Direct Loan Borrower Rights & Responsibilities
As a student borrower, you are entitled to:
- A copy of your repayment schedule and detailed information about your interest rates, fees, balance owed and repayment options;
- A six month grace period before repayment begins;
- A standard repayment period of at least ten years.
As a student borrower, you have the right to:
- Be notified if your lender sells or transfers your loan and have new servicer contact information provided to you
- Prepay all or part of your loan at any time without penalty
- Defer repayment for specific time period, if you qualify
- Request forbearance
- Have your loan obligation canceled if you die or become totally and permanently disabled.
Acceptance of an educational loan requires:
- You must provide complete and true information on all of your loan documents.
- You must notify your lender if you change:
- Name, address or telephone number
- Social security number
- Enrollment status (e.g. withdrawal, graduation or enrolled less than half time)
- You must repay your loan on time and in full even if you:
- Do not graduate or complete your program of study
- Are unable to secure employment
- Are dissatisfied with the education you received
- You must make payments on your student loan even if you don’t receive a bill or repayment notice. If you have not received a billing schedule, please contact your loan service provider.
- You must communicate with your loan service provider if you are having trouble making payments. You may be able to reduce or postpone your payments.
The federal student loan “grace period” begins the day after you graduate, leave school, or drop below half-time enrollment. Federal Direct loans have a six-month grace period; other federal student loans may have longer or shorter grace periods.
Payments are not required during the grace period; however, you may wish to pay the interest that accrues during this period. Any interest that is unpaid when repayment begins will be capitalized and added to your principal balance, increasing the total loan amount you must repay. Note: interest is charged on unsubsidized loans during the grace period, but not on subsidized loans.
How to Manage Your Student Loans
Approximately 30-45 days from the last day of your grace period, your first payment will be due. You will receive a repayment schedule during your grace period that will disclose payment amounts, due dates and the period of time you will be paying.
Direct loan consolidation allows a borrower with multiple federal student loans to combine them into a single loan with one interest rate and repayment schedule. The interest rate for the consolidation is the “weighted average” of the interest rates on the loans being consolidated and is fixed for the life of the loan.
For more information about loan consolidation under the Federal Direct Loan Program:
A deferment is a period in which a borrower is allowed to postpone payments on the loan principal. The interest accrues and is capitalized if the borrower has an unsubsidized Direct Loan. You are required to make payments on your Direct loan until all deferment documentation is complete and has been approved by your loan servicer. 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
- unemployed (up to three years)
- experiencing economic hardship (up to three years)
Should you become financially unable to make monthly payments, you may be able to to delay or reduce monthly loan payments for a short period of time at the discretion of your loan servicer.
Consequences of Default
If you do not make a payment on time, you are then considered delinquent. Default occurs when a Federal Student Loan borrower becomes 270 days delinquent in making a loan payment. There are several consequences that will result if you default on your federal student loan:
- You will not be eligible for future federal student aid
- Your student loan account may be turned over to collections
- Your credit rating will be damaged
- Your tax refunds and wages may be garnished
Developing good financial health while in college will help you manage your student loan debt when you leave school. Healthy money management while in school involves setting goals and developing and following a budget that will help you meet your goals and minimize loan debt.
Please contact your loan servicer for more information regarding loan repayment. If you would like to know how many loans you have and who your loan servicers are, please visit studentaid.gov.