A Master Promissory Note (MPN) is the binding legal document you sign when you apply for a student loan. It lists the conditions under which you are borrowing and the terms under which you agree to pay back the loan. It will include information on how interest is calculated and what the deferment and cancellation provisions are. It is very important to read and save this document because you will need to refer to it later when you begin repaying your loan.
Loan applications and master promissory notes can be completed on-line at the sites listed below. You will need to have your FAFSA PIN to electronically sign your MPN.
ENTRANCE COUNSELING - All Stafford Loan borrowers at San Juan College must complete entrance counseling before you're given your first disbursement of the loan. During entrance counseling the borrower is reminded of the seriousness of taking out a loan, the terms and conditions, the repayment obligations, and the consequences of defaulting on a loan. Students taking a loan through Direct Lending must go to www.studentloans.gov. You will need your FAFSA PIN to log into the site and complete the information.
EXIT COUNSELING - When a loan borrower graduates, withdraws, or drops below half-time status, he/she must complete exit counseling. During exit counseling the terms and conditions of the repayment of the loan are reviewed, along with debt management strategies. Exit counseling can be completed at www.studentloans.gov. You will need your FAFSA PIN to log into the site and complete the information.
Federal loan monies are disbursed in at least two installments; no installment will be greater than half the amount of your loan.
Alternative loan monies are disbursed one installment per semester and usually are received during the first week of classes.
Whatever your loan type, your loan money must first be used to pay for your tuition and fees or other charges on your school account. If loan funds remain, you'll receive them by check and through the postal service, unless you give the school a written request to hold the funds until later in the enrollment period.
Your repayment amount will depend on the size of your debt and the length of your repayment period. More comprehensive information on repayment of student loans can be reviewed at the Federal Student Loans Repayment Page. The repayment periods for Stafford Loans vary from 10 to 30 years depending on whether the loan is a FFEL or a Direct Stafford Loan and depending on which repayment plan you choose. When it comes time to repay, you can pick a repayment plan that's right for you:
Calculating examples may help you in estimating how much you will be expected to repay when your Federal Loan becomes due. The repayment schedule for a specific student's loan(s) may be different from the examples used.
Your lender will send you information about repayment, and you'll be notified of the date repayment begins. However, you are responsible for beginning repayment on time, even if you don't receive this information. It is important to remember that failing to make payments on your loan can lead to default.
Your loan will enter into default when you fail to repay the loan according to the terms agreed when you signed the Master Promissory Note (MPN). The consequences of default are severe! The school, the lender or agency that holds your loan, the state, and the federal government may all take action to recover the money, including notifying national credit bureaus of your default. This notice affects your credit rating for a long time. For example, you might find it very difficult to borrow money from a bank to buy a car or a house. In addition, the IRS can withhold your U.S. income tax refund and apply it to the amount you owe, or the agency holding your loan might ask your employer to deduct payments from your paycheck. If you return to school, you are not entitled to receive additional federal student aid. In many cases, default can be avoided by submitting a request for a deferment, forbearance, or discharge and by providing the required documentation.
A deferment is a period of time during which no payments are required and interest does not accrue (accumulate), unless you have an unsubsidized Stafford Loan. In that case, you must pay the interest.
Under certain circumstances, you can receive periods of deferment that allow you to postpone loan repayment. The most typical loan deferment circumstances are enrollment in school at least half time, the inability to find full-time employment (for up to three years), and economic hardship (for up to three years). Other deferment circumstances are loan specific. These periods of deferment don't count toward the length of time you have to repay your loan. You are also unable to get a deferment on a loan that is in default.
Receiving a deferment is not automatic. You or your parents must apply for it. To apply for a deferment of your student loan, you will need to contact the lender or agency holding the loan. You MUST continue making payment on your loan until you're notified that your deferment has been granted! If you don't, and your request isn't approved, you'll become delinquent and could end up with a loan in default.
If you temporarily can't meet your repayment schedule but you don't meet the requirements for a deferment, your lender might grant you forbearance. During forbearance, your loan payments are postponed or reduced. Interest continues to accrue (accumulate). You are responsible for paying it, no matter what kind of loan you have.
Under certain circumstances, you can receive periods of forbearance that allow you to postpone loan repayment. Generally, you can receive forbearance for periods of up to 12 months at a time for a maximum of three years. You will have to provide documentation to the lender or holder of your loan to show why you should be granted the forbearance.
A loan discharge (cancellation) releases you from all obligation of having to repay a student loan. However, it is only under specific circumstances that this is possible. Two examples are your death or your total and permanent disability. Also, your loan might be discharged because of the type of work you do: teaching in a designated low-income school, for example. In order to qualify for a loan discharge, you must contact the lending institution or serving agent that holds the loan.
It is important to remember that your loan cannot be cancelled because you didn't complete the program of study at your school (unless you couldn't complete the program for a valid reason - because the school closed, for example). Also, cancellation is not possible because you didn't like the school or program of study, or you didn't obtain employment afterwards.
Loan Consolidation is a way for you to consolidate (combine) multiple federal student loans with various repayment schedules into one loan: either a Federal Family Education Loan (FFEL) Consolidation Loan or a Direct Consolidation Loan. Then, you can make just one monthly payment. You can consolidate during your grace period, once you have entered repayment, or during periods of deferment or forbearance.
With a consolidation loan, your payments might be significantly lower, and you can take a longer time to repay (up to 30 years). Also, you might pay a lower interest rate than you would on one or more of your existing loans. However, it is important to remember that consolidation significantly increases the total cost of repaying your loans. Because you can have a longer period of time to repay, you'll pay more interest. In fact, consolidation can double total interest expense. So, compare the cost of repaying your unconsolidated loans with the cost of repaying a consolidation loan.
To qualify for a consolidation loan or to receive more information about interest rates, you can contact the consolidation department of a participating lender or the holder of the loan(s).
It is important to keep in touch with your lending institution or Direct Loan servicing office. You must notify your lender or servicing office when you:
Failure to keep updated information with your direct loan servicing office could cause your loan to go into default or to be sent to a collection agency.
If you have additional questions you may also contact Dawn Sells, Student Loan Advisor, (505) 566-3420.
(Skype) (505) 566-3420 FREE