DEFAULT PREVENTION

What Should You Know?

If you are unable to make payments on your student loan you may be eligible for a deferment or forbearance.

Deferment is the postponement of payments, for which you may qualify under certain circumstances. Your eligibility is affected by loan type and the specific terms stated on your promissory note.

Forbearance is a period of time during which the lender may reduce or suspend your regular payments. When you are willing, but temporarily unable, to make full or partial payments and do not qualify for a deferment, forbearances may be granted at the lender's discretion.

www.mapping-your-future.org
Mapping Your Future's mission is to counsel students and families about college, career, and financial aid choices through a state-of-the-art public service Web Site.

www.ed.gov
The U.S. Department of Education's Web Site allows you to explore college or career training and compare programs, costs, and academic requirements at more than 9,000 postsecondary schools. It also has a guide to information about grants, loans, work-study, tax credits for education and how to apply for them.

www.slgfa.org
SLGFA's Web Site offers a variety of information and services to students in or preparing for college, and parents with college-bound children.

Managing Your Educational Debt

As a student loan borrower under the Federal Family Education Loan Program (FFELP), it is up to you to accept the responsibility of repaying your student loan. The key elements of debt management are knowledge and planning. Learning about your educational debt will allow you to plan for repayment.

REPAYMENT OPTIONS
Standard Repayment: The monthly payments for this plan are fixed and remain the same until the loan is repaid in full. The minimum monthly payment is $50 and may be higher in order to pay off the loan in ten years.

Graduated Requirement: This repayment plan starts with low payments that steadily increase over time. The graduated repayment plan is a good alternative if you anticipate your income to steadily rise. The payment amount may be less than $50 per month, as long as your total loan is repaid within ten years.

Income-Sensitive Repayment: This repayment plan is calculated from your actual earnings, starting with payments that increase or decrease as your income fluctuates. The payment amount may be less than $50 per month, as long as your total loan is repaid within ten years

Extended Repayment Plan: This repayment plan is based on fixed standard or graduated repayment amounts over a period not to exceed 25 years. Payments must be at least $50 a month and will be more, if necessary, to repay the loan within the required time period. This plan is only available to new borrowers on or after October 7, 1998 who accumulate FFELP loans totaling more than $30,000.

Top Ten Ways to Avoid Default

The best way to avoid default is to stay in contact with your lender or servicer, especially when you cannot make your payments. Your lender or service will assist you with any problems you may experience during the repayment of your student loan. Stay on top of the situation by following these ten guidelines:

1. Understand your rights and responsibilities regarding your repayment obligation as well as your repayment options.
2. Borrow for college expenses only. Borrow only the amount you need and only what you can reasonably expect to be able to repay.
3. Keep all records regarding your loan. Make copies of all letters, canceled checks, and any forms you sign.
4. Notify your lender or servicer when you have a change of address, phone number, or name, or if you change schools or your enrollment status.
5. Seek help as early as possible if you have any difficulty maintaining your student loan repayment arrangement.
6. If you have any questions, talk to your lender or student loan guarantor about the particular terms of your loan.
7. Keep credit card debt to a minimum or avoid credit card debt completely.
8. Create and maintain a budget that is within your monthly income.
9. Consider making nominal student loan payments while in school. This will reduce the amount you owe after graduation.
10. Make loan payments on time.

Consequences of Default
If you miss several payments on your loan and it becomes 270 days past due, your loan will be considered in default. What happens if you default on your student loan? Failure to repay your loan may result in any or all of the following:

• Report of the default to all national credit bureaus, resulting in adverse credit reports which may affect your ability to obtain financing for cars, houses, etc.;
• Report of the default to the Internal Revenue Service, causing federal tax refunds to be withheld and applied to the loan balance (this is also true for state tax refunds):
• Garnishment of your wages
• You will be charged collection costs and other costs necessary to collect debt. Your loan will be assigned to a collection agency;
• Loss of other federal or state payments;
• Loss of eligibility for further assistance from any Title IV Program;
• Loss of eligibility for repayment options, deferments and interest benefits as described on the Promissory Note;
• Denial of access to academic transcripts;
• Denial of professional licenses (in some states)
• Lawsuit; and
• Liability for court/legal expenses
  

Rights and Responsibilities of Student Loan Borrowers

1. I am obligated to repay my Loan(s), including all accrued interest and deducted fees, even if I do not complete the program, cannot find employment or I am dissatisfied with the program of study.
2. I have a maximum of ten years to repay my loan(s) unless I choose to consolidate my loans.
3. I may repay all or part of my loan(s) without penalty.
4. The minimum monthly payment is $50. The payment may be larger depending on the amount borrowed. I will begin to repay my loan(s) after the 6-month grace period.
5. The interest rate of my loan(s) is specified in the Notice of Loan Disclosure and Guarantee Statement that will be sent after the loan application is processed.
6. I must notify my Lender or Holder of my loan(s) within 10 days if I:
• Change my name
• Change my address/phone number
• Change my graduation date
• Transfer to another college/university
• Enroll for less than or drop below half-time (drop below 6 hours)
• Withdraw from school
7. I will be notified in writing if my loan(s) is transferred to a new holder.
8. I must direct all correspondence to the new holder.
9. If I qualify for a deferment, I will contact my lender or holder of the loan(s) to apply.
10. If I do not qualify for a deferment, but I am unable to make monthly payments, I must contact my lender or holder of the loan(s) and request a forbearance.
11. If I do not repay my loan(s), I will be considered in DEFAULT, and the following may result:

• It will be reported to National Credit Bureaus and have a negative effect on my credit rating.
• The entire unpaid balance plus interest will become due immediately.
• I will be ineligible to receive any additional Federal Aid.
• My wages and Federal and State income tax return will be garnished.
• In some states practicing licenses will be revoked.