Before Accepting Loans
- 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.
- 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; 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 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:
- 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.
Consequences of Default
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. Default on student loans will affect your credit rating. 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 in 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 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.
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.
Credit Check Processing for Borrowers who have requested a Credit Freeze
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 StudentLoans.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 StudentLoans.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.
COD Borrower Support Center 1.800.557.7394
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 online for assistance, via e-mail at firstname.lastname@example.org; or via telephone at 1-877-557-2575 (toll-free).
A deferment is a period (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 (per federal regulations) that has caused you to have economic hardship.
Deferments for borrowers with an outstanding FFELP loan disbursed before July 1, 1993, include:
- 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 disabled spouse or dependent
- Parental leave to care for a newborn, if you attend school in the six months before the leave
- Mothers who have pre-school age children and are entering or re-entering the workforce 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.
Learn more at https://studentaid.gov/h/manage-loans
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. Learn more at https://studentaid.gov/h/manage-loans
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.
Right to Cancel Loans
Federal regulations allow student loan borrowers up to 14 days after disbursement of funds to cancel or reduce the loans. The following describes the process to request a cancellation or reduction of student loans.
Students may contact the Bursar requesting the cancellation of any disbursed loans.
Please be aware that you will be required to replace the funds that applied towards your account with a Cashier’s check or money order payable to Purdue University. You may view financial aid funds applied to your account, (including Federal loan funds), by logging into your myPurdue account.
If you repay your loans directly to the Direct Loan Servicer, your loan account will be credited as a repayment on the loan rather than a reduction/cancellation. This means that your loan fees will not be reduced, nor will it renew your academic year eligibility. If you have already borrowed your academic year limit, you will not be able to re-borrow this amount later.