All About Stafford Loans (Part 2)



 


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Does A Stafford Loan Have Any Other Charges, Other Than Interest?
You'll pay a fee of up to 4 percent of the loan amount, which is deducted proportionately from each loan disbursement. Also, if you don't make your loan payments when scheduled, you may be charged collection costs and late fees.

When Do I Start Paying Back A Stafford Loan?
Once you graduate, leave school, or drop below half time status, you'll have six months before you begin repayment. This six-month period of time is called a "grace period".

During the grace period on a subsidized loan, you don't have to pay any principal, and you won't be charged interest. During the grace period on an unsubsidized loan, you don't have to pay any principal, but you will be charged interest. You can either pay the interest or it will be capitalized, and added onto your outstanding balance.

Is It Ever Possible To Postpone Repayment Of My Stafford Loan?
Yes, under certain conditions, you can receive a "deferment" or "forbearance" on your loan, as long as the loan isn't in default. A deferment allows you to temporarily postpone payments on your loan. If you have a subsidized loan, you won't be charged interest during the deferment. If your loan is unsubsidized, you'll be responsible for the interest during the deferment. In that case, if you don't pay the interest as it accrues (accumulates), it will be capitalized and the amount you'll have to pay will increase.

Deferments are possible for the following types of reasons:

  • Unable to find full-time employment
  • Economic hardship
  • You've enrolled in an approved graduate fellowship program or in an approved rehabilitation training program for the disabled
  • You've enrolled at least half-time at a post secondary school

If you're temporarily unable to meet your repayment schedule, but you're not eligible for a deferment, your lender might grant you forbearance for a limited and specified period. During forbearance, your payments are postponed or reduced, or your repayment period might be extended. Whether your loans are subsidized or unsubsidized, you'll be charged interest during a period of forbearance. If you don't pay the interest as it accrues, it will be capitalized.

Forbearance may be granted for the following types of reasons:

  • Inability to pay due to poor health or other unforeseen personal problems
  • You're serving in a medical or dental internship or residency
  • You're serving in a position under the National Community Service Trust Act of 1993
  • You're obligated to make payments (on certain federal student loans) that are equal to or greater than 20 percent of your monthly gross income

Deferment and forbearance are not automatic. If you have a FDSLP Stafford Loan, you must contact your Direct Loan Servicing Center to request either option. If you have a FFELP Stafford Loan, you must contact the lender or agency that holds your loan, and may have to provide documentation to support your request. You must continue making scheduled payments until you're notified that the deferment or forbearance has been granted.

Is It Ever Possible To Have My Stafford Loan Discharged (Cancelled)?

Yes, in certain circumstances. A discharge releases you from all obligations to repay the loan.

A Stafford Loan may be discharged for the following reasons:

  • The school you're attending closes down before you could complete your program of study
  • Bankruptcy (but this is decided by the Bankruptcy Court)
  • Borrowers total and permanent disability or death
  • If you become a full-time teacher for 5 consecutive years in a designated elementary or secondary school serving students from low-income families

Another type of repayment assistance (not a discharge) is available through the U.S. Department of Health and Human Services' Nursing Education Loan Repayment Program (NELRP). This program will help repay student loans for registered nurses in exchange for their service in eligible facilities located in areas experiencing a shortage of nurses. All NELRP participants must enter into a contract agreeing to provide full-time employment in an approved eligible health facility (EHF) for 2 or 3 years. In return, the NELRP will pay 60 percent of the participant's total qualifying loan balance for two years or 85 percent.

 

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