Student Loan Counseling

Q: How do I know how much I should be able to borrow?
A: Given a student's expected future annual salary and total loan debt upon graduation, the "how much to borrow calculator" on the finaid.org website is helpful in determining how much to borrow.

Q: How can I estimate monthly student loan payments based on various interest rates and loan amounts? Is there a good calculator?
A: A loan repayment calculator is available on the finaid.org website.

Q: How do I know whether I'll be able to afford student loan payments in the future?
A: Student loan borrowers need to have a realistic projection of anticipated estimated salary and future potential earnings; starting salaries for Purdue graduates are available a website provided by the Purdue Center for Career Opportunities.

Q: What information is available specifically for Federal Loan borrowers?
A: Federal Loan borrowers should review information at www.purdue.edu/dfa/loans/loanrepayment.php.

Q: What is entrance loan counseling?
A: Students who borrow educational loans at Purdue are encouraged to complete entrance loan counseling.

Q: What is exit loan counseling?
A: Students are encouraged to receive exit loan counseling before graduating or otherwise leaving school. In addition, the University Collections Office is required to conduct exit loan counseling for Perkins, Purdue, and Health Profession Loan borrowers.

Q: What are consolidation loans?
A: Consolidation Loans are designed to help student and parent borrowers simplify loan repayment by allowing the borrower to combine several types of Federal Student Loans with various repayment schedules into one loan, and/or to extend the repayment period length.

Q: Since private loans require established credit, what tips are available to maintain/establish a good credit record?
A: It is essential to understand credit reporting and credit scoring. As well, being creditwise also requires practicing good habits. Please see this article, Becoming Credit-Wise: What Students (and You!) Should Know, for tips and more information.

Q: Are there any special loan deferment positions for members of the military?
A: Yes, the College Cost Reduction and Access Act (CCRAA) made several welcomed changes to the military service deferment created by Higher Education Reconciliation Act of 2005 (HERA); see this NASFAA article for more information.

Q: Is there any public service loan forgiveness?
A: Yes, the recently enacted College Cost Reduction and Access Act (CCRAA) creates a new loan forgiveness option for Direct Loan borrowers who hold public service jobs. FFEL borrowers may take advantage of public service loan forgiveness by consolidating or reconsolidating their FFEL loans into the Direct Loan program; see this NASFAA article for more information.

Q: How do I know if a private loan is a good deal?
A: Students and families should beware of high interest loan products and deceptive marketing tactics. It is almost always in the best interest of students to explore Federal Student Loan options before applying for private loan products. Purdue students are encouraged to research private student loan options at www.finaid.org/loans/privatestudentloans.phtml.

Q: What type of assistance is available once I start repayment?
A: Your lender or loan services can answer almost all loan repayment questions; another independent resource to help borrowers is the Federal Student Loan Borrower Assistance website.

Regulations require exit counseling information be provided to all Federal Loan borrowers who are graduating or ceasing at least half-time enrollment at Purdue University. Exit loan counseling includes information regarding...

• Your Federal Loan indebtedness
  
• Deferments, consolidations, and other repayment options
  
• Debt management strategies
• Student responsibility upon leaving school

FEDERAL LOAN REPAYMENT CHECKLIST

The Division of Financial Aid sends out an email to December graduates with Federal Loans to remind you of the following:

• You can access your Federal Loan debt incurred prior to Fall 2008 by contacting your lender(s) or loan servicer s); for most Purdue students this will be Sallie Mae: www.salliemae.com or call 1-888-272-5543.
• You can access your Federal Loan debt incurred after summer 2008 by contacting the Federal Direct Loan Servicer at www.dl.ed.gov or call 1-800-848-0979.
• To access your entire Federal student loan borrowing history, visit the National Student Loan Data System at www.nslds.ed.gov.
• You must inform your lender of any changes to your address, phone number and other contact information.

If you have any private loans contact your private lender or visit their website for repayment information.

RIGHTS
As a student borrower, you are entitled to:

• Repayment period of at least ten years as long as the $50 minimum monthly payment is met;
  
• A copy of your repayment schedule and disclosure statement from your lender or guarantee agency;
  
• Have any questions about your Federal Loan answered by your lender or guarantor.

As a student borrower, you have the right to:

• Prepay all or any part of your loan at any time without penalty;
  
• Be notified in writing by your lender if your loans are sold or transferred for servicing;
  
• Have your loan obligation canceled if you die or be­come totally and permanently disabled;
• Defer payment for a specified period of time, if qualified.

RESPONSIBILITIES
Acceptance of an educational loan requires:
1. That you use the loan for educational expenses and repay your loan debt in full even if you:

• Do not graduate or complete your program of study;
• Are unable to obtain employment on ending or completing your program;
• Are dissatisfied with the school or did not receive the education or other services you purchased from the school.

2. You must make payments on your student loan at the end of your grace period whether or not you have received a repayment schedule. If your first payment due date is nearing and you have not received a repayment schedule, contact your loan service provider.

3. You must notify your lender if you change:

• Schools;
• Name or address;
• Enrollment status (e.g., withdraw, graduate, or enroll less than half time).

4. Upon leaving school, you must notify your loan service provider of your expected employer and permanent address, the address of next of kin, and any changes in your social security or driver's license numbers.

5. If you receive notice that your loan is being serviced by an agency other than your lender, you must refer all further correspondence, inquiries, or payments to the servicer.

6. You should keep copies of all student loan papers, documents, and correspondence.

CONSEQUENCES OF DEFAULT
If you fail to repay your loan according to its terms and conditions, your default will be reported to a national credit bureau and you may suffer any or all of the following consequences:

• Collection agency action;
• Withholding of federal income tax refunds;
• Garnishment of wages;
• Loss of eligibility for federal student aid;
• Difficulty in obtaining other credit;
• In most instances, student loans may not be discharged through bankruptcy.
• If you’re having trouble making payments, don’t wait! Get help from your loan holder or servicer immediately.

GRACE PERIOD
The Federal Loan grace period begins the day after you leave school ("leaving school" means graduat­ing, withdrawing, or dropping to less than half-time enrollment status). The grace period for most Federal Loans is six months; during this period, no payments are due and interest on the loan (if it is subsidized) continues to be paid by the federal government.

REPAYMENT
With the subsidized Federal Loan, interest begins to accrue in your name on the day after your grace period ends. Approximately 30-45 days later, your first payment will be due. Thereafter, payments are due once a month until the loan is paid in full. You will receive a repayment schedule and disclosure statement for each of your student loans from your loan service provider. This schedule will tell you how much your payments will be, when they are due, and over what period of time you will be paying.

For unsubsidized Federal Loans, students are responsible for paying interest during the period of time that the principal is deferred. Because most lenders will permit students to defer interest repayment during school enrollment, the interest accrues during this deferred period.

DEFERMENT
A deferment is a period of time (varying in length as indicated below) when you are not required to make payments on your loans because you temporarily cannot afford the scheduled payments. If you think you are eligible for a deferment, contact your lender/servicer. A deferment does not apply and you are not excused from making loan payments until the documentation is complete. 
For borrowers with no loans prior to July 1, 1993, the following types of deferment are available:

• at least half-time study at an eligible school,
• studying in an approved graduate fellowship or rehabilitation program for the disabled,
• up to three years, while you are conscientiously seeking but unable to find full-time employment,
• up to three years, for any reason (in accordance with federal regulations) that has caused you to have an economic hardship.

Deferments for borrowers with an outstanding FFELP loan disbursed before July 1, 1993, include:

• unemployment,
• full-time enrollment at an eligible school,
• half-time enrollment at an eligible school, if you borrow a new Federal Loan during the enrollment period,
• participation in a rehabilitation program,
• study under an approved graduate fellowship program,
• serving an internship necessary for professional practice or service,
• temporary or total disability, or inability to work because caring for a temporarily or totally disabled spouse or dependent,
• parental leave to care for a newborn, if you attend school in the six months prior to the leave,
• mothers who have pre-school age children and are entering or re-entering the work force at less than $1 above minimum wage,
• service in the National Oceanic and Atmospheric Administration Corps (NOAA),
• active duty service in the U.S. armed forces or service as an officer in the Commissioned Corps of the United States Public Health Service,
• full-time teaching in a private, nonprofit, or public elementary or secondary school shortage area.

FORBEARANCE
Should you become financially unable to make monthly payments, you may be able to suspend payments, lower payment amounts, or make interest payments only for a short period of time (six-month periods) at the discretion of your loan service provider.

REPAYMENT OPTIONS

• Standard Repayment Plan: Federal Loans are repaid with level payments over a ten-year period.

Advantages: Economical and predictable.  Able to budget more easily as monthly payments stay the same.
Disadvantages:  No major disadvantages, however, other options may be more customized to fit you.

There are also several alternative repayment plans available.

• Extended Repayment Plan: Lower monthly payments over extended repayment period (up to 30 years).

Advantages:  Lower monthly payments than Standard Plan
Disadvantages:  You’ll pay more over more time as interest accrues.

• Graduated Repayment: Smaller monthly payments that increase at a predetermined rate over a ten-year period

Advantages: Monthly payments will be easier to manage at first; initial payments will be lower than the Standard Plan.
Disadvantages:  You will end up paying more in interest over the life of the loan.  Also, without an increasing income, you may have as the monthly payments rise over time.

•  Income Sensitive Repayment: Payments are tied to income levels, family size, interest rate and loan amount; payments will rise and fall throughout the repayment.

Advantages:  Up to 25 years to repay. Any portion of the loan amount that has not been repaid up to this time is forgiven.
Disadvantages:  After 25 years, the forgiven loan balance will be counted as income and is taxable.  Parent loans are not eligible

CONSOLIDATION
If you have multiple federal student loans with varying interest rates and repayment plans, it may be a good idea to consolidate your loans.  Here are some pros and cons to loan consolidation:

• obtain a fixed interest rate and one monthly payment
• extend the time for repayment (up to 30 years)
• reduce the monthly payment amount
• pay in full one or more of your existing student loans
• you may pay MORE overall.

The interest rate for the consolidation loan is the "weighted average" of the interest rates on the loans being consolidated and is fixed for the life of the loan. Before committing to loan consolidation, be sure to discuss your particular situation fully with a loan consolidation specialist to see if loan consolidation is best for you.

If you do not have any Federal Direct Student Loans , you must first contact the holders of your loans or loan servicer to see if any participate in the consolidation loan program. If so, they will provide you with the application and an explanation of the procedure.

If the federal loan holder does not offer a federal consolidation loan program, does not offer you acceptable income-sensitive terms, or you intend to apply for the Public Service Loan Forgiveness Program; you can apply for a Federal Direct Consolidation Loan.

DEBT MANAGEMENT
In order to manage your student loan debt, you will need to manage your finances in general. Good money management involves setting goals, setting a time frame to reach those goals, and developing and following a budget. To reach your goals, you should begin thinking about your budget while in college. The amount of your expected starting salary is an important element in creating and managing a budget. You may wish to contact the Purdue University Center for Career Opportunities for up-to-date salary information for your field and the part of the country in which you intend to live.

The U. S. Department of Education has made available to students the office of the FSA Student Loan Ombudsman. This office works with student loan borrowers to informally resolve federal loan disputes and problems. It is best to think of the Ombudsman as a last resource. When you have made a reasonable effort to resolve your student loan problem with your lender/servicer and the problem is still not resolved, contact the Ombudsman. This office may be contacted via on-line assistance at www.ombudsman.ed.gov, via e-mail at fsaombudsmanoffice@ed.gov; or via telephone 1-877-557-2575 (toll free).

FURTHER INFORMATION
Contact your lender or servicer for more information about Federal Loan repayment. For many Purdue borrowers, Sallie Mae is the servicer of loans. Sallie Mae can be reached on the web at www.salliemae.com or by telephone at 1-888-272-5543.

Federal Direct Loan student loan information is available on the Federal Direct Loan Servicing website.

All Federal Student Loan information is also available through the National Student Loan Data System (NSLDS) website at www.NSLDS.ed.gov