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Q. |
What
is a Master Promissory Note (MPN) |
| A. |
The MPN replaces the Common Federal Stafford and Common
Federal PLUS Application and Promissory Note, and is designed
to be simpler and clearer for both students and schools.
Generally, if you borrow from a school that uses the serial
MPN and you do not change lenders, you will not have to
fill out a new loan application each time you apply for
a Stafford loan. The MPN is good for ten years unless
no disbursement is made within 12 months after you sign
or you send a written notification to the lender to stop
its use for additional loans. Please be aware that there
are schools that use the annual MPN, which means that
you must sign a new MPN each time you apply for a Stafford
loan. The MPN was designed to establish a closer relationship
between you and your lender, provide more efficient loan
processing in years to come, reduce the exchange of paper
and improve consumer information. |
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Q. |
Who
is eligible for a federal Stafford loan?
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| A. |
Students attending at least half-time at an eligible institution
may qualify for a federal Stafford loan. However, it is
up to your school to certify your eligibility for a subsidized
or unsubsidized loan based on your need. Your financial
need is determined from the information you provided on
the Free Application for Federal Student Aid (FAFSA).
Most students do qualify for some type of financial aid.
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Q. |
What
is the difference between subsidized and unsubsidized
loans? |
| A. |
Subsidized:
The federal government pays the interest while you're
in school, during the six-month grace period or during
periods of deferment.
Unsubsidized: You are responsible for
the interest while you're in-school, during grace, repayment,
and periods of deferments. During your in-school or grace
periods, interest payments can be made quarterly, or you
may have them deferred. If you choose to defer payments
and depending on when your loan was first disbursed, the
interest will accrue and will be capitalized (added to
your loan balance) at the start of repayment. It is in
the student's best interest to select a lender like AHELA
that only capitalizes upon entering repayment. |
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Q. |
Can
my parents take out a loan for me? |
| A. |
Yes, through the federal PLUS loan program, the parent
takes out a loan for his/her dependent undergraduate son
or daughter. Repayment begins within 60 days after the
final disbursement. Your school determines if you are
eligible for this loan. |
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Q. |
What
is Confirmation and Notification? |
| A. |
Confirmation requires you to confirm with your Financial
Aid Office whether you want, or do not want, the loan
that has been awarded. If you want the loan, but would
like the amount reduced, the confirmation process allows
you that option. With Notification, the school informs
you that your loan has been awarded for a specific amount
and will be disbursed unless you notify your school that
you either do not want the loan or would like it reduced.
Your school's Financial Aid Office decides which process
to use. |
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Q. |
What
if I decide I don't need this loan? |
| A. |
The loan has not been finalized until you endorse the
disbursement check. If you do not want the check, you
can request that the school send it back to the lender.
If the disbursement is being sent via an electronic funds
transfer (EFT), you may request to have the disbursement
canceled. Check with your institution for its specific
EFT cancellation policy. |
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Q. |
How
will my loan be sent to the school? |
| A. |
It will be sent in a check made co-payable to the school
and the student or by electronic funds transfer (EFT)
to the school. |
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Q. |
When
is my loan disbursed? |
| A. |
The school determines or designates disbursement dates
that your lender follows. Your loan will be disbursed
in at least two payments co-payable to the school and
the student. First-time borrowers receive their first
disbursement 30 days after classes start. |
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Q. |
If
my tuition and fees are paid and the student loan proceeds
received create a credit balance, am I entitled to still
receive those funds? |
| A. |
After payment of tuition and fees, remaining funds are
paid to the student. Check on your school's policy. |
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Q. |
If
I leave school before the end of an academic term, what
happens to my loan? |
| A. |
If the loan has not been disbursed to you, the school
will return the full amount to the lender. If you have
already received the loan proceeds, you may be required
to return a prorated amount to the school, depending on
the time you were enrolled/attending. Please check your
school's refund policy. The school is required to return
the refund amount to the lender. Your lender will apply
the refund to the unpaid principal balance of your student
loan. You are responsible to repay any funds not refunded
to the lender by the school. |
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Q. |
What
if I'm in repayment and go back to school or can't repay
my loan(s)? |
| A. |
There are several options available to those returning
to school or in financial hardship. There are different
repayment options available that may temporarily postpone
payments (such as a deferment or a forbearance) or a different
repayment option (such as graduated, income sensitive
or extended repayment plans). Contact your lender immediately
if you return to school or have difficulty making your
monthly payments. |
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Q. |
How
much are my payments going to be? |
| A. |
Your payment depends on the loan amount and interest rate
(there is a minimum payment of $50.00 per month or $600
per year for all of a borrower's FFELP loans with each
lender). Call your lender for your payment amount. |
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Q. |
Can
I choose to pay off my loan early or make a larger payment
than required? |
| A. |
You can increase payment amounts or pay off your student
loan at anytime without penalty. |
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Q. |
Are
there different repayment options for paying back a loan?
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| A. |
Several plans may be offered by a loan servicer to assist
borrowers in repaying their student loans. The plans usually
offered are:
- Prepayment:
You may prepay part, or all, of your loan at any time
without penalty. This may decrease your total costs.
You may elect to accelerate repayment of your loan
by increasing the amount of your monthly payment.
- Level
or Standard Repayment: The most common payment
arrangement is a level payment option where every
payment is the same amount. Under this option, the
payment amount will be fixed in order to repay the
loan obligation within the required loan term.
- Graduated
Repayment: Many lenders and servicers allow
you to begin repayment with smaller monthly payments
and gradually increase the payment amount over time,
with no payment greater than three times any other
payment. The graduated repayment plan assumes your
income will grow to cover the increasing payment amounts.
Total interest paid on this repayment option will
be somewhat higher than the level repayment option,
because interest accrues on a higher balance for a
longer period.
- Income
Sensitive Repayment: Many lenders and servicers
offer an Income Sensitive Repayment (ISR) plan where
payment amounts are determined by utilizing your total
gross monthly income. ISR payments must equal at least
the monthly accrued interest. You must request and
be eligible for this lower payment plan. An ISR is
granted in 12 month increments so you must annually
request an ISR from your lender or servicer.
- Loan
Consolidation: You can request a single lender
or servicer to pay off the principal balances of all
your loans and issue a single loan with new terms.
Check with your lender to see which loans are eligible
for consolidation. Check with your loan servicer for
specific details on each of the plans offered.
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Q. |
What
is an Ombudsman? |
| A. |
The Department of Education has designated the Office
of the Ombudsman to assist borrowers in informally addressing
and resolving problems and complaints regarding their
Title IV loans. These requirements apply to schools, lenders
and guaranty agencies under three Title IV student loan
programs: the Federal Family Education Loan Program, the
William D. Ford Federal Direct Loan Program and the Federal
Perkins Loan Program. For more information, contact the
Office of the Ombudsman:
U.S.
Department of Education
Student Financial Assistance
FSA Ombudsman
830 First Street, NE
Fourth Floor
Washington, DC 20202-5144 |
(877) 557-2575 - Phone
(202) 275-0549 - Fax
http://ombudsman.ed.gov
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