Educational LoanOrganizer
Your Guide to Student Loans through theFederal Family Education Loan Program
www.mgaloan.com1-800-642-5626
TABLE OF CONTENTS
Managing Your Student Loans .................................................................................................................................................. 1Budgeting .................................................................................................................................................................................... 5Reporting Changes ..................................................................................................................................................................... 9Loan Repayment ....................................................................................................................................................................... 11Protecting Your Credit Rating ................................................................................................................................................. 21Glossary of Terms and Record Keeping ................................................................................................................................. 23
INTRODUCTION
The Federal Stafford and PLUS Master Promissory Notes (MPN) replaced the common Federal Stafford and PLUS applications and promissory notes. The MPN basically opens a line of credit with a lender for education expenses during your academic career. By signing it, you are agreeing to repay the loan under its terms and conditions and also agreeing to use the loan only for educational expenses. The prevailing interest rate, fees, and repayment terms and conditions are specified in the MPN and/or the loan disclosure statement that you will receive.
If you attend an eligible Title IV institution, you may be able to take advantage of the serial loan feature of the MPN. The serial loan feature of the MPN allows you the option to sign one MPN, which could potentially cover all loans requested over a maximum ten (10) year time period. You do not have to sign a new MPN if your school or guarantor changes; however, you will need to sign a new MPN if you use a new lender. If you attend an institution that is not eligible or elects not to participate in the serial loan feature of the MPN, you must complete a new MPN each time you request a new loan.
OmbudsmanThe U.S. Department of Education has a Student Loan Ombudsman’s Office. This office was established to help resolve disputes between borrowers and their schools, lenders, guarantors, or loan servicers. The Ombudsman’s office can be contacted at: U.S. Department of Education FSA Ombudsman 830 First Street, N.E., Fourth Floor Washington, DC 20202-5144
Their toll-free telephone number is 1-877-557-2575, or you can access their Web site at www.fsahelp.ed.gov or www.ombudsman.ed.gov.
Additional information concerning student loans, grants, and scholarships is available on the Michigan Guaranty Agency’s Web site located at www.mgaloan.com.
National Student Loan Data SystemThe National Student Loan Data System (NSLDS) is the U.S. Department of Education’s central database for student aid. It receives data from schools, agencies that guarantee loans, the Federal Direct Loan Program, the Pell Grant Program, and the other U.S. Department of Education programs. NSLDS provides a centralized, integrated view of Title IV loans and Pell grants that are tracked through their entire cycle; from aid approval through closure. You may visit the Web site of the NSLDS at www.nslds.ed.gov or call the Federal Student Aid Information Center toll-free at 1-800-4-FED-AID or TDD 1-800-730-8913.
In order to use the NSLDS Student Access Web site, you will need to provide your Social Security Number (SSN), the first two letters of your last name, your date of birth, and your PIN (formerly known as EAC). You can use the Web site to make inquiries about your Title IV loans and/or Pell grants. The site displays information on loan and/or grant amounts, outstanding balances, loan statuses, and disbursements.
Educational Loan Organizer, Page 1
MANAGING YOUR STUDENT LOANSA student loan is an investment in your future. It provides you an opportunity to obtain an education that might otherwise be beyond your financial reach. With a loan comes responsibilities that exist while you are enrolled in school, as well as during your repayment period. Borrowing money through the Federal Family Education Loan Program to finance your education will have long-term implications for your financial future. The Michigan Guaranty Agency (MGA) has compiled this folder to help explain what you need to know about borrowing and repaying your student loans.
Things to Consider Before You BorrowQualifying for a student loan may be a fairly easy process, but repaying it is more difficult. Before borrowing, consider the following items:
• A LOAN MUST BE REPAID. It is not a grant. Signing the promissory note is a legal and binding promise to repay a loan. Read your note for terms and conditions of the loan. Repayment is expected even if you do not complete your education, fail to complete your program of study within the regular time for program completion, are dissatisfied with your education, do not graduate, or do not find a job after you complete your program. Failure to repay your educational loans in a timely manner can affect your credit rating and your future ability to borrow for other purposes such as a car or a house.
• Know when repayment begins. Some loans go into repayment shortly after final disbursement; other loans have a period where payments of principal and/or interest are deferred. Your lender will provide a repayment schedule which lists repayment terms and conditions.
• Check your finances before you apply for a loan. Consider how much you and/or your family can contribute toward your education. Apply for other financial aid resources such as scholarships, grants, and work opportunities through your college financial aid office.
• Consider your expected salary and other expenses when you leave school. Can you afford monthly educational loan payments ranging from $250 to $600 over a ten (10) year repayment period? Too large a debt may prevent the “good life” you expected to experience after graduation. THE MORE YOU BORROW, THE MORE YOU PAY EACH MONTH.
• If you must borrow, borrow only what you need and what you can reasonably expect to repay. Current information regarding educational loan eligibility and applications can be obtained from the financial aid office at your school. The financial aid office must advise you of the effect of accepting the loan on eligibility or other types of student financial assistance.
• Borrower benefits may differ between lenders. Check with lenders regarding their borrower benefits.
How Much Can I Borrow?Federal Stafford Loans (Subsidized and Unsubsidized)Maximum Annual Loan Amounts — Federal Stafford Loans1, 2 (including Federal Direct Loans)
Borrower’s Academic LevelDependent 3 Student Independent Student
Sub + Unsub Subsidized Unsubsidized Total1st Year Undergraduate Student one academic year in length4 $5,500 $3,500 + $6,000 = $9,500
2nd Year Undergraduate Student one academic year in length4 $6,500 $4,500 + $6,000 = $10,500
3rd Year and RemainingUndergraduate Student one academic year in length4
$7,500 $5,500 + $7,000 = $12,500
Graduate or Professional Student N/A $8,500 + $12,000 = $20,500
1 Eligible students in certain health professions may be qualified to receive increased unsubsidized loan amounts. Check with your school.2 Effective for loans disbursed on or after July 1, 2008, and with a loan period end date greater than July 1, 2008.3 For dependent students whose parents do not qualify under the PLUS Program, the amount a student can borrow under the unsubsidized
program is the same as for an independent student.4 Loan limits may be subject to proration. Check with your school for eligible loan limits.
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Maximum Aggregate Loan Amounts — Federal Stafford Loans *
Borrower’s Academic Level Subsidized and Unsubsidized
Dependent Undergraduate Student $31,000
Independent Undergraduate Student $57,500
Graduate or Professional Student $138,500 * The aggregate loan limits also include any portion of a borrower’s Consolidation loan which was used to repay a Federal Stafford loan.
Federal Grad PLUS LoansIf you have applied for a Federal Grad PLUS loan (available only to graduate and professional students), the financial aid office has advised you of your eligibility to borrow Federal Stafford loans and the differences between the terms and conditions of Stafford and PLUS loans. If you allow the interest to be capitalized, you will be charged interest on top of interest when your loans enter repayment. It is your option to pay the interest on a Grad PLUS loan while you are in school.
Academic Year All Grade Levels
Graduate/Professional Cost Minus Aid (no cap)
How Much Can My Parent(s) Borrow on My Behalf?Federal PLUS Loans
Academic Year All Grade Levels
Undergraduate Cost Minus Aid (no cap)
Can You Afford Your Student Loans?You will be entering a very financially demanding period of your life. Your new earnings will quickly disappear as you find a place to live, build a wardrobe, buy a car, pay for meals, as well as make monthly payments on your educational loans. Your ability to repay your student loans depends upon: your future income; your monthly living expenses; and your total educational loan debt. Some students borrow the maximum amount each year thinking they can afford the future monthly payments. However, after leaving school, jobs may be difficult to find and you may not start at the top of the pay scale. Also, the cost of living is often more than expected.
Estimated Average Entry Level SalariesSource: www.salary.com, January 2009
The following salaries may be lower or higher depending on state and location. *Note: www.salary.com is a helpful Web site to view potential salaries by geographic area
Annual Occupation Gross IncomeAccountant $41,643Accounting Clerk $30,466Advertising Clerk $38,874Aircraft Electrician $42,220Auditor-Internal $48,863Benefits Clerk $35,379Branch Management Trainee $36,521Broadcast Technician $41,182Budget Analyst $47,591CAD Drafter $41,001Cartoonist/Animator $51,927Chauffeur $31,048Claims Clerk $29,753Commercial Loan Officer $64,457Computer Maintenance Technician $41,912Computer Operator $34,553Computer Programmer $53,634Conservation Technician $38,615Consumer Loan Collection Clerk $24,277Consumer Loan Processor $29,908Copywriter $41,835Data Control Clerk $29,509Dispatcher $35,143E-Commerce Customer Svc. Rep. $32,979
AnnualOccupation Gross IncomeEnvironmental Engineering Technician $41,748Financial Analyst $47,223Fire Fighter $40,117Loan Processing Clerk $32,532Massage Therapist $46,932Mechanic-Airframe and Engine $48,039Nurse-Licensed Practical $39,185Nurse-Registered $61,314Operations Clerk $23,941Payroll Clerk $33,684Physical Therapist $69,548Proofreader $41,153Public Relations Specialist $43,541Reporter $30,949Restaurant Manager-Assistant $37,373Secretary $31,672Social Worker-BSW $43,808Tax Accountant $47,318Teacher-Elementary $50,110Teacher-High School $51,252Telecommunications Analyst $46,971Veterinary Assistant $26,383Web Designer $47,775
Educational Loan Organizer, Page 3
Potential Earnings vs. Loan Debt
Gross Annual Salary After Graduation Gross Monthly Salary Amount Borrowed* Monthly Payment*
$10,000 $ 833 $5,200 $ 6015,000 1,250 7,800 9020,000 1,667 10,500 12125,000 2,083 13,100 15130,000 2,500 15,750 18135,000 2,917 18,300 21140,000 3,333 21,000 24245,000 3,750 23,600 27250,000 4,167 26,200 302
* The amount you can afford and your monthly payment are approximate, and are based on an 6.8% interest rate and a ten (10) year repayment term.
Getting OrganizedAccepting an educational loan means accepting personal responsibility for the timely repayment of your loan. You may not realize the many responsibilities involved in managing a large debt like a student loan. Student loans have many of the same legal requirements as consumer loans. How well you manage your loan depends upon how seriously you accept responsibility.
To properly manage your student loan, you should do the following:1. Start a file. Keep all loan documents for future reference. Keep application, promissory note, disclosure
statement, deferment forms, and all other correspondence.2. Always keep your lender and school officials informed in writing of any name, address, enrollment
status, and school changes. Dropping below half-time, withdrawing, or extending your studies changes the date your first payment is due.
3. Keep documentation. If you telephone or write your lender regarding changes to your student loan status, keep documentation and follow up within six (6) weeks if you have not received confirmation of the requested change. Your lender relies on you for current information.
4. For information regarding your rights and responsibilities, contact your lender, school, servicer, or MGA.
Key Points• Before you borrow, know what your loan payments will be and be sure you can afford the payments you
are planning to undertake.• Keep a file of all loan documents and correspondence.• Keep your school and lender informed of changes in your name, address, or student enrollment status.
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BUDGETING
Deciding Whether to Borrow AgainBefore you take out another loan, ask yourself:
• Instead of borrowing, what other sources such as grants, financial aid, or part-time work are available?• If I need to borrow, what is the minimum amount I need?• What are the advantages of staying with the same lender and guarantor?• How much will my monthly payments increase if I borrow again?• Considering my future salary potential, what size loan payments will fit into my budget?
If you are an undergraduate student, plan to keep your monthly student loan payments to no more than 8% of your gross monthly income.
If you are a graduate student, plan to keep your monthly student loan payments to no more than 15% of your gross monthly income.
A variety of calculators are available on our Web site (www.mgaloan.com) to help you manage your money.
Borrowing from the Same Lender and Guaranty AgencyIf you must borrow again, it is recommended that you stay with the same lender and guaranty agency. Borrowing from the same lender means you notify only one lender or servicer when you change your name, address, enrollment status, or school. Borrowing from more than one lender could increase your total monthly payments and make it more difficult to budget your money successfully. If this does happen to you, upon repayment, consolidation is an option.
Although your guaranty agency keeps records of the loans it guarantees, your lender maintains all specific information regarding your loan. Contact your lender for this information.
Saving on Your Total Interest Payment Students who pay interest on their loans while in school can save on the total interest paid over the life of the loan, and also realize lower monthly payments after they leave school. See the chart on page 6.
Budget Planning
Begin to manage your money today to ensure your future ability to successfully allocate what may be a limited income among an OVERWHELMING number of expenses. Use the worksheet on page 7 to determine the total amount of student loan debt you will be able to handle and still cover your other living expenses.
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ESTIMATED MONTHLY IN-SCHOOL INTEREST PAYMENT
ESTIMATED MONTHLY IN-SCHOOL INTEREST PAYMENT
Students who choose to pay interest on their loans while in school can save on total interest paid and also realize lower monthly payments after they leave school.
(Formula used: (Principal x Interest 12 months)
PRINCIPAL 3.40% 4.50% 5.60% 6.0% 6.25% 6.50% 6.80% 7.0% 7.25% 8.50% 3,500 10.00 13.00 16.00 17.00 18.00 19.00 20.00 20.00 21.00 25.00 4,000 11.00 15.00 19.00 20.00 21.00 22.00 23.00 23.00 24.00 28.00 4,500 13.00 17.00 21.00 22.00 23.00 24.00 25.00 26.00 27.00 32.00 5,000 14.00 19.00 23.00 25.00 26.00 27.00 28.00 29.00 30.00 35.00 6,000 17.00 23.00 28.00 30.00 31.00 32.00 34.00 35.00 36.00 42.00 7,000 20.00 26.00 33.00 35.00 36.00 38.00 40.00 41.00 42.00 50.00 8,000 23.00 30.00 37.00 40.00 42.00 43.00 45.00 47.00 48.00 57.00 9,000 26.00 34.00 42.00 45.00 47.00 49.00 51.00 52.00 54.00 64.00 10,000 28.00 38.00 47.00 50.00 52.00 54.00 57.00 58.00 60.00 71.00 12,000 34.00 45.00 56.00 60.00 62.00 65.00 68.00 70.00 72.00 85.00 15,000 43.00 56.00 70.00 75.00 78.00 81.00 85.00 87.00 91.00 106.00 20,000 57.00 75.00 93.00 100.00 104.00 108.00 113.00 117.00 121.00 142.00 23,000 65.00 86.00 107.00 115.00 119.80 125.00 130.00 134.00 139.00 163.00 30,000 85.00 113.00 140.00 150.00 156.00 162.00 170.00 175.00 181.00 212.00 40,000 113.00 150.00 187.00 200.00 208.00 217.00 227.00 233.00 242.00 283.00 46,000 130.00 173.00 215.00 230.00 240.00 249.00 261.00 268.00 278.00 326.00 50,000 142.00 188.00 233.00 250.00 260.00 271.00 283.00 292.00 302.00 354.00 55,000 156.00 206.00 257.00 275.00 286.00 298.00 312.00 321.00 332.00 390.00 65,500 186.00 246.00 306.00 327.00 341.00 355.00 371.00 382.00 396.00 464.00
NOTE: Most lenders/servicers mail statements on a quarterly basis, but the interest may be paid monthly with arrangements made through the lender/servicer.
EXAMPLE 1 - Carol borrows $18,000 total during her four years in school and pays monthly interest payments while in school. Monthly interest payment based on 6.8%: 1st Year--1st Loan $ 23.00 based on $4,000 borrowed 2nd Year--2nd Loan $ 45.00 based on an additional $4,000 borrowed
3rd Year--3rd Loan $ 74.00 based on an additional $5,000 borrowed 4th Year--4th Loan $102.00 based on an additional $5,000 borrowed
Total interest paid over four years during school = $2,928.00 Repayment Monthly payment (principal and interest) based on a ten (10) year payback = $207.14 Monthly payment if interest had not been paid during school = $240.84 Total amount paid for the loan = $24,856.80 Total amount of loan if interest had not been paid during school = $28,900.80 Carol saves $1,116.00 in interest over ten (10) years by making interest payments during school. EXAMPLE 2 - John borrows $9,000 total during his four years in school and pays monthly interest payments while in school. Monthly interest payment based on 6.8%: 1st Year--1st Loan $ 6.00 based on $1,000 borrowed 2nd Year--2nd Loan $ 17.00 based on an additional $2,000 borrowed
3rd Year--3rd Loan $ 34.00 based on an additional $3,000 borrowed 4th Year--4th Loan $ 51.00 based on an additional $3,000 borrowed
Total interest paid over four years during school = $1,296.00 Repayment Monthly payment (principal and interest) based on a ten (10) year payback = $103.57 Monthly payment if interest had not been paid during school = $118.49 Total amount paid for the loan = $12,428.40 Total amount of loan if interest had not been paid during school = $14,218.00 John saves $493.60 in interest over ten (10) years by making interest payments during school.
BENEFITS OF PAYING INTEREST WHILE IN SCHOOL Monthly payments are lower during repayment
Total interest paid is less
Educational Loan Organizer, Page 7
YOUR BUDGET WORKSHEET
Educational Loan DebtAmount Borrowed to Date
Federal Stafford Loan (subsidized) $Federal Stafford Loan (unsubsidized)Federal Perkins LoanGraduate/Professional PLUS LoanOther Educational Loans
Total $Monthly Loan Payment
(see page 12—Sample Loan Repayment Schedule) $Estimated IncomeGross Annual Income $ ________________ Gross Monthly Income $
(see page 3—Estimated Average Entry Level Salaries)Net Monthly Income (take-home pay) $
(gross monthly income minus deductions)Estimated Monthly Expenses
Rent/Mortgage Payments $UtilitiesFoodCar Expenses
InsurancesClothingMedicalCredit CardsSavingsMiscellaneous ExpensesMonthly Student Loan Repayment
Total Monthly Expenses $Net Disposable Income $
(net monthly income minus total monthly expenses)
The net disposable income is your discretionary or available monthly spending income after all your expenses have been deducted. Your ability to repay a loan will be directly affected by your monthly income after graduation. Your income will be determined by the type of career you select and by your average living expenses.
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Debt Management
Taking the time to plan for repayment of your student loan now can save you hundreds of dollars in interest costs and possible harm to your credit. The following are ways that you can plan for successful debt management and repayment of your student loans:
• Organize all student loan documents in a folder that you have easy access to.• Estimate your monthly student loan payments by using a repayment calculator. • Choose a repayment plan that creates a monthly payment you can afford, but also repays your loan as quickly as
possible, so you avoid paying additional interest.• Develop a realistic monthly budget based on your minimum salary requirement and expenses, including your monthly
student loan payment.• Ask your lender about starting automatic deduction of your loan payments from your bank account to guarantee on-
time payment.
• You should limit the amount of other types of debt, particularly credit card debt, while you are repaying your student loans.
Key Points
• Consider your expected income and monthly living expenses before you burden yourself with too large a debt.
• Staying with one lender and guaranty agency helps you manage your loans more easily.
• Paying interest on your loan(s) while in school can save you money in the long run.
• Only borrow when necessary.
• Taking time to plan for successful debt management now can save you money and prevent possible harm to your credit in the future.
WARNING: Expensive debts may be hazardous to your “future dreams.”
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REPORTING CHANGES
Many borrowers think they do not have to worry about managing their educational loans until they graduate or finish school. NOT TRUE. If you transfer schools, drop credits or extend your studies, YOU are responsible for keeping your loan in good standing and for reporting certain changes.
Schools periodically update enrollment status, but YOU ultimately are responsible for meeting the terms of your promissory note. Otherwise, your loan can go into repayment without your knowledge, become delinquent, and then be placed in default. Keep your lender and current school informed of any name, address, enrollment status, and school changes.
Avoid problems by immediately notifying your lender and current school in writing if you:• Change your name.• Change your address. Do not assume that filing an address change with the post office is enough.• Change your telephone number.• Change your Social Security Number (SSN).• Fail to enroll for the loan period certified.• Transfer to a new school.• Drop below half-time enrollment, withdraw, or graduate.• Have graduation date changes.
Graduating, Dropping Credits, or Leaving SchoolDo not wait for your lender to contact you. If you graduate, leave school, or drop below half-time enrollment, arrange a repayment schedule.
The financial aid office must advise you of the definition of half-time enrollment at your school, during regular terms and summer school. If your enrollment status drops to less than half-time, you no longer qualify for in-school deferment of your loan payments, and you either begin your grace period or your loans enter repayment. During your grace period, you are not required to make payments, although unsubsidized interest will continue to accrue.
Transferring Schools or Extending EnrollmentLenders use the anticipated graduation date listed on your most recent loan application to put your loan into repayment unless otherwise advised by the school. If the date you complete your studies is different because you transfer to another school or extend your studies, inform your lender. If you transfer to another school, inform your lender . . . even if you do not get another loan . . . so that enrollment verification can be obtained. Otherwise, you may be billed while you are still in school. Request an extension by completing an in-school deferment form from your servicer or lender and have the school mail it to your servicer or lender.
Key Points• Contact your lender in writing when you change your name, address, telephone number, SSN,
enrollment status, school or fail to enroll for the loan period certified.• Always keep copies of all correspondence relating to your loans for future reference.• Avoid unexpected early repayment by informing your lender if you transfer schools, even if you
don’t take out another loan, or if you change the date you expect to complete your studies.
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LOAN REPAYMENT
Beginning RepaymentWhen you applied for a student loan, YOU SIGNED A LEGAL AND BINDING NOTE to repay your lender. As you leave school, it is important that YOU FULFILL THIS OBLIGATION.• Repayment is YOUR responsibility.• Contact your lender to arrange repayment of your loan and be aware that you are able to prepay all
or part of your loan(s) without penalty.• Know when your first payment is due.• Explore alternative repayment options with your lender.
Contact Your Lender and Arrange RepaymentImmediately after dropping below half-time, leaving, or graduating from school, contact your lender regarding:• Available Repayment Options: There are many repayment choices which are available to you. You will
find a brief description of them on pages 13-14. See page 15 for a more in-depth financial breakdown of your choice. Study options carefully and discuss them with your lender. There IS a repayment plan that will best meet your needs.
• A Repayment Schedule: You are allowed at least a six-month grace period on Stafford loans to arrange a repayment schedule and to gain employment. The schedule lists repayment terms and conditions.
• A Deferment: Deferments are used after your grace period, if applicable. Contact your lender for specific information regarding the types of deferments available.
• A Forbearance or Hardship Deferment: If you are willing but unable to meet your repayment obligation, contact your lender. You may be eligible for a full or partial discharge, forgiveness, or cancellation of your federal student loan(s) under special circumstances.
• In-School Verification: Submit enrollment documentation from your new school to your lender if you transfer schools before the end of your grace period.
Your lender may transfer or sell your loan to a secondary market or employ a servicing agency to disburse and/or service your loan. If your loan is transferred from the original lender to a new holder, you will send all payments and information to the new holder. You will be advised of the transfer by mail, so keep your lender informed of your current address. Otherwise, you will be unaware of the transfer or sale, and your loan could become delinquent.
NOTE: The terms of your promissory note will remain the same even if your loans are transferred or sold.
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5,60
524
0.81
5,89
825
0.75
7,09
026
2.33
8,48
026
4.68
8,76
228
2.10
10,8
52
30,0
00
120
295.
25
5,43
1 31
0.91
7,
310
314.
10
7,69
3 32
7.06
9,
248
342.
11
11,0
61
345.
24
11,4
29
367.
95
14,1
56
40,0
0012
039
3.17
7,24
141
4.55
9,74
741
8.80
10,2
5743
6.08
12,3
3145
6.22
14,7
4846
0.32
15,2
3949
0.61
18,8
73
46,0
00
120
452.
72
8,32
7 47
6.73
11
,209
48
1.63
11
,796
50
1.50
14
,181
52
4.66
16
,960
52
9.36
17
,525
56
4.20
21
,704
50,0
0012
049
2.09
9,05
151
8.19
12,1
8352
3.51
12,8
2154
5.11
15,4
1457
0.28
18,4
3557
5.40
19,0
4861
3.26
23,5
92
55,0
00
120
541.
29
9,95
6 57
0.01
13
,401
57
5.86
14
,103
59
9.62
16
,955
62
7.31
20
,278
63
2.94
20
,953
67
4.58
25
,951
60,0
0012
059
0.50
10,5
6162
1.83
14,6
2062
8.21
15,3
8665
4.13
18,4
9668
4.34
22,1
2269
0.48
22,8
5873
5.91
28,3
10
65,5
00
120
644.
63
11,8
57
678.
83
15,9
60
685.
79
16,7
96
714.
09
20,1
92
747.
07
241.
50
753.
77
24,9
53
803.
37
30,9
05
*Fig
ures
in th
is co
lum
n in
dica
te a
ppro
xim
ate
tota
lint
eres
t am
ount
you
will
pay
ove
r the
life
of y
our l
oan.
NO
TE:
Min
imum
mon
thly
pay
men
t is $
50.
Borro
wer
s with
var
iabl
e in
tere
st ra
tes s
houl
d co
ntac
t the
ir le
nder
s to
dete
rmin
e cu
rrent
rate
s and
/or m
onth
ly p
aym
ent a
mou
nts.
Educational Loan Organizer, Page 13
Loan Repayment OptionsMaking the right choice about your repayment options can give you an advantage in meeting your future loan debt obligations. Your minimum monthly payment will depend on the type of loan and amount borrowed, but generally will not be less than $50 per month. You must repay your loan(s) within ten (10) years unless your loans are consolidated or you have selected special repayment options such as income-sensitive repayment, graduated or extended repayment, or income-based repayment, or have qualified for a deferment or forbearance. You may request a shorter repayment schedule and/or change repayment plans. A brief description of the repayment choices for both the Federal Family Education Loan Program (FFELP) and the Federal Direct Loan Program (FDLP) are listed below. For more detailed information, please refer to MGA’s brochure, “Loan Repayment Options.” (Contact your school or MGA for a copy.)
Standard Repayment• Most common repayment option in both FFELP and FDLP.• Fixed monthly payments of at least $50 and loan(s) are repaid in full within ten (10) years, excluding periods
of deferment or forbearance.• Well-suited for borrowers with loan balances of $10,000 or less or for borrowers with higher loan balances
and sufficient income to make monthly payments.• Minimizes total interest charges, offers a stable payment schedule, and secures a faster payoff.
Graduated Repayment• Available for both FFELP and FDLP borrowers.• Monthly payment amount will increase over time, but no payment will be more than three times greater than
any other payment.• Appealing to borrowers with at least $10,000 in loans, those who have other financial obligations requiring
attention, or whose incomes start low but increase steadily.• Lower initial payments with a predictable schedule, but the borrower will pay higher interest costs than under
the Standard Repayment option.
Extended Repayment Plan (FFELP)• Available to first-time FFELP borrowers on or after October 7, 1998.• Loans must total $30,000 or more.• Loan repayment has a fixed annual or graduated repayment amount paid over an extended period of time,
with a maximum of 25 years.
Extended Repayment Plan (FDLP)• Available for Stafford and PLUS loans.• Appropriate for borrowers with loan balances of $10,000 or more or for borrowers who are facing monetary
difficulties and want to reduce their monthly payments.• Reduces monthly payments, providing long-term budget relief, although long-term interest costs will rise
substantially.
Income-based Repayment PlanEffective July 1, 2009, Stafford, Grad PLUS, and some Consolidation loan borrowers who meet the definition for Partial Financial Hardship will be able to limit their monthly payment to 15 percent of the amount by which adjusted gross income exceeds 150 percent of the poverty line applicable to the borrower’s family size.
Educational Loan Organizer, Page 14
Income-sensitive Repayment• Available to FFELP borrowers.• Attractive to borrowers with loan balances of $10,000 or more, those at risk of defaulting, or those anticipating
initially low incomes which are expected to increase as time passes.• Repayment terms can be adjusted annually to adapt to income changes, but by reducing early payments and
extending the repayment period, long-term interest costs will increase.• Requires an annual eligibility determination based on the borrower’s income.• Extends the permissible income-based repayment period beyond ten (10) years regardless of size of debt.• May be canceled after a total of 25 years if the borrower qualifies as being economically challenged.
Income-contingent Repayment• Available to FDLP Stafford borrowers only.• Appealing to borrowers with loan balances of $10,000 or more, those at risk of defaulting, or those anticipating
initially low incomes that are expected to increase as time passes.• Payments rise and fall with income changes, but borrowers with low or modest incomes and large loan
balances may experience a major negative amortization and incur extensive interest expenses.
Loan Consolidation• Available to both FFELP and FDLP borrowers.• For borrowers with large educational debts, because it allows borrowers to combine multiple educational
loans into a single loan.• Lower monthly payments; up to 30-year repayment period.• Longer repayment period means more interest paid.• Consolidation loans may be prepaid without penalty.
Consolidation loans are not for everyone. Borrower benefits may differ between lenders. Before choosing loan consolidation, review all options to be sure it’s the right choice. You may be able to change your Consolidation loan repayment plan. Depending on what types of loans you consolidate and when you consolidate, you may lose your grace period, deferment options, as well as loan forgiveness benefits and loan cancellation.
Whatever loan repayment option you choose, at some point you may find yourself unable to meet your debt obligation. CONTACT YOUR LENDER AT ONCE and ask about a deferment or forbearance. See charts on page 17 and 18.
Deferments and Forbearances• Provide relief in both FFELP and FDLP for borrowers who find it hard to make monthly payments.• Allow temporary postponement, suspension, or reduction of payments.• Help borrowers avoid defaulting on educational loans.• May increase long-term interest costs.• Can be used with all previously described repayment options.
Loan Discharge, Forgiveness, and CancellationA loan discharge, forgiveness, or cancellation releases a borrower from all obligations to repay the loan. A borrower may be eligible for a full or partial discharge of federal student loan(s), under the following circumstances:• If the borrower dies.• If a physician certifies that the borrower is totally and permanently disabled or the Department of Veterans
Affairs has determined that the borrower meets certain disability criteria.• The borrower’s school closes and the borrower is unable to complete the course of study.• If the borrower establishes undue hardship in an adversary proceeding before a bankruptcy court.• As a result of the crime of identity theft, the borrower’s loan was falsely certified.• If the borrower’s school falsely certified eligibility for the loan.• If the borrower’s school failed to make a required refund to the lender on the borrower’s behalf.
Educational Loan Organizer, Page 15
Examples of Debt Levels, Beginning Monthly Payments, and Total Amounts Repaid for All FFELP 1
Standard Graduated2 Extended Repayment Income-sensitive2
Repayment Income-based Repayment
Income - $25,0003Initial Debt When Loan
EntersRepayment
PerMonth Total
PerMonth
PerMonth
after two years Total Per Month Total
PerMonth
PerMonth
after two years Total
FirstMonth
10th year payment
Max Monthly payment Total
$2,500 $50.00 $2,948 $N/A $N/A $N/A $N/A $N/A $N/A $N/A $N/A $28.77 $28.77 $28.77 $3,452
5,000 57.54 6,905 N/A N/A N/A N/A N/A N/A N/A N/A 50.00 50.00 57.54 7,017
7,500 86.31 10,357 N/A N/A N/A N/A N/A N/A N/A N/A 50.00 50.00 86.31 11,882
10,000 115.08 13,810 79.02 96.07 14,556 N/A N/A 83.33 126.09 14,105 50.00 102.28 115.08 18,389
15,000 172.62 20,715 118.53 144.10 21,833 N/A N/A 83.33 203.60 21,545 50.00 102.28 172.62 36,331
20,000 230.16 27,619 158.04 192.14 29,111 N/A N/A 83.33 281.10 28,985 50.00 102.28 230.16 40,525
25,000 287.70 34,524 197.54 240.16 36,389 N/A N/A 83.33 358.60 36,425 50.00 102.28 267.42 41,325
30,000 345.24 41,429 237.05 288.19 43,667 208.22 62,467 83.33 436.10 43,865 50.00 102.28 267.42 41,325
40,000 460.32 55,239 316.07 384.26 58,222 277.63 83,289 83.33 591.10 58,745 50.00 102.28 267.42 41,325
50,000 575.40 69,048 395.09 480.33 72,778 347.04 104,109 83.33 746.10 73,626 50.00 102.28 267.42 41,325
75,000 863.10 103,572 592.63 720.49 109,167 520.55 156,168 83.33 1,133.61 110,826 50.00 102.28 267.42 41,325
100,000 1150.80 138,096 790.18 960.61 145,556 694.07 208,223 83.33 1,521.11 148,026 50.00 102.28 267.42 41,325
1Payments are calculated using the repayment interest rate of 6.8 percent.2Under Graduated repayment and Income-sensitive repayment the monthly payment amount will increase every two years throughout the repayment schedule.
3Assumes a 4 percent annual income growth (Source: Census Bureau), a discount rate of 5.8 percent, a family size of two, up to $31,000 Subsidized Stafford and the remainder Unsubsidized Stafford. Any outstanding eligible loan balance is forgiven after 25 years.
A borrower may be eligible for forgiveness of a portion of the outstanding Stafford or PLUS loan indebtedness based on certain service as a teacher or in other defined areas of national need. A borrower may qualify for full or partial cancellation of outstanding Perkins loan debt based on service in certain occupations.
The U.S. Department of Education has provided additional information on deferment, forbearance, loan cancellation, and forgiveness in the publication Funding Education Beyond High School: The Guide to Federal Student Aid. To view this publication, visit www.studentaid.ed.gov.
Educational Loan Organizer, Page 16
Repayment Guidelines
Federal Stafford Loans — SubsidizedPayment of principal and interest on student loans where the federal government pays the interest (subsidized) begins approximately six (6) months after enrollment ceases to be at least half-time (grace period).
Federal Stafford Loans — UnsubsidizedPayment of principal on student loans where the federal government does NOT pay interest (unsubsidized) begins approximately six (6) months after enrollment ceases to be at least half-time (grace period); however, the borrower is responsible for interest payments once the loan is disbursed.
You must pay or capitalize interest on unsubsidized loans regardless of enrollment status. If you allow interest to be capitalized, you will be charged interest on top of interest when your loans enter repayment. It is your option to pay the interest on an unsubsidized Stafford loan while you are in school. (See chart on page 6 for information on paying interest while in school.) If you pay qualifying interest on your federal student loans during a tax year, you may be eligible to deduct all or a portion of it from your federal income tax liability. See Publication 970, Tax Benefits for Education.
Federal Supplemental Loans for Students (SLS)The Federal SLS Loan Program was eliminated effective with loan periods beginning on July 1, 1994. However, those borrowers with active SLS loans should continue to follow the repayment guidelines. Payment of principal and interest on a Federal SLS loan began within 60 days after the date of final disbursement. While in school, a deferment of principal and interest may be authorized by the lender. SLS borrowers who also have a Stafford loan may defer payment of principal during the six-month grace period; however, interest must be paid to the lender or capitalized during this period.
Key Points• Be sure to contact your lender whenever you have a problem or question.• Always inform your lender of changes in name, address, telephone number, SSN, enrollment status, school,
or fail to enroll for the loan period certified. Loans can be defaulted without your knowledge if your lender is unable to contact you.
• Your lender schedules your first payment based on the anticipated graduation date listed on your most recent application unless otherwise advised by your school. Inform your lender of any change in your graduation date.
• Keep a copy of your loan application, promissory note, disclosure statement, deferment forms, and all other correspondence to prevent payment disputes in the future.
• Your original lender may transfer or sell your loan to another holder, or employ a servicing agency to handle your loan. Make all payments to the new holder.
• After you have chosen the repayment option which best fits your needs and have been making regular payments on your loan, you should periodically review the list of repayment options. Your circumstances may change over time, and a different option might answer your needs better than the original one you chose. Contact your lender to discuss the possibilities.
Educational Loan Organizer, Page 17
Deferment Options
STAFFORD AND SLS LOANS PLUS LOANS CONSOLIDATION LOANS
FORM DEFERMENT TYPE TIMELIMIT
Borrower-Based Deferments
Pre- 7/1/87
Borrower
New1
Borrower 7/1/87
to6/30/93
New2
Borrower 7/1/93
Loans Before 8/15/83
Pre- 7/1/87
Borrower
New1
Borrower 7/1/87
to6/30/93
New2
Borrower 7/1/93
Pre7/1/93
Borrower8
NewBorrower 7/1/939
In-School: Full-time none SCH
In-School: Half-time7 none
Graduate fellowship none
Rehabilitation training none
Teacher shortage 3 years EDU
Internship/Residency training 2 years
TDIS Temporary Total Disability3 3 years Armed Forces or Public Health Services4 3 years
National Oceanic and Atmospheric Administration Corps4
3 years PUB
Peace Corps, ACTION Program, and Tax-exempt organization volunteer
3 years
Unemployment 2 years UNEM Unemployment 3 years
Parental leave5 6 months PLWM Mother entering/reentering
work force 1 year
HRD Economic Hardship 3 years
In-School: Full-time none
In-School: Half-time none PLUS6
Rehabilitation training none
Military Service10 noneMIL
Post-Active Duty Students11 13months12
Note: For more detailed information regarding each deferment situation, please contact your lender.
1 “New Borrower” 7/1/87 to 6/30/93: A borrower whose first Federal Family Educational Loan Program (FFELP) loan was made on or after July 1, 1987, and before July 1, 1993, or who had an outstanding balance on a loan obtained on or after July 1, 1987, and before July 1, 1993, when he or she obtained a loan on or after July 1, 1993, or who had no outstanding balance on a Federal Consolidation loan made before July 1, 1993, that repaid a loan first disbursed before July 1, 1987.
2 “New Borrower” 7/1/93: A borrower whose outstanding FFELP loans were all made on or after July 1, 1993, and when his or her first FFELP loan was made on or after July 1, 1993, had no outstanding FFELP loans that were made before July 1, 1993.
3 A deferment may be granted during periods when the borrower is temporarily totally disabled or during which the borrower is unable to secure employment because the borrower is caring for a dependent (including the borrower’s spouse) who is temporarily totally disabled.
4 Borrowers are eligible for a combined maximum of three (3) years of deferment for service in the National Oceanic and Atmospheric Administration Corps, Public Health Services, and U.S. Armed Forces.
5 A parental leave deferment may be granted to a borrower in periods of no more than six (6) months each time the borrower qualifies.
6 Deferment for parent borrower during which the dependent student for whom the parent obtained a PLUS loan meets the deferment eligibility requirements.
7 A borrower who received a Federal Consolidation loan before July 1, 1993, that repaid a loan made before July 1, 1987, or who had an outstanding balance on a FFELP loan obtained prior to July 1, 1987, when the Federal Consolidation loan was obtained, is eligible for in-school deferment only if the borrower attends school full time.
8 A borrower with a Federal Consolidation loan made before July 1, 1993, or a borrower who receives a Consolidation loan on or after July 1, 1993, who has any outstanding FFELP loan(s) at the time of consolidation that was first distributed before
July 1, 1993. 9 A borrower who receives a Federal Consolidation loan made on or after July 1,
1993, who has no outstanding FFELP loans at the time of consolidation that were on or before July 1, 1993.
10 A deferment may be granted to a borrower who is serving active duty during a war or other military operation or national emergency (including qualifying National Guard duty). The borrower’s military service must begin on or after October 1, 2007, or include that date.
11 A deferment may be granted to a borrower called to active National or State duty who is a member of the National Guard or Reserves (including retired members) and who was enrolled at least half time at an eligible school at the time of, or within six (6) months prior to, being activated. The borrower’s military service must begin on or after October 1, 2007, or include that date.
12 A post-active duty student deferment may be granted to a borrower for a period of no more than 13 months each time the borrower qualifies. There is no limit to how many deferments of this type a borrower may receive. If a borrower is also eligible for a military service deferment, the 13-month period may run concurrently with the 180-day post-military mobilization period.
Source: Common Manual, July 2009
Educational Loan Organizer, Page 18
FOR
BE
AR
AN
CE
ELI
GIB
ILIT
Y C
HA
RT
T
YP
E
LEN
GT
H
Dis
cret
iona
ry
Finan
cial d
ifficu
lties d
ue to
perso
nal p
roble
ms w
hen t
he
borro
wer is
unab
le to
make
regu
larly
sche
duled
paym
ents1 .
Redu
ced-
paym
ent fo
rbea
ranc
e1Th
e per
iod es
tablis
hed i
n the
term
s of th
e forb
earan
ce ag
reeme
nt (n
ot to
exce
ed 12
-mon
th inc
remen
ts); n
o max
imum
.
Man
dato
ryMe
dical
or de
ntal in
terns
hip/re
siden
cy2,
3
Depa
rtmen
t of D
efens
e stud
ent lo
an re
paym
ent p
rogr
ams3
Natio
nal s
ervic
e2, 3
Activ
e Milit
ary S
tate D
uty2,
3, 9
12-m
onth
incre
ments
(or a
less
er pe
riod e
qual
to ac
tual p
eriod
durin
g whic
h the
borro
wer is
eligi
ble);
no m
axim
um.
Debt
exce
eds m
onthl
y inc
ome4,
5
12-m
onth
incre
ments
; thre
e (3)
year
s max
imum
. Te
ache
r Loa
n For
given
ess2,
3 Pe
riod w
hile b
orro
wer m
aintai
ns fo
rgive
ness
eligi
bility
. 12-
month
incre
ments
. M
anda
tory
Adm
inis
trat
ive
Loca
l or n
ation
al em
erge
ncy7
Milita
ry mo
biliza
tion8
Desig
nated
disa
ster a
rea7
Perio
d spe
cified
by th
e U.S
. Dep
artm
ent o
f Edu
catio
n or g
uara
ntor,
plus 3
0 day
s foll
owing
the p
eriod
.
Repa
ymen
t acc
ommo
datio
n Th
ree-
year
max
imum
for v
ariab
le int
eres
t rate
; Five
-year
max
imum
for in
come
-sens
itive r
epay
ment.
De
ath
Date
lende
r rec
eives
relia
ble no
tifica
tion o
f dea
th to
date
lende
r rec
eives
death
certif
icate
or ot
her a
ccep
table
docu
menta
tion,
not to
exce
ed 60
days
. Th
e per
iod w
hile t
he le
nder
is aw
aiting
a co
mplet
ed lo
an fo
rgive
ness
appli
catio
n, no
t to ex
ceed
60 da
ys.
Teac
her L
oan F
orgiv
enes
s2, 6
Date
lende
r rec
eives
a co
mplet
ed lo
an fo
rgive
ness
appli
catio
n to d
ate le
nder
rece
ives e
ither
a de
nial o
r the
loan
forg
ivene
ss am
ount
from
the gu
aran
tor.
Adm
inis
trat
ive
Borro
wer in
eligib
le for
defer
ment6
Begin
ning d
ate to
endin
g date
of th
e ine
ligibl
e defe
rmen
t. De
linqu
ency
befor
e a de
ferme
nt or
certa
in for
bear
ance
s6 Fir
st da
te of
over
due p
ayme
nt to
the da
y befo
re th
e beg
inning
date
of de
ferme
nt or
othe
r for
bear
ance
type
. Fo
rgive
ness
unde
r Inc
ome-
Base
d Rep
ayme
nt6 60
days
for le
nder
to co
llect
and p
roce
ss do
cume
ntatio
n to d
eterm
ine a
borro
wer’s
eligi
bility
. La
te no
tifica
tion o
f out-
of-sc
hool
dates
6 Da
te bo
rrowe
r sho
uld ha
ve en
tered
repa
ymen
t to da
te firs
t or n
ext p
ayme
nt wa
s esta
blish
ed.
Bank
ruptc
y filin
g6Th
e ear
lier o
f the f
irst d
ate of
over
due p
ayme
nt or
rece
ipt of
relia
ble in
forma
tion t
hat th
e bor
rowe
r has
filed
bank
ruptc
y to d
ate of
disc
harg
e dete
rmina
tion o
r rep
urch
ase.
Date
lende
r rec
eives
phys
ician
’s wr
itten r
eque
st for
addit
ional
time t
o date
lend
er re
ceive
s a co
mplet
e, ce
rtified
loan
disc
harg
e app
licati
on or
othe
r for
m(s)
appr
oved
by
the D
epar
tmen
t, if th
e bor
rowe
r sub
mits
the ce
rtifica
tion t
o the
lend
er w
ithin
90 da
ys of
the d
ate th
e phy
sician
certif
ied th
e app
licati
on, n
ot to
exce
ed 60
days
.
Total
and P
erma
nent
Disa
blilty
6
For a
non-
disab
led co
make
r, the
earlie
r of th
e date
that
the le
nder
rece
ives t
he lo
an di
scha
rge a
pplic
ation
or th
e date
the l
ende
r rec
eives
notic
e fro
m the
guar
antor
that
one c
omak
er is
total
ly an
d per
mane
ntly d
isable
d, to
the da
te tha
t the l
ende
r rec
eives
notic
e of th
e fina
l disc
harg
e dete
rmina
tion.
Spou
ses a
nd pa
rents
of S
eptem
ber 1
1, 20
01, v
ictim
s660
days
from
date
appli
catio
n sen
t to bo
rrowe
r if ap
plica
tion i
s not
rece
ived b
y len
der,
and f
rom
date
guar
antor
rece
ives d
ocum
entat
ion to
date
of de
termi
natio
n.
Repu
rchas
e of a
non-
bank
ruptc
y clai
m6 Th
e per
iod th
at the
loan
was
held
by th
e gua
ranto
r due
to a
claim
purch
ase.
Death
Da
te aft
er m
anda
tory a
dmini
strati
ve fo
rbea
ranc
e due
to re
liable
notifi
catio
n of d
eath
ends
to da
te len
der r
eceiv
es de
ath ce
rtifica
te or
othe
r acc
eptab
le do
cume
ntatio
n, no
t to ex
ceed
60 da
ys.
Clos
ed sc
hool
Perio
d of u
noffic
ial cl
osur
e noti
ce as
spec
ified b
y gua
ranto
r. Cl
osed
scho
ol or
false
certif
icatio
n660
days
from
date
appli
catio
n sen
t to bo
rrowe
r if ap
plica
tion i
s not
rece
ived b
y len
der,
and f
rom
date
guar
antor
rece
ives d
ocum
entat
ion to
date
of de
termi
natio
n.
False
Cer
tifica
tion-
-Iden
tity T
heft6
Date
eligib
ility r
equir
emen
ts se
nt to
indivi
dual
to da
te re
ques
t and
docu
menta
tion r
eturn
ed, n
ot to
exce
ed 60
days
; and
from
date
guar
antor
rece
ives d
ocum
entat
ion to
da
te of
deter
mina
tion.
Delin
quen
cy af
ter de
ferme
nt or
Man
dator
y For
bear
ance
6 De
ferme
nt or
man
dator
y for
bear
ance
end d
ate to
estab
lishm
ent o
f nex
t pay
ment
due d
ate.
Educational Loan Organizer, Page 19
Docu
men
tatio
n co
llecti
on a
nd p
roce
ssing
6Da
te bo
rrowe
r req
uests
defer
men
t, fo
rbea
ranc
e, ch
ange
in re
paym
ent p
lan, o
r loa
n co
nsoli
datio
n to
dat
e su
ppor
ting
docu
men
tatio
n is p
roce
ssed
by l
ende
r, no
t to
exce
ed 6
0 da
ys.
60 d
ays f
rom
dat
e ap
plica
tion
sent
to b
orro
wer i
f app
licat
ion is
not
rece
ived
by le
nder
, and
from
dat
e gu
aran
tor r
eceiv
es d
ocum
enta
tion
to d
ate
of d
eter
mina
tion.
Un
paid
refu
nd d
ischa
rge
The
perio
d du
ring
guar
antor
revie
w an
d en
ding
on th
e da
te le
nder
rece
ives t
he gu
aran
tor’s
deter
mina
tion f
or a
borro
wer w
ho re
ques
ts a
revie
w of
a d
enial
de
term
inatio
n. Un
paid
refu
nd6
End
date
of in
itial 6
0-da
y man
dato
ry a
dmini
strat
ive fo
rbea
ranc
e to
rece
ipt o
f com
plete
d dis
char
ge re
ques
t, and
dur
ing p
eriod
of d
eter
mina
tion o
f disc
harg
e elig
ibility
. Ne
w ou
t-of-s
choo
l dat
es a
fter c
onve
rsion
6 Or
igina
l rep
aym
ent s
tart
date
to a
djuste
d sta
rt da
te.
Loan
sale
or tr
ansfe
r6 Fi
rst d
ate
of d
elinq
uenc
y to
date
loan
is so
ld or
tran
sferre
d, if
the
loan
is les
s tha
n 60
day
s deli
nque
nt.
Ineli
gible
sum
mer
brid
ge e
xtens
ion6
Day a
fter e
xpira
tion
of b
orro
wer’s
last
in-sc
hool
defe
rmen
t to th
e 30
th d
ay a
fter f
all cl
asse
s beg
in.
Cure
6 Da
te o
f ear
liest
unex
cuse
d vio
lation
to d
ate
lende
r rec
eives
a fu
ll pay
men
t or n
ew si
gned
repa
ymen
t agr
eem
ent.
Natur
al dis
aster
s, loc
al or
natio
nal e
merge
ncies
, milita
ry mo
biliza
tion6
From
dat
e bo
rrowe
r affe
cted,
not
to e
xcee
d th
ree
(3) m
onth
s for
eac
h oc
curre
nce.
Repa
ymen
t alig
nmen
t-SLS
/Sta
fford
4 Fi
rst p
aym
ent d
ue d
ate
to la
st da
y of th
e lon
gest
appli
cable
Sta
fford
loan
gra
ce p
eriod
.
Note
: Fo
r mor
e det
ailed
info
rmat
ion
rega
rdin
g ea
ch fo
rbea
ranc
e situ
atio
n, p
lease
cont
act y
our l
ende
r.
1 Le
nder
mus
t doc
umen
t the
bor
rowe
r’s re
ques
t, the
reas
on fo
r the
forb
eara
nce,
and
the te
rms o
f the
forb
eara
nce a
gree
ment.
2
For b
orro
wers
only.
3
A re
ques
t, sup
portin
g doc
umen
tatio
n fro
m th
e au
thor
ized o
fficial
(s) in
dicati
ng th
e be
ginnin
g and
end
ing d
ates
, and
a ve
rbal
or w
ritten
agre
emen
t are
requ
ired.
4
A re
ques
t is re
quire
d.
5A
requ
est a
nd su
ppor
ting
docu
men
tation
of m
onth
ly inc
ome a
nd m
onth
ly pa
ymen
ts on
Title
IV e
duca
tion l
oan
obli
gatio
ns, a
nd a
verb
al or
writ
ten
agre
emen
t are
requ
ired.
6
Lend
er m
ust n
otify
the
borro
wer (
or in
dividu
al or
end
orse
r, if a
pplic
able)
and
docu
ment
the b
eginn
ing a
nd e
nding
d
ates
and
reas
on fo
r the
forb
eara
nce i
n bor
rowe
r hist
ory r
ecor
d. 7
Noti
ce fr
om th
e U.
S. D
epar
tmen
t of E
duca
tion o
r gua
ranto
r is r
equir
ed.
8 D
ocum
enta
tion
show
ing b
orro
wer i
s sub
ject t
o a m
ilitar
y mob
ilizat
ion is
requ
ired.
9 Fo
r milit
ary s
ervic
e tha
t beg
ins o
n or
afte
r Octo
ber 1
, 200
7, or
inclu
des t
hat d
ate.
So
urce
: Co
mm
on M
anua
l, Jul
y 200
9
Educational Loan Organizer, Page 20
Educational Loan Organizer, Page 21
PROTECTING YOUR CREDIT RATING
Beware of Identity TheftIdentity theft is a serious crime. It occurs when your personal information is stolen and used without your knowledge to commit fraud or other crimes. Identity theft can cost you time and money. It can destroy your credit and ruin your good name.
Working with other government agencies and organizations, the Federal Trade Commission (FTC) has developed a Web site www.ftc.gov/bcp/edu/microsites/idtheft// to educate consumers about identity theft. The site provides information about what steps to take, your legal rights, how to handle specific problems you may encounter on the way to clearing your name, and what to watch for in the future.
Establishing Good CreditKnowing and accepting the terms of repayment on your student loan is vital to establishing and maintaining good credit. Here are a few steps you need to follow:
• Keep in contact with your lender at all times. Your lender depends on you for all current information.
• Initiate a repayment schedule with your lender.• Make all scheduled payments on time. If you miss a payment, contact your lender.• If you need to extend or delay repayment obligations, contact your lender.
What Is a Delinquent Loan?If you are willing but unable to make scheduled payments, request assistance from your lender within 30 days of your loan payment due date. If payment is not received, your loan will become delinquent. When your loan is delinquent, the lender, servicer, and the Michigan Guaranty Agency will attempt to contact you by letter(s), telephone, and by contacting your references.
Avoiding DelinquencyIf you are having difficulty making your scheduled student loan payments, contact your lender for possible solutions. You may use the following steps:
1. Review your situation with your lender and ask about deferments for which you qualify.2. Request a forbearance from your lender to either lower or stop your student loan payments for a short
period of time.
What Is a Defaulted Loan?If you refuse to repay your loan or cannot be located, your lender places the loan into default. Your lender will default your loan when it is determined that you have not complied with the terms of your promissory note, or after 270 days of delinquency. After default, your loan is purchased by the Michigan Guaranty Agency for collection. The full amount of the loan, accrued interest, collection costs, and other costs are due and payable to the Michigan Guaranty Agency. For details regarding repayment of a defaulted loan, contact MGA’s Collections Unit at 1-800-642-5626, ext. 60600. If your defaulted loan(s) is held by the U.S. Department of Education, call 1-800-621-3115 or visit www.1800IWillPay.com.
Prot
ectin
g Yo
ur C
redi
t R
atin
g
Educational Loan Organizer, Page 22
Consequences of Defaulting If you fail to repay a loan, you will be considered in default, and the following may result:
• Your default status may be reported to a national credit bureau and have a negative effect on your credit rating for seven years.
• You will be pursued for payment by collection agencies.• The entire unpaid amount of your loan, including interest, may become due and payable immediately.• You will lose deferment, repayment, and forgiveness options.• Your wages may be garnished.• Your savings account(s) may be attached.• You may be taken to court if you fail to make satisfactory arrangements and/or payments on your defaulted
loan.• The U.S. Internal Revenue Service and the State Treasury Department will seize any federal and state income
tax refunds you are owed.• You will be assessed collection costs, including attorney fees.• You may not be eligible for future student loans and other federal/state student aid.
Key Points• Students who repay their loans maintain a good credit record. Students who default face serious penalties
including a bad credit rating.• Keep in contact with your lender at all times, even while you are a student. Failure to respond to notices
from your lender can cause your loan to go into default.• Submit written changes of name and address to your lender; otherwise, important mail may not reach
you.• Keep copies of all correspondence until your loan is fully repaid.• Check with your lender if you think you may be eligible for a loan deferment. Even after you begin
repaying your loan, you may enter into situations that will permit you to defer principal payments.• You are legally responsible for the full repayment of your educational loans. You also are fully liable
for the consequences if you default.
Educational Loan Organizer, Page 23
GLOSSARY OF TERMS AND RECORD KEEPINGAccrued Interest Interest that accumulates on the unpaid balance of a loan.
Capitalization The process of adding unpaid interest to the principal balance of an educational loan, thereby increasing the monthly payment and the total amount to be repaid.
Consolidation A loan program that allows a lender to pay off a borrower’s educational loans by creating one new loan.
Default Failure to meet the terms of the promissory note or other written agreement. For a loan repayable in monthly installments, a loan is considered to be in default when this failure to repay persists for 270 days.
Deferment A period of time during repayment in which the borrower, upon meeting certain conditions, is not required to make payments of loan principal. In some situations, the federal government will pay the interest.
Delinquency The period which begins when a borrower fails to make the equivalent of one full payment after the payment is due.
Disbursement The transfer of loan proceeds by a lender to a borrower, to a borrower in care of his/her school, to another lender, or to an escrow agent by issuance of a check or by electronic funds transfer.
Disclosure Statement A statement of the actual cost and terms of the loan including interest rate and additional finance charges.
Due Diligence Thorough, extensive, and persistent procedure for servicing and collecting loans by a lender or its lender servicer.
Entrance Interview A loan repayment and debt management counseling session required by federal regulations that is arranged and conducted by a school’s financial aid administrator for students who are receiving their first federally guaranteed student loan associated with attendance at the school. This counseling session must be conducted before the student can receive the proceeds of the first disbursement of any federally guaranteed education loan. Some schools participate in internet online entrance interview programs. Check with your financial aid office to see if this is an option.
Exit Interview A loan repayment and debt management counseling session required by federal regulations that is arranged and conducted by a school’s financial aid adminstrator for students who have received federally guaranteed loans while attending school. This counseling session must be conducted before the student graduates or leaves the school, whenever possible. Some schools participate in internet online exit interview programs. Check with your financial aid office to see if this is an option.
Garnishment of Wages The deduction of a portion of a borrower’s paycheck, with or without the borrower’s consent. A lender, guaranty agency, or the government may take this action to force repayment of a loan that is in default.
Federal Default Fee A fee deducted from the borrower’s loan proceeds prior to disbursement and paid to the guaranty agency that insures the loan. By law the fee cannot exceed 1% of the loan amount.
Forbearance An authorized period of time during which the lender agrees to temporarily postpone a borrower’s principal repayment obligation or to reduce the amount of the payments. Interest payments continue to be the borrower’s responsibility. Forbearances may be granted at the lender’s discretion when a borrower demonstrates good intentions of repaying but is unable to do so.
Glo
ssar
y of
Ter
ms
and
Rec
ord
Kee
ping
Educational Loan Organizer, Page 24
Grace Period The period between the time borrowers leave school or drop below half-time study and the time they are obligated to begin repaying their loans — usually six months, depending on the type of loan.
Guaranty Agency State agency or private non-profit institution that insures student loans and administers the Federal Family Education Loan Program for the federal government.
Holder The institution with legal title to a borrower’s loan. The holder may be the lender that originally made the loan, a new lender, or a secondary market to which the lender has sold the loan, or in the event of a default, the guaranty agency.
Interest A fee charged to a borrower for the use of a lender’s money. Interest is calculated as a percentage of the principal loan amount. The rate may remain constant throughout the life of the loan (fixed rate) or it may change at specified times (variable rate).
Lender A financial institution (bank, credit union, or certain state agencies) that provides the funds for students and parents to borrow educational loans. Some schools also are lenders.
Master Promissory Note The promissory note a student signs when taking out a Stafford loan. The Master Promissory Note covers both the subsidized and unsubsidized Stafford loans the student may receive for the same enrollment period. The Master Promissory Note also covers subsidized and unsubsidized Stafford loans the student may receive for future enrollment periods of up to ten (10) years.
Origination Fee A fee charged by the federal government and deducted from loan proceeds before disbursement to partially offset administrative costs of the Federal Family Education Loan Program.
Principal Amount a person borrows (which may increase as a result of capitalized interest) and the amount on which interest is paid.
Promissory Note The legal document borrowers sign when they get an educational loan. It lists conditions under which the money is borrowed and the terms under which borrowers agree to repay the loan with interest. The agreement also includes information about any grace period, deferment, or cancellation provisions, along with the borrower’s rights and responsibilities with respect to the loan.
Secondary Market An organization established to purchase educational loans from lenders. This allows lenders to replenish capital to fund new loans. Selling loans is a common practice among lenders and does not affect the terms and conditions under which the loan was originally made.
Servicer A company employed by a lender, secondary market, school, U.S. Department of Education, or guarantor to perform the administrative tasks that are associated with educational loans.
Subsidized Loan A need-based loan on which interest is paid by the federal government during the in-school, grace, and authorized deferment periods, and (if applicable) post-deferment grace periods, if the loan meets certain eligibility requirements.
Unsubsidized Loan A non-need-based loan on which interest is not paid by the federal government. Borrowers are responsible for interest on all unsubsidized loans from the date the loan is disbursed.
Educational Loan Organizer, Page 25
Educ
atio
nal
Loan
Rec
ord
Cre
ate
a re
cord
of y
our e
duca
tiona
l loa
ns b
y re
cord
ing
the
perti
nent
info
rmat
ion
for e
ach
loan
rece
ived
. Per
iodi
cally
det
erm
ine
your
cur
rent
tota
l edu
catio
nal
borr
owin
g as
a r
emin
der
of th
e ex
tent
to w
hich
you
hav
e co
mm
itted
fut
ure
earn
ings
.
D
ate
of
Nam
e of
Loa
n
Scho
ol
Enr
ollm
ent
Inte
rest
Loa
n
Loa
n Pr
ogra
m
Len
der
Att
ende
d Pe
riod
R
ate
A
mou
nt
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$ E
duca
tiona
l Ind
ebte
dnes
s To
tal/S
ubto
tal T
his
Page
(con
tinue
d on
bac
k)
Educational Loan Organizer, Page 26
Educ
atio
nal
Loan
Rec
ord
(con
tinue
d)
D
ate
of
Nam
e of
Loa
n
Scho
ol
Enr
ollm
ent
Inte
rest
Loa
n
Loa
n Pr
ogra
m
Len
der
Att
ende
d Pe
riod
R
ate
A
mou
nt
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Ed
ucat
iona
l Ind
ebte
dnes
s To
tal/S
ubto
tal T
his
Page
$
Ed
ucat
iona
l Ind
ebte
dnes
s Pr
evio
us P
age
$
G
RA
ND
TO
TAL
$
Educational Loan Organizer, Page 27
Educational Loan Record Contacts
School
Contact Person
Phone Number
Lender
Contact Person
Phone Number
Servicer
Contact Person
Phone Number
Holder
Contact Person
Phone Number
School
Contact Person
Phone Number
Lender
Contact Person
Phone Number
Servicer
Contact Person
Phone Number
Holder
Contact Person
Phone Number
School
Contact Person
Phone Number
Lender
Contact Person
Phone Number
Servicer
Contact Person
Phone Number
Holder
Contact Person
Phone Number
Educational Loan Organizer, Page 28
Telephone Call and Correspondence Log
Keep a record of telephone calls and correspondence you initiate or receive regarding your student loan(s).
Date Individual Organization Reason
This material was prepared by the Michigan Guaranty Agency (MGA) of the Michigan Higher Education Assistance Authority (MHEAA) under authority of the Higher Education Act of 1965, as amended, and printed in compliance with Executive Directive 1991-6. MHEAA and MGA comply with all federal laws and regulations prohibiting discrimination and with all requirements and regulations of the U.S. Department of Education.
Michigan Department of Treasury, 3144 (Rev. 11-09)Copies Printed: 20,000 Total Cost: $9,336.13 Cost per Copy: $0.47