Before you or your parents
borrow, make sure you understand all of the terms of the loan.
The following questions and answers will give you a basic
understanding of FFELs and Direct Loans.
Other than interest, is there a
charge for loans?
You or your parents will pay a
fee of up to 4 percent deducted proportionately from each
disbursement of a loan. A portion of this fee goes to the
federal government to help reduce the cost of the loans. Also,
if you or your parents do not make loan payments when they are
scheduled, you might be charged late fees and collection costs.
How are loans repaid?
There are several ways to repay
your loan. Your choices are:
- A 10-year plan with a minimum
monthly payment of $50
- A graduated plan with a
monthly payment that starts out low and then increases
gradually during the repayment period
- A plan that bases the monthly
payment amount on how much money you make.
Your parents can repay a PLUS
Loan using either of the first two plans. Under the Direct Loan
Program, you or your parents can also choose a plan with a
minimum monthly payment amount of $50 and a repayment period of
more than 10 years.
What if someone has trouble
Under certain circumstances, you
can receive a deferment or forbearance on your loan. During a
deferment, no payments are required. If you have a subsidized
loan, the federal government will pay the interest that accrues
during the deferment. If your loan is unsubsidized, you will be
responsible for the interest on the loan during the deferment.
Your parents will be responsible for the interest on their PLUS
Loan during a deferment. No borrower can receive a deferment if
his or her loan is in default (that is, if he or she does not
repay the loan according to its terms).
During forbearance, payments are
postponed or reduced. The government does not pay the
interest. You are responsible for paying it on your
student loan, and your parents are responsible for paying it on
their PLUS Loan.
Neither deferment nor forbearance
periods count as part of the repayment period. For more details
on deferments and forbearance, see The Student Guide,
2002-03 which also explains our loan programs and the loan
application process in greater detail. You can access the Guide
You can also get a paper copy of The
Student Guide, 2002-03, check with your college or career
school or call our Federal Student Aid Information Center: 1-800-4-FED-AID
A FFEL or Direct Loan (including
a PLUS Loan) can be canceled under the following conditions:
- The borrower dies, or the
student on whose behalf a parent borrowed dies
- The borrower becomes totally
and permanently disabled
- The loan is discharged in
bankruptcy (in rare cases)
- The student's school closes
before the student completes the program
- The school falsely certifies
In addition, if a school does not
make a required return of loan funds to the lender, a portion of
the FFEL or Direct Loan (up to the amount the school was
required to return) can be canceled.
Even if you do not complete the
program of study at the school, do not like the school or the
program of study, or do not obtain employment after completing
the program of study, these loans must be repaid. No
cancellation is available for these reasons.
Repayment assistance (not a
cancellation, but another way to repay) may be available if you
serve in the military. For more information, contact your