FINANCIAL AID
GETTING A LOAN - WHAT YOU SHOULD KNOW BEFORE YOU APPLY

You Must Repay Your Student Loans

Direct Loans are low-interest loans that you borrow from the U.S. Department of Education rather than a bank or other financial institution. These loans help students pay for the cost of their education. It is important that students understand that Direct Loans are real loans, just like car loans or mortgage loans. You can’t just get out of repaying a student loan if your financial circumstances become difficult any more than you could get out of a car loan or mortgage, unless you qualify for bankruptcy. But, it’s very difficult to have federal student loans discharged in bankruptcy; this happens only rarely. Also, you can’t cancel your student loans if you didn’t get the education you expected, didn’t get the job you expected, or didn’t complete your education. Remember, your student loans belong to you; you have to pay them back.

The Consequences of Default

Make sure you take advantage of deferments and forbearances when you need them. If you go back to school later, remember that you can defer making payments on the loan while you’re enrolled at least half-time at a school that’s eligible to participate in the Department’s Federal Student Aid Programs. You may also qualify for a deferment if you are unemployed or meet the Department’s rules for economic hardship. Forbearances also allow you to defer loan payments in certain situations, such as illness.

You are delinquent if your monthly payment is not received by the due date. If you fail to make a payment, the Direct Loan Servicing Center (DLSC) will send you a reminder that your payment is late. If your account remains delinquent, the DLSC will send you warning notices reminding you of your obligation to repay your loan and the consequences of default. Late fees may be added if your payments are late, and your delinquency will be reported to one or more national credit bureaus.

Default occurs when you become 270 days delinquent in making payments on your loan. If you default:

The Master Promissory Note (MPN)

To get a Direct Loan, you must sign a MPN. The MPN is a legally binding agreement that states you will repay your loan to the Department. It contains the terms and conditions of the loan and explains how and when it should be repaid. You should keep a copy of the MPN and other loan documents in a safe place for future reference.

You’ll receive a disclosure statement that gives you specific information about your loan that the school plans to disburse under your MPN, including the loan amount and loan fees. The disclosure statement also tells you how to cancel your loan if you don’t want it.