Frequently Asked Questions — Paying

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Questions about paying

  1. How do I apply for financial aid?
  2. What are the eligibility criteria for obtaining federal financial aid?
  3. What is campus-based aid?
  4. What if my income (or my parents' income) changes significantly after I apply for financial aid?
  5. What are the pros and cons of a Federal Consolidation Loan?
  6. What does default on a student loan mean?
  7. What does delinquent mean?
  8. How can I get a grant or scholarship?
  9. How much can I borrow under the federal Stafford loan program?
  10. What should I do if I cannot make a payment on my student loan?
  11. What are the conditions for cancellation or discharge of a federal student loan?
  12. What is the difference between a subsidized Stafford loan and an unsubsidized Stafford loan?
  13. Is it possible to have my loan payments automatically withdrawn from my bank account?
  14. Do I still need to make loan payments if my coupon booklet runs out?
  15. How can I estimate what my monthly payment will be on my Stafford loan?
  16. What is a federal Perkins loan?
  17. How much can I borrow in the Perkins loan program?
  18. Do guarantors (such as TG) report borrowers to credit bureaus for delinquency on student loan accounts?
  19. What is the maximum repayment period for my federal Stafford loan?
  20. When do I start making payments on my federal Perkins loan?
  21. When do I start making payments on my federal Stafford loan?
  22. If I choose to use student loans to finance my higher education, what do I need to know?
  23. Does the government subsidize the interest on a Perkins loan?
  24. What determines financial need?
  25. What is satisfactory academic progress, or SAP?
  26. Should I look for a job now to pay for college?

Answers

  1. How do I apply for financial aid?

    The first step in applying for any type of financial aid is to complete the Free Application for Federal Student Aid (FAFSA). You can submit the FAFSA online by going to http://www.fafsa.ed.gov. Once this form is processed, you will receive either a paper Student Aid Report (SAR; pronounced sar) from the U.S. Department of Education or if you provided a valid e-mail address, you will receive a SAR through e-mail. The SAR will contain your Expected Family Contribution (EFC), which is the amount your family is expected to contribute toward your education. The school(s) that you listed on the FAFSA should also receive this information electronically. The financial aid office will then use it to award you an aid package. This package may include a mix of grants, loans, and other types of aid, depending on your eligibility. In this package, the school will indicate whether you are eligible to receive the federal Stafford loan. If you are eligible, the school will certify a loan amount for you and provide you with any additional instructions needed for completing the Master Promissory Note (MPN).

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  2. What are the eligibility criteria for obtaining federal financial aid?

    In order to apply for financial aid, students must first complete the Free Application For Federal Student Aid (FAFSA) at www.fafsa.ed.gov. Once the school receives this information via the Student Aid Report (SAR), it can then determine which types of financial aid (including federal loans) its students are eligible to receive. The school will then send award notifications to students along with instructions about how to apply.

    Some of the qualifications for federal financial aid include the following. You must:

    • Have financial need (except for unsubsidized student loans);
    • Have a high school diploma or a General Education Development Certificate (GED) or meet standards approved by the U.S. Department of Education;
    • Be enrolled as a regular student working toward a degree or certificate in an eligible program;
    • Be a U.S. citizen or eligible non-citizen;
    • Have a valid Social Security number;
    • Make satisfactory academic progress;
    • Sign a statement of educational purpose/certification statement on refunds and default (found on the SAR);
    • Sign a statement of updated information, if required (found on the SAR); and
    • Register with the Selective Service, if required.
    Students should contact their financial aid offices directly if there are any questions about the different types of financial aid offered to them by their schools.

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  3. What is campus-based aid?

    Campus-based aid programs are administered directly by the financial aid office at participating schools. Not all schools are involved with all three programs. The Federal Supplemental Educational Opportunity Grant (FSEOG) Program awards grants, the Federal Work-Study (FWS) Program offers jobs, and the Federal Perkins Loan (Perkins) Program offers loans. Each participating school receives a limited amount of funds for the program(s), so make sure to apply with the FAFSA early!

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  4. What if my income (or my parents' income) changes significantly after I apply for financial aid?

    A financial aid administrator may use professional judgment to adjust the data used in determining a student's EFC, if extenuating family circumstances may cause the data to yield an EFC that wouldn't accurately reflect the family's ability to contribute to the student's education. You should discuss the change in your circumstances with the financial aid office at your school to see if the EFC can be altered.

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  5. What are the pros and cons of a Federal Consolidation Loan?

    Loan consolidation is an option that most student loan borrowers consider at some point over the life of their loans. And while the reasons why a borrower may choose to consolidate vary, most borrowers consolidate in order to:

    • Combine multiple loan balances under a single lender, so that the borrower has to make only one monthly payment; or
    • Lock in a fixed interest rate for the entire repayment period of the loan.

    Remember, however, that you are not required to consolidate your loans. It is a decision that you should consider seriously.

    A borrower seeking a Consolidation loan can consolidate several different types of federal education loans. The types of loans that you may include in a Consolidation loan are:

    • FDLP loans (Stafford, PLUS, and prior Consolidation loans)
    • FISL loans
    • Perkins loans (formerly National Student Defense Loans)
    • Health Professions Student Loans (HPSL), including Loans for Disadvantaged Students (LDS)
    • Nursing Student Loans (NSL)
    • Health Education Assistance Loans (HEAL)
    Note: There may be disadvantages to including a Perkins loan in a Consolidation loan. Please visit http://www.tgslc.org/borrowers/consol_faq.cfm for more information about this topic.

    In order to qualify for a Federal Consolidation loan, you must be in your grace period or have entered repayment on each loan that is selected for consolidation.

    Note: Effective July 1, 2006, a borrower may no longer request to enter repayment on a Stafford loan while still enrolled in school in order for the borrower to consolidate those loans.

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  6. What does default on a student loan mean?

    When a borrower is 270 days or more delinquent in making payments on a student loan, the borrower is considered to be in default. Once a borrower is in default, the lender may file a default claim with the guarantor of the loan. Provided that the lender has met applicable federal servicing requirements, the guarantor will pay the lender for the default claim.

    Once the guarantor has paid the lender’s default claim, the guarantor becomes the holder of the loan and is responsible for collecting on the loan on behalf of the federal government. If the borrower fails to comply with a voluntary repayment schedule in order to rehabilitate the defaulted loan, the guarantor can implement collection activities that include the following:

    • Administrative wage garnishment;
    • Assessment of collection costs;
    • Assignment of account to collection vendors;
    • Credit reporting;
    • Loss of financial aid eligibility;
    • Seizure of Texas lottery winnings;
    • Reimbursements (warrants) from the Texas State Comptroller may be withheld;
    • Suspension or denial of state licensing (including professional and handgun licensing);
    • Holds on transcripts and academic records; and
    • Seizure of any U.S. Treasury payments the borrower is due (including, but not limited to, the borrower’s IRS tax refund).

    For additional information on the consequences of default, visit AIE's "Consequences of Default" page.

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  7. What does delinquent mean?

    This is when the monthly payment on a loan is past due.

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  8. How can I get a grant or scholarship?

    To determine eligibility for a federal grant or state grant, complete the Free Application for Federal Student Aid (FAFSA). You can submit the FAFSA online by going to http://www.fafsa.ed.gov. To determine your eligibility for a scholarship, access the AIE Scholarship Search. Not all scholarship awards are determined by academic achievement. You should also contact the school you are interested in attending to see if you qualify for any aid they offer. Your local library may also have information on grants and scholarships. Students can also check the local paper for scholarship opportunities offered by civic and non-profit organizations in addition to the library resource.

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  9. How much can I borrow under the federal Stafford loan program?

    Please refer to the following for information on Stafford loan limits:

    Federal Stafford Loan maximums1
    Annual limits per year of study

    Dependent undergraduates2
    Year Max. (subsidized and unsubsidized)3
    First year$5,500 — no more than $3,500 of this amount may be subsidized
    Second year$6,500 — no more than $4,500 of this amount may be subsidized
    Third year and beyond$7,500 — no more than $5,500 of this amount may be subsidized
    Independent undergraduates2
    (and dependent undergraduates whose parents are unable to borrow under the PLUS Loan Program)
    Year Max. (subsidized and unsubsidized)3
    First year$9,500 — no more than $3,500 of this amount may be subsidized
    Second year$10,500 — no more than $4,500 of this amount may be subsidized
    Third year and beyond$12,500 — no more than $5,500 of this amount may be subsidized
    Graduate and professional students
    Year Max. (subsidized and unsubsidized)3
    For any year of study$20,500 — no more than $8,500 of this amount may be subsidized
    Aggregate limits3
    Maximum amounts over academic career
    Type of student Max. (subsidized and unsubsidized)3
    Dependent undergraduates$31,000 — no more than $23,000 of this amount may be subsidized
    Independent undergraduates (and dependent undergraduates whose parents are unable to borrow under the PLUS Loan Program)$57,500 — no more than $23,000 of this amount may be subsidized
    Graduate and professional students$138,500 — no more than $65,500 of this amount may be subsidized

    1 Certain health profession students may qualify for higher limits.

    2 All undergraduate Stafford annual loan limits are subject to proration.

    3 The borrower may receive less than the maximum if he or she receives other financial aid that is used to cover the cost of attendance. Keep in mind that the federal government will pay interest on only subsidized Stafford loans while the student is in school.

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  10. What should I do if I cannot make a payment on my student loan?

    You should contact your lender, servicer, or TG to discuss your situation. We might be able to help you.

    Deferment and forbearance options are available to temporarily suspend your loan payments if you are enrolled in school at least half time, unemployed, or experiencing financial hardship. Certain members of the military may also qualify for a deferment.

    You can visit our Web site at www.tgslc.org/borrowers/helpful.cfm to gather additional information about repayment options or to download the applicable forms. You can also call TG's Default Prevention Department at (800) 338-4752 to discuss your situation and find out about alternative repayment schedules that might make it easier for you to afford your monthly payments.

    If you need to contact information for your lender or servicer, you can go to TG's Student Loan Inquiry page.

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  11. What are the conditions for cancellation or discharge of a federal student loan?

    The following conditions allow cancellation or discharge of Direct and FFEL Program loans (contact the loan holder for specific requirements):

    • Borrower's total and permanent disability or death
    • In case of PLUS loan borrowed on behalf of a dependent student, death of student
    • Closed School (before student could complete program of study) or False Loan Certification for loans received on or after January 1, 1986
    • Bankruptcy (in some rare cases)
    • Cases of fraud, false identification, or theft
    • Teacher loan forgiveness

    For Perkins loans, refer to the chart available from Mapping Your Future.

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  12. What is the difference between a subsidized Stafford loan and an unsubsidized Stafford loan?

    After the FAFSA is processed, the school(s) that the student has chosen will receive the expected family contribution (EFC) figure from the U.S. Department of Education. It can then determine whether or not a student is eligible for a need-based Federal Subsidized Stafford loan. If the student does receive a federally subsidized loan, the government will pay the interest to the lender that accrues during the in-school, grace, and authorized deferment periods on the borrower's behalf. If the student is not eligible for a need-based loan, the school can then opt to certify a Federal Unsubsidized Stafford loan. In addition to the principal, the borrower will be responsible for paying all the interest that accrues over the life of an unsubsidized loan. However, if the student is unable to make quarterly interest payments while enrolled in school, he or she can direct the lender to add the accrued interest to the loan principal. This will make the balance that has to be repaid increase, so it is always best to make the interest payments on an unsubsidized loan while enrolled in school, if possible.

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  13. Is it possible to have my loan payments automatically withdrawn from my bank account?

    Yes. Most lenders and/or servicers do offer an auto draft of the monthly payment from your bank account. Contact the institution servicing your student loan about how to set it up.

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  14. Do I still need to make loan payments if my coupon booklet runs out?

    Yes. Remember that you are financially responsible for your loan and timely payments are important not only to your lender/servicer, but to your credit history as well. If your coupon booklet runs out, request a new one by contacting your lender or servicer, but always keep the payment address on file and send your monthly payment regardless of whether or not you have payment coupons. Also, it is a good idea to include your account number on all payments made to your lender or servicer.

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  15. How can I estimate what my monthly payment will be on my Stafford loan?

    Monthly payments can be affected by several things including the loan amount and type, your income, and the repayment plan selected. There are four repayment plans for federal education loans. They are the standard, extended, graduated, and income-sensitive repayment plans. All four plans are available for student loans, but only the first three are available for parent loans. See below for details of the plans.

    Standard Repayment Plan — If you choose this plan, you will make fixed monthly payments and repay your loan in full within 10 years (not including periods of deferment or forbearance) from the date the loan entered repayment. Payments must be at least $50 a month and will be more, if necessary, to repay the loan within the required time period.

    Extended Repayment Plan — If you choose this plan, you will make monthly payments based on fixed annual 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. You are eligible for this plan if (i) at the time you sign this Note you have no outstanding balance on a FFELP loan made before October 7, 1998, and (ii) you accumulate outstanding FFELP loans exceeding $30,000.

    Graduated Repayment Plan — If you choose this plan, you will usually make lower monthly payments at first, and your payments will increase over time. No single payment will be more than three times greater than any other payment.

    Income-Sensitive Repayment Plan — If you choose this plan, your monthly payments will be adjusted annually, based on your expected total monthly gross income from all sources. You may call your lender at any time for more information about this repayment plan option.

    Contact TG's Default Prevention Department at 800-338-4752 or your lender for additional information. You can access AIE's loan repayment calculator at http://aie/College/Calculators/Loan/index.cfm.

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  16. What is a federal Perkins loan?

    A federal Perkins loan is a low-interest (5 percent) loan for both undergraduate and graduate students with exceptional financial need as determined by the school's financial aid office. The school acts as the lender, and the students makes payments to it directly upon entering repayment. The loan is made using government funds with a share contributed directly by the school. You can find out more about this loan program and other types of campus-based aid on the U.S. Department of Education's Web site at http://studentaid.ed.gov/PORTALSWebApp/students/english/campusaid.jsp?tab=funding.

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  17. How much can I borrow in the Perkins loan program?

    Depending on when you apply, your level of need, and the funding level of the school (remember to apply with the FAFSA early), you can borrow up to:

    • $4,000 for each year of undergraduate study. The total you can borrow as an undergraduate is $20,000.
    • $6,000 for each year of graduate or professional study. The total you can borrow as a graduate/professional student is $40,000. That includes any Perkins loans you borrowed as an undergraduate.

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  18. Do guarantors (such as TG) report borrowers to credit bureaus for delinquency on student loan accounts?

    Federal regulations require your lender to report information on each loan it makes or holds to at least one national credit bureau. In addition, your guarantor will report each loan it purchases as a default claim (i.e., a loan that the guarantor has acquired because the borrower has failed to make installment payments when due for a period of at least 270 days) to all national credit bureaus. If you are diligent about making your loan payments in a timely manner, it can have a positive effect on your credit history. Conversely, if you are negligent about keeping up with your monthly payment, it can adversely affect your credit history and your ability to obtain credit in the future. For a list of some of the major consequences of default, go to www.tgslc.org/borrowers/conseque.cfm.

    To obtain information about what is being reported on your credit report, you can visit the major credit bureaus’ Web sites at www.experian.com, www.equifax.com, and www.transunion.com.

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  19. What is the maximum repayment period for my federal Stafford loan?

    The maximum repayment period is determined by the repayment plan selected. There are four repayment plans for federal education loans. They are the standard, extended, graduated, and income-sensitive repayment plans. All four plans are available for student loans, but only the first three are available for parent loans. See below for details of the plans.

    Standard Repayment Plan — If you choose this plan, you will make fixed monthly payments and repay your loan in full within 10 years (not including periods of deferment or forbearance) from the date the loan entered repayment. Payments must be at least $50 a month and will be more, if necessary, to repay the loan within the required time period.

    Extended Repayment Plan — If you choose this plan, you will make monthly payments based on fixed annual 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. You are eligible for this plan if (i) at the time you sign this note you have no outstanding balance on a FFELP loan made before October 7, 1998, and (ii) you accumulate outstanding FFELP loans exceeding $30,000.

    Graduated Repayment Plan — If you choose this plan, you will usually make lower monthly payments at first, and your payments will increase over time. No single payment will be more than three times greater than any other payment.

    Income-Sensitive Repayment Plan — If you choose this plan, your monthly payments will be adjusted annually, based on your expected total monthly gross income from all sources. You may call your lender at any time for more information about this repayment plan option.

    Contact TG's Default Prevention Department at 800-338-4752 or your lender for additional information. You can access AIE's loan repayment calculator at http://www.aie.org/college/ccs_calc.cfm

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  20. When do I start making payments on my federal Perkins loan?

    Repayment begins nine months after either a student graduates or ceases to be enrolled at least half time. This 9-month window before repayment begins is called a grace period. Federal Perkins loans are repayed directly to the school. You can get additional information about the Federal Perkins Loan Program on the U.S. Department of Education's Web site at http://studentaid.ed.gov/PORTALSWebApp/students/english/campusaid.jsp?tab=funding.

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  21. When do I start making payments on my federal Stafford loan?

    The repayment period on a federal Stafford loan begins no later than 60 days following the last day of the grace period. This one-time grace begins when you cease to be enrolled at least half time (i.e., graduate, drop below half-time status or withdraw from school) and lasts for 6 months.

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  22. If I choose to use student loans to finance my higher education, what do I need to know?

    Loans are financial aid that must be repaid. Government-sponsored education loans are a good deal if you decide to borrow to pay for your education. They are better than traditional consumer loans because they offer lower interest rates. There are certain eligibility requirements. Congress limited access to education loans because paying for an education is considered to be the primary responsibility of individual families. Borrowers must qualify based on eligibility or need. Whether or not to borrow to pay for your education is an important decision, and it is one only you and your family can make. A good education can be expensive, but it is worth the investment of time, effort, and money. When you decide to enter the world of credit and finance, you assume new responsibilities, and it is important for you to realize that your loan will have to be paid back. As with any debt, you are responsible for repaying your loan -- in full -- even if you did not (as sometimes happens) complete school, or cannot get a job. If you do not make your monthly payments as scheduled -- and you do not make any special arrangements with your lender -- you may default on your loan, which carries significant consequences.

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  23. Does the government subsidize the interest on a Perkins loan?

    Yes, during authorized periods of deferment, while a borrower is enrolled at least half time and in grace, the government subsidizes the interest.

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  24. What determines financial need?

    The information supplied on a completed Free Application For Federal Student Aid (FAFSA) is used in a formula, established by the U.S. Congress, that calculates your Expected Family Contribution (EFC), the amount you and your family are expected to contribute toward your education. If your EFC is below a certain amount, you may qualify for a Federal Pell Grant (if you meet all other requirements). Your financial aid administrator determines your Cost of Attendance (in most cases, tuition and fees, room and board, travel, books and supplies, and personal and miscellaneous expenses) and subtracts your EFC. The remaining balance is your financial need. Other sources of financial assistance are subtracted from the Cost of Attendance before need is determined.

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  25. What is satisfactory academic progress, or SAP?

    SAP stands for satisfactory academic progress. It is a federally required measure that the school uses to track its students progress. While each school develops its own SAP policy, a time frame for program completion and a minimum quality standard, such as GPA, must be established. A school must track its students SAP at least annually. If a student fails to make SAP, he or she will lose eligibility for Title IV aid.

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  26. Should I look for a job now to pay for college?

    As education costs continues to increase, many students are working while they attend college to help pay for the education. This a smart move only if you can balance both a job and your classes. The more money you pay out-of-pocket towards your education, the less money you will have to borrow and pay back later. In the long run, this will save you money and eliminate the stress of having debt after graduation.

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