Tips on Loan Repayment

Terms of your Loan

Interest Rate for Variable Stafford Loans
Fall 2006 - Spring 2007
6.8 % while in school and during grace-period
6.8% during repayment
8.25% maximum cap
Rate is good through June 30, 2007
Will reset beginning July 1, 2007
Grace Period for 6 months
(beginning when last enrolled at least half time)

Repayment Options

Prepayment - You may pre-pay all or part of your loan at any time without penalty. This may substantially decrease your total interest costs.
Standard Repayment Plan – Under this plan, your monthly payment will remain the same over the entire repayment period. This repayment plan is the most economical. Term is up to 10 years.
Graduated Repayment Plan – As its name suggests, this plan begins with smaller payments, followed by a gradual increase in the payment in the payment amount at specified intervals. Your interest rate and the repayment period remain the same, but you’ll probably pay more interest over the term of the loan. Term is up to 10 years.
Income-Sensitive Repayment Plan – This plan ties the size of your monthly payment to your income level with adjustments to your payment amount made annually. Your payment must be large enough to cover interest charges. This plan can increase the amount of interest you pay over the term of your loan. Term is up to 10 years, but repayment may take longer than that. If so, your lender will use forbearance to lengthen the term for up to five year (15 years total).
Consolidation – Your outstanding loans could be combined into a single new loan with new terms. You would have a new interest rate and repayment could extend up to 30 years. Be sure to consider the following before deciding to consolidate:

Consolidated loans may have a higher interest rate.
You may lose certain deferment and forbearance rights.
If you choose a longer repayment period, your monthly payments will be reduced but the total interest you pay will be higher.

Forbearance and Deferment Options

If you are temporarily unable to meet your repayment obligation, your servicer may grant a forbearance, which lets you postpone or reduce your payments for an agreed upon period of time. You will still be responsible for any interest that accrues during the forbearance period, but you may be able to pay it later. Contact the servicer of your loan for more information.

Deferments allow you to stop both the payments and the interest on your loans. By law, there are a number of deferments available, including:

Returning to school at least half time
Unemployment
Economic hardship
Others as defined by the federal government

To request a deferment, you will need to complete a deferment form (available from your loan servicer). A deferment can take 30 days or more to process, so file as soon as possible. You must keep making your payments until you receive notice that your deferment has been approved.

If you don’t repay your loan. . .

Delinquencies, or a monthly payment more than 30 days late, are reported to credit bureaus. This can hurt your chances for obtaining loans in the future, for cars, a home, etc. Also you may lose eligibility for further financial aid, deferments and forbearances until the delinquency is cleared up. Default occurs when there is no payment made for 270 days.
The penalties for defaulting are:

A bad credit report
Assignment of loan to a collection agency
Full balance of loan is due (no more monthly payment privileges)
Loss of eligibility for future financial aid (this includes grants)
Withholding of state and federal income tax refunds and California lottery winnings
Your wages may be garnished (a portion withheld for repayment)

Your Rights as a Borrower. . .

You are entitled to receive a repayment schedule prior to your payment due date.
If your loan is sold or transferred, you will be notified in writing and given the name, address and phone number of the new holder. Be sure to open all your mail so do not overlook this important information.

Your Responsibilities as a Borrower. . .

Once you sign your student loan prom note and endorse your check your legal responsibilities begin, even though you’re still in school.
One responsibility is to keep in contact with the holder of your loan. You must inform the holder of the following changes:

Name, address or phone number
Transferring to another school
Leave of absence, withdrawal from school, or dropping below halftime enrollment
New graduation date

#1 responsibility: You must repay your loan!!!!

Tips to make your repayment easier

Get organized. Make a single student loan file for all your loan documents, information and payment records. You may want to keep this Tip Sheet in your file as a reference.
Read your mail. Important notices about your loan, including loan sales, will come by mail. Open and read these notices immediately, and respond or file them, as appropriate.
Know who holds and who services your loans. Your loan holder and servicer may not be the same company. Many loan holders contract with servicing agents to collect payments and otherwise administer their student loans. It’s up to you to keep track.
Call if things change. Notify your loan holder or servicer if you change your name or address. You should also call them if you decide to return to school more than half time.
Call if you are having problems making your payment on time. Ask if special payment arrangements can be made.
Write your loan account number on all loan-related correspondence and checks. Keep copies of all correspondence.
Take notes of your phone conversations with your loan holder or servicer - who talked to, what was discussed – and keep this information in your loan file.
Set up a budget for yourself and stick to it.

Did you know

Financial Aid & Scholarship Office
One Washington Square
San José, CA 95192-0036
408-283-7500
fao@sjsu.edu
Fed. School Code: 001155

Financial Aid Map Location