I wanted to discuss a little bit about getting student loans from the government. As I said in my first post, it is really quite important that you do your proper research in getting a loan and of course knowing the rules for paying it back. One of the most popular loan types out there are from the government.  One of type of loan that is offered is what they term a direct loan.

The term direct is misleading though. I say that because while the government under the U.S. Department of Education actually is the one loaning the money to the student, the loan servicer if you will can actually be a bank, credit union or other type of business. This is important because you will need to focus on the fact you are getting what again they term a “direct” loan.

 

Ok so what are the features of a direct loan? The Features of Direct Loans Are:

• The place that you borrow from is the federal government. Therefore you are given a single point of contact. This is your loan servicer whether that be a private institution or otherwise. They are in charge of repayment and this would be even if you have different school loans with them
• You can access your loan directly from your service provider’s website. This is similar to internet banking or other types of on line accounts.
• The borrower can decide from a few different repayment plans that can be tailored to almost any student and you can switch your method of paying the loan back if you need to make an adjustment

• The major difference between undergraduate and graduate loans is the interest rate. The interest rate for graduate loans is more than undergraduate loans.

When it comes to repaying your student loans

The most common terms for repaying your loans are 10 to 25 years. However please note there are many options to choose from.

When your first payment is due your loan service provider will tell you the first date that your payment is to be paid. If you have not chosen a plan to pay back your loan, the default term will be added. The default is ten years. Most students who borrow funds due take the standard plan. Of course as we said earlier there are multiple options so you can choose the best one that suits your needs.

The advantage of a direct loan is that you can change your term at any time.

 

 

Great Payback Option

One of the great payback options is to do it through automated debiting of your checking or savings account. Again this is similar to a mortgage or other

What if you are having difficulty making your payments?

One of the most important things you can do if you see you are falling behind on your loan is to contact your loan administrator as soon as you can. They will then look to assist you in determining the best course of action.

 

It is to your benefit to contact them early before they contact you. If you are proactive about the situation they may be able to assist you more then if they only get wind of non payment through having missed one or more payments.

 

 

 

They can do one of the following among other things:

• Assign a new payment plan option
• If you meet the proper requirements they can offer a deferment. That means you will be able to temporarily stop making payments to your account. This will hopefully allow you to get your finances in order and then begin making payments again when things are better.
• Another possibility is forbearance. This means that you do not for the moment have to make payments on your loan. It tends to be a shorter term. Forbearance can provide an extension in terms of the terms of the loan. Finally it can also mean making smaller payments on your normal payment cycle. It is important you study up on the terms of a forbearance prior to making a decision to go that route.

If you do not get approved for any of the above options and are unable to make your payments this can put the loan in default and does have consequences.

The first status upon not paying back your loan is call delinquent. This means that your monthly payment is not received upon the first date it is due. If that continues, meaning the subsequent payments are not met then there will be notices of failed payment that will tell you the penalty for not making payment. The notice will also state that you have a legal obligation to pay back your student loan.

If you are delinquent on your loan payments, contact your loan servicer immediately to find out how to bring your account current. Late fees may be added, and your delinquency will be reported to one or more national consumer reporting agencies (credit bureaus), but this is much better than remaining delinquent on your payments and going into default.

So What Are the Penalties of Defaulting on Your Student Loan?

If you do not pay your loan back then:

• The ability to pay the loan over time will no longer be an option therefore you will have to pay back the entire loan at that time
• There is the potential for any tax refund whether state or federal or other to be used towards paying back your loan
• There is also the possibility of having wages garnished which means they tell your employer to take money off of your paycheck to pay the student loan
• The federal government can sue you to gain back the loan
• Any court fees, attorney’s fees or collection agency costs will be passed along to you the student
• If you are going for a professional license that is a result of your degree that may not be granted to you
• All future student aid or loan programs may be denied
• Future loan deferment will no longer be an option
• The credit bureaus will be notified of the default which may impact in turn your credit rating

Again further investigation should be done if your loan is either in default or you can no longer make your loan payments

There is the option of loan forgiveness which means part or all of your loan will not have to be paid back. However there are strict guidelines that should be reviewed in order to be entitled to that option.

As a reminder, always do your research and choose your best option for paying back your student loan.