Guide for Borrowers
How to Prepare for Repayment
You should have copies of the disclosure statements and promissory notes for all your loans. It is important to know the following information as you prepare to enter repayment:
- The amount that you borrowed as an undergraduate and during any other graduate program
- The name, address and phone number for your lender(s) and/or servicer(s)
- The loan terms (interest rate, length of repayment, grace period, repayment options, etc.)
- An estimate of your monthly payments
This information is available from several sources including SU’s Financial Aid Office, your lenders, and the National Student Loan Data System (NSLDS).
One to two months prior to the end of the grace period, you can expect to receive statements from your lenders indicating your outstanding balance and actual monthly payments.
Federal Student Loan Exit Counseling
Students who borrowed loans through the Federal Direct Loan Program while at Susquehanna are required to complete exit counseling.
The exit counseling session is an opportunity to learn about the repayment terms that apply to your federal loans. Prior to graduation, students will be asked to visit www.studentloans.gov to complete an online exit counseling session.
When Do I Need to Complete Exit Counseling?
You need to complete it before you withdraw, graduate, or drop below half-time attendance (even if you plan to transfer to another school).
Why Do I Need to Complete Exit Counseling?
• It helps you understand your rights and responsibilities as a student loan borrower.
• It provides useful tips and information to help you manage your loans.
What is the NSLDS?
NSLDS is the U.S. Department of Education’s central database for student aid. It has information on Title IV programs, including Stafford, Direct Loans, Perkins, PLUS, SEOG, and Pell Grant.
The NSLDS website is www.nslds.ed.gov. It provides access federal loan and grant information. It also includes contact information for the servicer for each of the loan programs.
Use your FAFSA PIN to gain access to your information on NSLDS. To be reminded of your PIN, go to www.pin.ed.gov, and “Request a Duplicate” to complete the steps to receive your PIN.
Federal Loan Repayment
The Department of Education has hired several companies to collect payments and process deferments. The servicer oversees the status of a loan, distributes funds, collects payments and handles deferments, forbearances and other related issues. A significant amount of Susquehanna student loans are serviced by the following:
|Great Lakes Educational Loan Services, Inc.||1-800-236-4300||www.mygreatlakes.org|
|FedLoan Servicing / PHEAA||1-800-699-2908||www.myfedloan.org|
|Navient Corporation (now a separate company from Sallie Mae)||1-800-722-1300||www.navient.com|
Federal Direct Loans enter their grace period six months after you graduate or six months after your leave of absence or withdrawal from the university becomes effective. During the grace period, the in-school loan terms continue:
- No payments are required.
- Direct Subsidized Loans will not be eligible for an interest subsidy during the six-month grace period (for loans disbursed prior to July 1, 2012). *Loans disbursed as of July 1, 2012-July 1, 2014, will be impacted by a new provision that eliminates the interest subsidy during the six-month grace period for subsidized loans. If you received a subsidized loan during this timeframe, you will be responsible for the interest that accrues while the loan is in the grace period. No payment is required during the grace period (unless by choice) but the interest will be added (capitalized) to the principal amount of the loan when the grace period ends. This provision does not eliminate the interest subsidy while the borrower is in school or during eligible periods of deferment.
- Interest accrues on the Direct Unsubsidized Loans.
The grace period is only granted once for each loan. If you borrowed student loans for your undergraduate program or another graduate program, and you were out of school for more than six months before beginning school, you will not receive a second grace period for these loans.
Any unpaid, accrued interest on your unsubsidized loans is capitalized and added to your principal balance at the end of the grace period. This will result in a higher starting principal balance.
Paying the interest on your unsubsidized and private loans before it is capitalized will reduce the total amount you will repay, since interest will accrue on a smaller balance.
Direct Loans offer five repayment plans for repayment:
- Standard Repayment—Equal monthly payments over 10 years
- Extended Repayment—Repayment term extends up to 25 years; fixed or graduated payments
- Graduated Repayment—Payments start lower and increase over 10 years
- Income Contingent Plan—Payment will not exceed 20 percent of discretionary income, remaining balance forgiven after 25 years.
- Income Based Repayment—Monthly payment is calculated using 15 percent of adjusted gross income. You pay interest on subsidized loans for the first three years; the remaining balance is forgiven after 25 years. The servicer will require the borrower to annually submit copies of federal income tax returns to determine the monthly payment amount.
- Pay As You Earn - Monthly payment amount is calculated using 10 percent of discretionary income. Payment will change as income changes. You must be a new borrower on or after Oct. 1, 2007 and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. You must have a financial hardship to qualify for the loan repayment option. If you have not repaid your loan in full after you made the equivalent of 20 years of monthly payments, any outstanding balance on your loan will be forgiven.
The extended, graduated, income based and income contingent plans are designed to reduce your monthly payments. Because you will usually be repaying the loans over a longer repayment term, they will accrue additional interest and the total amount repaid will be higher than under the standard plan.
Borrowers are allowed to prepay any amount at any time without a penalty regardless of the repayment option that they choose. Borrowers may make additional payments on a monthly basis or periodically throughout repayment. Any payment received in excess of the standard monthly payment will be applied first to any outstanding interest balance and then to principal.
Deferment and Forbearance
Borrowers who are temporarily unable to make their loan payments have two short-term options:
These options will either suspend or reduce your monthly loan payments for a short period of time. They may be used for a variety of situations, including, but not limited to, interruptions in employment, delayed employment start dates, illness or to delay payments while setting up a new repayment option.
If you are having difficulty making your payments, it is imperative that you contact your loan servicer immediately. Not only will a deferment or forbearance relieve your financial stress, it will also protect your credit rating by preventing your loans from entering delinquent or default status (see below).
A deferment is a period during which payments of principal are postponed. Interest may or may not accrue on the subsidized loan (it depends on if the loan was disbursed after July 1, 2012). Interest is charged on unsubsidized loans and may be paid or allowed to accrue and capitalize.
Borrowers must request the deferment and meet specific eligibility criteria, for which documentation will also be requested. Deferments may be granted for cases of unemployment and economic hardship. Deferments are typically granted for six or 12 month periods and may not exceed three years in total.
During a period of forbearance, borrowers may either suspend payments or reduce their scheduled monthly payment amount on a temporary basis. Borrowers must apply for forbearance and may be required to submit supporting documentation. Interest continues to accrue on both the subsidized and unsubsidized loans. Interest is capitalized when the forbearance ends.
Federal Loan Consolidation
Federal loan consolidation is a repayment option that allows you to borrow a new loan to replace your existing federal loans (can include Federal Stafford, Grad PLUS, Perkins and Federal Consolidation Loans). The terms of this loan include the ability to extend your repayment term up to 30 years (for debt greater than $60,000) and a fixed interest rate (calculated as a weighted average, rounded up to the nearest 1/8th of a percent).
Borrowers should consolidate during their grace period or during repayment. Consolidation is another way to structure your loan repayment. This option will work best for borrowers who have federal loans with multiple lenders, those who need a lower monthly payment and those who are interested in the federal loan forgiveness option for public service.
Please visit www.studentloans.gov to access consolidation calculators, frequently asked questions and the application to consolidate.
Public Interest/Government Employment
Borrowers interested in a career in public service have repayment options that can make it easier to choose this career path. Income based repayment (described above) and public service loan forgiveness are designed to work together to provide students in lower-paying public service employment the ability to afford their living expenses while in this type of position.
The public service loan forgiveness program encourages individuals to enter and continue to work full-time in public service jobs. Under this program, you may qualify for forgiveness of the remaining balance due on your eligible federal student loans after you have made 120 payments on loans under certain repayment plans while employed full time by certain public service employers. Link to http://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service for more detailed information.
Private Loan Repayment
Repayment of private loans begins six or nine months after you leave school depending on the terms set by the lender. The repayment period varies by lender, but is usually 15 to 20 years.
While some private lenders may offer several repayment options, you should be prepared to make loan payments under the standard terms of the loan program. There are no prepayment penalties for any private educational loans.
Delinquency and Default
Your loans will be considered to be in delinquent status if your payment is not received by the lender by the payment deadline. Late charges may be assessed and the delinquency may be reported to the credit bureaus. Your loans will be considered in defaulted status if your payment is more than 270 days overdue. The consequences of default may include the following:
- The lender can declare the entire balance of your loans due immediately.
- Your wages can be garnished.
- You will no longer be eligible for a loan deferment.
- The IRS can withhold your income tax refund.
- Your account can be turned over to a collection agency and the government can take legal action against you.
- Collection and litigation costs can be added to your loan balance.
- The default will appear on your credit report for at least seven years.
You can avoid delinquency and default by signing up for electronic debit payment, updating your address promptly if you move and requesting a deferment or forbearance before you miss a payment.
Find helpful information regarding the repayment of student debt, please visit the Consumer Financial Protection Bureau site for additional guidance.