Information for Borrowers

What You Must Do

When you take out a student loan, you have certain responsibilities. Here are some important ones:

Think About How Much You're Borrowing

Think about what your repayment obligation means before you take out a loan. If you don't repay your loan on time or according to the terms in your promissory note, you might go into default, which has serious consequences and will affect your credit rating. You don't have to borrow the maximum amount you're allowed. Borrow only what you really need to pay for school.

Agree to Repay the Loan

When you sign a promissory note, you're agreeing to repay the loan according to the terms of the note. The note states that except in cases of loan discharge (cancellation), you must repay the loan, even if you don't complete your education (unless you couldn't for a valid reason-because the school closed, for example). Also, you must repay your loan even if you can't get a job after you complete the program, or you don't like the education you paid for.

Make Payments Regardless of Receiving Billing Notices

You must make payments on your loan even if you don't receive a bill or repayment notice. Billing statements (or coupon books) are sent to you as a convenience, but you're obligated to make payments even if you don't receive any reminders. Also, you must make monthly payments in the full amount your repayment plan has established. Partial payments do not fulfill your obligation.

Continue to Pay While Waiting for Deferment, Forbearance or Discharge Approval

If you apply for a deferment or forbearance or a loan discharge, you must continue to make payments until you're notified your request has been granted. If you don't, you might end up in default. You should keep a copy of any request form you submit, and make sure you document all contacts with the organization that holds your loan.

Keep in Touch with Your Loan Servicer

You must notify your loan servicer when you graduate; withdraw from school; drop below half-time status; change your name, address, or Social Security number; or transfer to another school.

Receive Entrance and Exit Counseling

For Direct or FFEL Stafford Loans, you must receive entrance counseling before you're given your first loan disbursement, unless you've previously received a Stafford Loan. No matter what type of federal student loan you have, you must receive exit counseling before you leave school. Your school will provide the counseling and important information about your loan. Your lender will give you additional information.

What You Must Know

You have certain rights as a borrower. Listed below are some of them.

Before the First Loan Disbursement

Before your school makes your first loan disbursement, you must receive the following information about your loan from your school, lender, or the Direct Loan Servicing Center:

1. the full amount of the loan and the interest rate

2. the date you must start repayment

3. a complete list of any charges you must pay (loan fees) and information on how those charges are collected

4. information about the yearly and total amounts you can borrow

5. information about the maximum repayment periods and the minimum payment amount

6. an explanation of default and its consequences

7. an explanation of available options for consolidating your loans and a statement that you can prepay your loan(s) without penalty at any time.

Before You Leave School

Before you leave school, you will receive the following information about your loan (as part of exit counseling) from your school, lender, or the Direct Loan Servicing Center:

1. a current description of your loans, including average anticipated monthly payments

2. the amount of your total debt (principal and estimated interest), your interest rate, and the total interest charges on your loan

3. if you have FFEL (Federal) Stafford Loans, the name of the lender or agency that holds your loans, where to send your payments, and where to write or call if you have questions

4. if you have Direct Stafford Loans, the address and telephone number of the Direct Loan Servicing Center

5. an explanation of the fees you might be charged during the repayment period, such as late charges and collection or litigation costs if you're delinquent or in default

6. a reminder of available options for loan consolidation and a reminder that you can prepay your loan without penalty at any time

7. a description of applicable deferment, forbearance, and discharge (cancellation) provisions

8. repayment options and advice about debt management that will help you in making your payments

9. notification that you must provide your expected permanent address and the name and address of your expected employer. You must also provide any corrections to your school's records concerning your name, Social Security number, references, and driver's license number (if you have one).

Grace Period

You have the right to a grace period before your repayment period begins. (Your parents do not receive a grace period for a PLUS Loan.) Your grace period will be six or nine months depending on the type of loan you have.

Loan Repayment Schedule

Your school, lender, or the Direct Loan Servicing Center, as appropriate, must give you a loan repayment schedule that states when your first payment is due, the number and frequency of payments, and the amount of each payment.

Sale of Loan

If you or your parents borrow under the FFEL Program, you (or your parents, for a PLUS Loan) must be notified when the loan is sold if the sale results in making payments to a new lender or agency. You must be given the identity of the new lender or agency holding the loan, the address to which you must make payments, and the telephone numbers of both the old and new lender or agency.