Loan Glossary

• When reviewing your financial aid offer, you need to get a full understanding of your cost of attendance and financial responsibilities. 
• We encourage you and your families to consider the debt from educational loans carefully before accepting any loan offers. Review alternative options available to reduce the amount you borrow. You may use the Federal Student Aid Loan Simulator to help with this.
• Calculate the total debt and monthly payments of loans accrued throughout your entire educational career, not just one academic year. 
• Compare your total debt to your projected future income. Is this a wise investment? Will the payments be manageable? 
• Consider your loan co-signers, parents who are borrowing a Parent PLUS Loan and others who may be borrowing on your behalf. Will their potential future debt payments be manageable? 

Acceptance of an educational loan requires: 

• 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 after ending or completing your program.
  • Are dissatisfied with the school or did not receive the education or other services you purchased from the school. 
• 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. 
• You must notify your lender if you change schools, name or address, or enrollment status (e.g., withdraw, graduate or enroll less than half-time). 
• Upon leaving school, you must notify your loan service provider of your expected employer and permanent address, the address of your next of kin and any changes in your social security or driver’s license numbers. 
• 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 new servicer. 
• You should keep copies of all student loan papers, documents and correspondence. 

As a student borrower, you are entitled to: 

• A repayment period of at least ten years if 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. 

Purdue University’s Cohort Default Rate (CDR) measures the number of federal Stafford and Direct student loan borrowers who default within a specified period of time. Currently, the default period is measured in a 3-year timeframe.

Purdue continues to have a below-national average 3-year default rate and is comparable with other BIG 10 and peer institutions.

Here is a link to the Federal Department of Education Official Cohort Default Rate Search for Schools website, where the most up to date Fiscal Year Cohort Default Rates are listed for all schools.

Important CDR Note: CDR rates beginning in 2020 have been significantly impacted by COVID-19 federal emergency relief measures (i.e. repayment and collections suspension on federal student loans from March 2020-September 2024).

When you accept a student loan, you also undertake the obligation to repay it. This is a serious obligation, as you may not include student loan debt should you ever file bankruptcy. 

Contrary to popular belief, default on a student loan is not ignored by colleges, banks or the government. Defaulting on student loans will affect your credit rating, and extended default eventually can lead to prosecution. Whatever your circumstances, don’t default! Lenders would rather work with you if you are finding it difficult to repay and can offer alternatives rather than have you default.  

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. 

Here are some pros and cons of 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 they 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. 

As a result of recent data breach events and heightened security concerns, many consumers are understandably taking steps to protect their personally identifiable information (PII). One of those steps may be placing a “credit freeze” on their credit profile at one or more of the credit bureaus, which prevents further credit activity from occurring without additional consent. 

Because a credit check is part of the process when a borrower or endorser completes a Direct PLUS Loan Request or an Endorser Addendum on the Studentaid.gov website, borrowers or endorsers with an active credit freeze may not be able to fully complete either process, or may receive an error message when the credit check is run. The borrower or endorser must remove the credit freeze first; this action cannot be done by the school or Federal Student Aid.

Note: Federal Student Aid can process an inquiry at two of the three main credit bureaus (currently Equifax and TransUnion). If a borrower or endorser places a credit freeze at only one credit bureau, Federal Student Aid could still receive a credit determination based on information provided by the secondary credit bureau. 

Federal Student Aid implemented additional messaging on the Studentaid.gov website on October 29, 2017. The messaging informs borrowers and endorsers that those who have a credit freeze on their credit profile will need to remove it before completing a Direct PLUS Loan Request or the Endorser Addendum. Federal Student Aid encourages schools working with borrowers and endorsers who may receive an error during the credit check process to ask about a credit freeze as a cause for the error. 

If you have additional questions about credit check processing, contact the COD School Relations Center. 

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 resort.  

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.

The difference between deferment and forbearance has to do with interest accrual (accumulation). During a deferment, interest doesn’t accrue on some types of loans. During a forbearance, interest accrues on all loan types.

• In most cases, interest will accrue during your period of deferment or forbearance. This means your balance will increase and you’ll pay more over the life of your loan.
• If you’re pursuing loan forgiveness, any period of deferment or forbearance may not count toward your forgiveness requirements. This means you’ll stop making progress toward forgiveness until you resume repayment.

Additional details on deferment and forbearance, information on how to apply and a glossary of definitions can be found at Federal Student Aid.

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. Learn more at https://studentaid.gov/h/manage-loans.

With the Subsidized Federal Loan, interest accrues during certain periods. The grace period is 6 months when no payment is required. Approximately 30-45 days after the grace period ends, 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.