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What should I know about student loans?

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Student loan laws in Georgia

What should I know? +

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What are student loans?

College is expensive. Most students need help paying for their education. One way to pay for college is with student loans. A loan is money that you borrow and pay back with interest. There are federal student loans and private student loans.These loans can be very different, so before you borrow any money for school, make sure you understand the type of loan, the loan’s terms and conditions. 

 

What are federal student loans?

Federal student loans and federal parent loans are funded by the federal government. There are two types of federal loans currently offered to students:

  • Direct Subsidized Loans. These are loans given to students based on their parents or guardians’ income. For students with financial need, the government pays the interest on a Direct Subsidized Loan:

    • While you are in school, at least part time;

    • For six months after you leave school,

    • If you are approved for a deferment (a pause in your loan payments).

Your school decides the amount you can borrow based on your financial need.

 

  • Direct Unsubsidized Loans. These are loans available to all undergraduate and graduate students. Unsubsidized loans are not based on financial need. Your school decides how much you can borrow based on tuition and any other financial aid you get. Interest on these loans will start adding up as soon as you borrow the money even though you will not be responsible for repaying the loan until six months after you graduate or stop attending school. 

 

If you have older loans, your loans might be called Stafford, FFEL, or Perkins loans. These types of loans are no longer offered.

 

The federal government also offers a loan for parents of students called the Direct PLUS Loan to help pay for college costs not covered by other financial aid. These loans are not based on financial need, but a credit check is required. 

 

Federal student loans have rules and protections for borrowers that private loans often don’t, including:

  • Payments are not due until you graduate, leave school or enroll less than half-time,

  • The interest rate on federal loans are fixed,

  • You do not need a credit check,

  • You can consolidate your loans (combine all federal loans so you have one payment),

  • If you cannot repay your loan, you are able to temporarily postpone or lower your payments,

  • Your loan payments can be based on your income,

  • There are no fees if you pay your loan off early,

  • There are some circumstances where you can have your loan cancelled or forgiven. 

 

Borrowers often get multiple offers from private companies such as Earnest or SoFi offering to buy or refinance their federal loans at a lower interest rate. Be careful of this option. Once you refinance with a private company, you no longer have the rights and protections of a federal loan. You will no longer have the right to discharge the loan because of disability or false certification. 

 

What are private student loans?

Private loans are loans made by banks, credit unions, and other private organizations. The terms of these loans will depend on the lender, but they are usually more expensive than federal loans. While federal loans have advantages like fixed interest rates, the option to delay payment and repayment plans, private loans often do not. Private loans are like any other loan and your repayment schedule will depend on the terms and conditions of the loan.

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What are my rights and responsibilities if I take out student loans?

If you are enrolled in undergraduate or graduate school more than half-time, you have the right to get Direct Unsubsidized Loans. If you show financial need, you have the right to get Direct Subsidized Loans. The amounts of these loans are determined by the school.

 

You are responsible for paying back any money you borrow:

  • You are responsible for understanding the terms of any loan you take out. When you sign the promissory note, you are saying that you will pay back the loan even if you do not finish college or get a job. 

  • You are responsible for making payments on time, even if you do not receive a bill or reminder.

  • You are responsible for contacting your loan servicer if you cannot make your payments or need to change your payment plan.

  • You are responsible for contacting your loan servicer if you change your name, address, phone number, social security number, or driver’s license number.

 

If your loan servicer sells your student loan, you have the right to be notified of the name, address and phone number of the new loan owner.

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What can I do? +

Contents


How can I decide if I should take out a student loan?

You have to repay any student loans you take out whether or not you graduate or get a job in your field. Before you take out a student loan, you should consider whether you will be able to repay this loan in the future. Some things to consider are:

  • The amount you will need to borrow to pay for your entire education. Add up the amount you think you will need to pay for every year you will be in school. Include:

    • Tuition,

    • Housing (rent, utilities, furnishings, etc.),

    • Food and entertainment, 

    • Books and fees,

    • Other expenses like cell phone bill, car payment, health insurance, technology, supplies, etc.

  • Research the average starting salary in your field. Your loan payment should be a small amount of your overall budget. 

  • Research what percentage of graduates from the colleges and career schools you are considering are employed after graduation. This will give you a good idea whether you can expect to get a job in your desired field.

  • Ask about the loan default rate for the colleges or career schools you are considering. A school with a low default rate indicates that their graduates are earning enough to pay back their loans and that students are incurring less debt. 

  • Understand the interest rate and fees (the terms) of the loans. 

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How can I apply for federal student loans?

To apply for a federal student loan:

  • First, fill out a Free Application for Federal Student Aid (FAFSA) form. You can fill out the FAFSA form online at the Federal Student Aid website. You must apply before your state’s deadline. You can find all FAFSA deadlines on the Federal Student Aid website.

  • Based on your FAFSA form, your school will send you a financial aid offer. You can accept all or part of the loan you are offered. 

  • If you accept federal loans, you must:

    • Complete entrance counseling, which will give you information about your loan and repayment.

    • Sign a promissory note, which is the document that gives you the terms of the loan.

The FAFSA is free to fill out. Watch out for scammers who may try to charge you for filling out a FAFSA form. 

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How can I apply for private loans?

Private education loans are made by banks, credit unions and other organizations. These are based on your credit. If you are a student with no income, you may need a cosigner to get one of these loans. Contact your school to see if they have a list of private lenders. Most lenders will allow you to apply online. Each lender will have different terms and conditions for their loans, so compare options, asking:

  • What is the interest rate? Is it fixed or variable?

  • When do you need to start repaying the loan? Can it be paused until after you graduate?

  • Are there additional fees?

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What is default and what can I do if I default on my student loan?

If you have a private loan, check the terms of the loan to know when you are in default. For federal student loans, your loan is not automatically in default when you miss a payment.

  • If you miss a payment, your loan becomes delinquent. Your loan will remain delinquent until you repay the past due amount.

  • If you are delinquent for more than 90 days, your loan servicer will report you to the three major credit bureaus. This will negatively affect your credit score.

 

After a time, a delinquent loan will default. 

  • For Direct loans, Stafford loans and FFEL loans, you will be in default if you don’t make a scheduled payment for 270 days.an 

  • For Perkins loans, you cbe in default after the first missed payment.

 

If you default on your loan, the entire amount of your loan and interest is due immediately. Additionally:

  • You cannot get a deferment or forbearance, or choose a repayment plan,

  • You cannot get additional federal student aid,

  • The default may be reported to the credit bureaus,

  • Tax refunds and federal benefits can be taken from you and applied to your loan,

  • Your wages may be garnished,

  • The loan holder may sue you to get repayment.

 

What can I do to get out of default?

There are ways to recover from default, but you should act quickly. You can:

  • Rehabilitate the loan. You can get out of default if you make enough on-time payments after default. Contact your loan holder to start the rehabilitation process. 

    • For Direct, Stafford and FFEL loans, to rehabilitate the loan you must make 9 payments within 20 days of the due date during a 10-month period. The loan holder will set a reasonable and affordable monthly payment.

    • For Perkins loans, to rehabilitate the loan, you must make 9 payments within 20 days of the due date during a 9-month period.

If you rehabilitate the loan, the record of the default will be removed from your credit history. 

 

You can only rehabilitate a loan one time. If you default again, you cannot rehabilitate the loan to get it out of default.

 

  • Consolidate the loan. Loan consolidation allows you to pay off all of your old federal student loans with a new Direct Consolidation loan. To consolidate your loans, you must:

    • Agree to a income-driven repayment plan, or

    • Make three consecutive, on-time, full monthly payments on the defaulted loan before you consolidate. 

You cannot consolidate loans that are collected through wage garnishment. Consolidation does not remove the default from your credit history. 

 

You can only consolidate your loans one time.

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What can I do if I cannot afford my student loan payment?

If you cannot afford your private loan payment, you will need to contact your lender quickly. In most cases private student loans, like federal student loans, cannot be discharged in bankruptcy. 

 

If you cannot afford your federal student loan payment, you do have some options. However, some of these options are not available if you are already in default on your federal student loans. 

 

  • If you qualify, you can get a deferment or forbearance on your federal loans. This will allow you to temporarily stop making payments or reduce the amount of your payments.You cannot get a deferment or forbearance if you are in default. You must contact your loan servicer to request either a deferment or forbearance.

 

With a deferment you do not build interest on subsidized loans while your loan is paused. With a forbearance, you will build interest on all loans while your loan payment is paused. 

 

You qualify for a deferment:

    • While you are enrolled in school at least half-time,

    • While you are in graduate school,

    • While you are in a graduate fellowship program,

    • While you are receiving cancer treatment and for six months after treatment, 

    • While you are in a rehab training program for disabled people,

    • While you are unemployed or unable to find full-time employment, for up to three years,

    • While you are experiencing economic hardship or in the Peace Corps, for up to three years,

    • While you are on active duty military in connection with war, operation, or national emergency and for 13 months afterwards.

 

Forbearances are granted for 12 months at a time. You can request another forbearance at the end of that period if you still need it. You qualify for forbearance: 

    • You can request a general forbearance if you cannot make your loan payment due to:

      • Financial difficulties,

      • Medical expenses,

      • Change in employment, or

      • Other reasons your loan servicer approves.

Your loan servicer decides whether or not to grant you a general forbearance.

  • You can request a mandatory forbearance  (the loan servicer MUST grant if you qualify) if:
    • You are an activated National Guard member.

    • You qualify for partial repayment under the U.S. Department of Defense Student Loan Repayment Program,

    • You are a teacher who will qualify for loan forgiveness,

    • You are in the AmeriCorps,

    • The amount you owe is more than 20% of your income, for up to 3 years,

    • You are in medical or dental residency 

 

  • If you can afford to make some payment, you could also contact your loan servicer to change your repayment plan. For federal student loans, it is free to change your repayment plan at any time. However, you cannot choose your repayment plan if you are in default. 

    • There are several repayment plan options, including plans that are tied to your income.

      • If choose an income based repayment plan, you must complete an income recertification every year. If you do not recertify by the deadline, your monthly payments may increase and your unpaid interest may capitalize. Many borrowers who do not recertify their loans on time end up not being able to pay their loans.

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Can I discharge my student loans?

It is rare, but there are some times where you can discharge, or get rid of, your student loans.  

  • Bankruptcy: In general, you cannot get rid of either private or federal loans in a bankruptcy. If you can prove that paying your student loans is an undue hardship, it is possible they could be included in bankruptcy. It is very rare to get a discharge for student loans in bankruptcy. To prove undue hardship, you have to show:

    • You can't maintain a minimal standard of living for yourself and your dependents based on your current income and expenses. 

    • Your financial situation isn't likely to change during your loan's term.

    • You've done everything you can to repay the loan.

  • Total and permanent disability: You must show medical proof that you are unable to work due to an illness or injury that:

    • Is expected to result in death

    • Is expected to last for a continuous period of not less than 5 years or

    • Has continued for a constant period of not less than 5 years.

  • Closed school: If you were going to a school that closed, you may be able to get a discharge.

  • False certification: You may be able to get a discharge from Direct or FFEL loans if:

    • The school certified that you were eligible to get a loan, but you actually did not meet the requirements at the time. This includes if the school certified that you had a high school diploma but you did not.

    • The school certified that you were eligible to get a loan, but you had a status (age, criminal record, etc.) that would disqualify you from the occupation you were studying for. 

    • The school signed your name on a loan application or promissory note without your authorization or knowledge and you did not get the money.

  • Identity theft or unauthorized payment: If someone else took out the loan in your name, you can discharge the loan.

  • Unpaid refund: If you enrolled, but did not attend school, and did not get a refund, you may get a cancellation of the loan.

To apply for a discharge you must contact your loan servicer.

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Who is eligible for loan forgiveness?

There are types of loan forgiveness and one type of loan cancellation. 

  • Public Service Loan Forgiveness: If you work full-time for a qualifying employer, this program forgives (wipes out) the rest of your federal Direct Loans after you make 120 monthly payments under a qualifying loan repayment plans. Qualifying employers are:

    • Government organizations at any level (federal, state, local, or tribal)

    • Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code

    • Other types of not-for-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, if they provide certain types of qualifying public services

  • Teacher Loan Forgiveness: If you teach full-time for five years in a low-income school, you might be eligible for up to $17,500 of loan forgiveness on Direct Subsidized and Unsubsidized loans.

  • Perkins Loans Cancellation: Perkins loans are no longer available, but if you received a Perkins loan in the past, you may be eligible for cancellation of some or all of the loan if you do certain work. Work that qualifies for cancellation includes:

    • Teachers,

    • Early childhood education provider,

    • Employee at a child or family services agency,

    • Faculty member at a tribal college or university,

    • Firefighter,

    • Law enforcement officer,

    • Librarian with master’s degree at Title I school,

    • Military service,

    • Nurse or medical technician,

    • Professional provider of early intervention (disability) services,

    • Public defender,

    • Speech pathologist with master’s degree at Title I school, or

    • Volunteer service (AmeriCorps VISTA or Peace Corps).

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Are there loans available for Georgia students?

If you attend a college in the University of Georgia, Technical College System of Georgia or Private postsecondary institution in Georgia, you might be eligible for a Student Access Loan. The Student Access Loan is a 1 percent fixed rate loan. This is a private loan and cannot be consolidated with federal loans.

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Resources for getting student loans

 

Resources for paying student loans

Last Review and Update: Jan 22, 2020