terms of the note. The note is a binding legal document and states that, except in cases of discharge, you must repay the loaneven if you do not complete your education (unless you were unable to complete your program of study because the school closed); are not able to get a job after you complete the program; or are dissatisfied with, or do not receive, the education for which you paid.
Think about what this obligation means before you take out a loan. If you do not repay your loan on time or according to the terms in your promissory note, you may go into default, which has very serious consequences and may affect your credit rating.
You must make payments on your loan even if you do not receive a bill or repayment notice. Billing statements (or coupon books) are sent to you as a convenience, but you are obligated to make payments even if you do not receive any reminders.
If you apply for a deferment or forbearance, you must continue to make payments until you are notified that the request has been granted. If you do not, you may end up in default. You should keep a copy of any request form you submit, and you should document all contacts with the organization that holds your loan.
You must notify the appropriate representative (school, agency, lender, or the Direct Loan Servicing Center) that manages your loan when you graduate, withdraw from school, or drop below half-time status; change your name, address, or Social Security Number; or transfer to another school.
Regardless of the type of loan you have, you must receive entrance counseling before you are given your first loan disbursement, and you must receive exit counseling before you leave school. These counseling sessions will be administered by your school and will provide you with important information about your loan. Your lender or the Direct Loan Servicing Center will provide you with additional information about your loan.
If you default on your loan, your school, the lender or agency that holds your loan, the state, and the Federal Government may all take action to recover the money, including notifying national credit bureaus of your default. This may affect your credit rating for a long time. For example, you may find it very difficult to borrow from a bank to buy a car or a house. Furthermore, a loan default may affect your eligibility for certain jobs.
In addition, if you default, the agency holding your loan may ask your employer to deduct payments from your paycheck. Also, you may be liable for expenses incurred in collecting the loan. If you decide to return to school, you are not entitled to receive any more federal student aid. Legal action might also be taken against you.
Rights
You have certain rights as a borrower. Listed below are some of them.
Before your school makes your first loan disbursement, you will receive the following information about your loan from your school, lender, and/or the Direct Loan Servicing Center:
the full amount of the loan.
the interest rate.
when you must start repaying the loan.
a complete list of any charges you must pay (loan fees) and information on how those charges are calculated.
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 or refinancing your loan.
a statement that you can prepay your loan at any time without penalty.
Before you leave school, you will receive the following information about your loan from your school, lender, and/or the Direct Loan Servicing Center:
a current description of your loans, including the average anticipated monthly payments.
the amount of your total debt (principle and estimated interest), what your interest rate is, and the total interest charges on your loan.
if you have FFEL Program Loans, the name of the lender or agency that holds your loan, where to send your payments, and where to write or call if you have questions.
if you have Direct Loans, the address and telephone number of your Direct Loan Servicing Center.
an explanation of the fees you might be charged during the repayment period, such as late charges and collection or litigation costs if youre delinquent or in default.
a reminder of available options for consolidating or refinancing your loan.
a description of applicable deferment, forbearance, and discharge (cancellation) provisions.
repayment options and advice about debt management.
notification that you must provide your expected permanent address and name and address of your expected employer.
notification that you must also provide any corrections to your school records (i.e. name, SSN, references, and driver's license.)
a grace period before your repayment period begins.
a loan repayment schedule with due date of first payment, number and frequency of payments, and amount of each payment.
notification to you or your parents when FFEL or PLUS loans are sold if the sale results in payments to a new lender or agency.
You can obtain a complete copy of the Student Guide by calling the U.S. Department of Education at 1-800-4-FED-AID or by downloading a copy from their website at studentaid.ed.gov/students/publications/student_guide/index.html.