Student Loans
Federal regulations stipulate that funds from the William D. Ford Direct loan program are to be used for expenses directly relating to your education. At Kirtland we strongly encourage students to monitor their student loan debt throughout their education and to limit borrowing strictly to cover tuition and related educational expenses.
Loan ENTRANCE Counseling
If you are requesting a Federal Stafford loan for the first time at Kirtland Community College, Entrance Loan Counseling is a requirement to ensure your understanding of student loans and your rights and responsibilities as a borrower.
Master Promissory Note
Federal Stafford student loans offer lower interest rates to help pay for college.
Loan EXIT Counseling
You must complete exit counseling when you leave school or drop below half-time enrollment. The purpose of exit counseling is to ensure you understand your student loan obligations and are prepared for repayment.
Other Loan Information
(click on the links below for details)
To receive a Direct Parent PLUS Loan, you must:
- Be the biological or adoptive parent (or in some cases, the stepparent) of a dependent undergraduate student enrolled at least half time at an eligible school;
- Not have an adverse credit history;
- Meet the general eligibility requirements for federal student aid. (Your child must also meet these requirements.)
How much can the parent borrow?
The maximum Direct Parent PLUS Loan amount that can be borrowed is the cost of attendance at the school your child will attend minus any other financial assistance your child receives.
How to apply for a Direct Parent PLUS loan
(Before applying for a Direct Parent PLUS Loan, make sure your child has completed a FAFSA.)
The information that you provide will be sent to the school that you select.
Apply online for Direct Parent PLUS Loan at StudentLoans.gov by completing:
- PLUS Application
- PLUS Loan Agreement (MPN)
- PLUS Credit Counseling
Finally, complete the Parent Plus Loan Request and submit the completed form to Kirtland’s Student Financial Services Office.
Alternative Education Loans are private loans through different lenders to assist with the cost of education. These loans are generally based on income and credit history. Interest rates and fees are set by each individual lender. Some students may be required to have a cosigner. Students who are considering borrowing an Alternative Education Loan should research each individual program to carefully determine which option will best suit their needs.
When you signed the Stafford Master Promissory Note (MPN), you signed a legal and binding note to repay your lender. As you leave school, it is important that you fulfill this obligation. Consider the following options.
- Standard Repayment: Typically this is the least-expensive option in terms of total interest costs. Most federal education-loan borrowers choose this option. This option provides a fixed monthly payment of at least $50 over a period of up to 10 years. A lender may permit a borrower to make smaller payments than otherwise required if the reduced scheduled monthly payment equals at least the amount of interest due on the loan.
- Graduated Repayment: This plan starts off with low payments, which then gradually increase every two years. The loan term varies depending on the total loan amount. Unless you consolidate several federal education loans, the maximum repayment term under this option is 10 years. No single payment will be more than three times greater than any other payment.
- Income-Sensitive Repayment: Monthly payments in this plan begin low and increase as the borrower’s income increases. Repayment terms can be adjusted annually to adapt to income changes. While this benefits the borrower with smaller initial payments, borrowers should be aware that by reducing early payments, the long-term interest costs will increase.
- Extended Repayment: This plan is for borrowers with accumulated loan balances of $30,000 or more received on or after Oct. 7, 1998. Under this plan, you may reduce the amount of your monthly payment by spreading payments over a period of up to 25 years. You may choose to make payments over this extended period under a level or graduated schedule. Because payments are stretched over a longer term, total interest costs will be significantly higher than under the other repayment plans. Although a borrower’s monthly payment will be lower, the total amount of money paid back over the life of the loan will be more than standard repayment.
If you experience trouble repaying your loans, read the section on Defaulting on Student Loans, which describes the consequences of defaulting and suggests other options.
This section provides information to students who are thinking about not paying on their loans. It summarizes the consequences of not paying, gives advice on how to avoid it and, if you’re already in default, how to get out of it.
You are responsible for repaying your student loans even if you do not graduate, have trouble finding a job after graduation, or just didn’t like your school. If you do not make any payments on your student loans for 270 days and do not make special arrangements with your lender to get a deferment or forbearance, your loans will be in default. Defaulting on your student loans has serious consequences.
Federal Guide to Defaulted Student Loans
The US Department of Education Debt Collection Service publishes a guide called Guide to Defaulted Student Loans to help students repay their defaulted student loans. For more information on repaying a defaulted loan, call 1-800-4-FED-AID (1-800-433-3243) or 1-800-621-3115.
Consequences of Default
If you default on your student loan:
- Your loans may be turned over to a collection agency.
- You’ll be liable for the costs associated with collecting your loan, including court costs and attorney fees.
- You can be sued for the entire amount of your loan.
- Your wages may be garnished. (Federal law limits the amount that may be garnished to 15% of the borrower’s take-home pay.)
- Your federal and state income tax refunds may be intercepted.
- The federal government may withhold part of your Social Security benefit payments. (The US Supreme Court upheld the government’s ability to collect defaulted student loans in this manner without a statute of limitations in Lockhart v US (04-881, December 2005).)
- Your defaulted loans will appear on your credit record, making it difficult for you to obtain an auto loan, mortgage, or even credit cards. A bad credit record can also harm your ability to find a job.
- You won’t receive any more federal financial aid until you repay the loan in full or make arrangements to repay what you already owe and make at least six consecutive, on-time, monthly payments. (You will also be ineligible for assistance under most federal benefit programs.)
- You’ll be ineligible for deferments.
- Federal interest benefits will be denied.
- You may not be able to renew a professional license you hold.
And of course, you will still owe the full amount of your loan.
Preventing Default
- Make sure you understand your options and responsibilities before taking out a loan.
- Make your payments on time.
- Notify your lender or servicer promptly of any changes that may affect the repayment of your loan. If you move or change your address, let them know. Likewise tell them about name changes (e.g., because of marriage), graduation or termination of studies, leaves of absence and transfers to another school.
- If you encounter financial difficulties, consider applying for a deferment or forbearance on your loans. It is better to defer your payments than to go into default. Ask your lender about these options while you are still making payments, before you default on your loan. You won’t be able to get a deferment or forbearance after you default.
- Consider using a consolidation loan to combine all of your educational loans into one big loan. This lets you send your payments to just one lender. You may also be able to extend the term of the loan in order to reduce the size of your monthly payments.
- Keep careful records regarding your loan. Put copies of all your letters, canceled checks, promissory notes, notices of disbursement and other forms in a file folder.
Getting Out of Default
To get out of default, you need to make arrangements with your servicer or lender to repay the loan. Once you have made six consecutive full voluntary on-time payments, you will be eligible for additional Title IV aid. On-time is defined as within 15 days of the due date. Voluntary excludes payments made by garnishment or other offsets. After you have made 9 of 10 consecutive payments within 20 days of the due date and applied for and received “rehabilitation”, you will no longer be considered in default. At this time record of the default will be removed from the reports to credit reporting bureaus.
For loan rehabilitation, the payments must be “reasonable and affordable”. This is determined by the guarantee agency, and will consider the borrower’s (and his/her spouse’s) disposable income and financial circumstances. It can be below the required minimum payment of $50 or the interest that accrues, whichever is greater, if the guarantee agency determines that a smaller amount is reasonable and affordable based on the borrower’s financial circumstances.
Also, if the default is very recent, the lender may not yet have reported the default to a guarantee agency. Lenders do not need to file a default claim until 90 days after the default occurs. If the borrower brings the delinquency under 270 days (the definition of default) within the 90-day period, before the lender has filed a default claim, they can cure the default.
It may also be possible to cure the default by consolidating the delinquent loan before the lender has filed for a default claim. Since the consolidation loan is a new loan and it pays off the delinquent loans, it effectively wipes the slate clean.
For information about your options, contact the servicer of the loan and/or the original lender. The financial aid office at your school should be able to tell you the name, address and telephone number of your lender and can also provide you with help and advice about repayment problems. You can also talk to the Default Resolution Group at the US Department of Education by calling 1-800-621-3115.
Collection Agencies
If you default on your student loans, the lender or guarantor may use a collection agency to collect the loan. The collection agency’s costs are added to the amount due, and the borrower is required to repay them in addition to the amount due on the loan.
Federal regulations state that a borrower who has defaulted on his or her student loans may be required to pay reasonable collection costs in addition to other charges, such as late payment fees. What constitutes reasonable is not very well defined.
For loans held by the US Department of Education (e.g., Federal Direct Stafford Loans), the department assesses collection costs at a rate of 25%.
When consolidating a defaulted loan, collection costs of up to 18.5% of the outstanding principal and interest may be included in the amount consolidated. So a collection agency might be willing to reduce its fees to 18.5% if the student consolidates his or her loans. But the collection agency is under no obligation to do so. So if the student consolidates his or her loans and the collection agency does not reduce its fees, the student must pay the amount in excess of 18.5%.
If you work out a payment schedule within 60 days of default, some collection agencies will waive or reduce the collection fee. Overall, it appears that collection costs can legally be as high as 40%, perhaps even higher.
This section provides information to students who are thinking about not paying on their loans. It summarizes the consequences of not paying, gives advice on how to avoid it and, if you’re already in default, how to get out of it.
You are responsible for repaying your student loans even if you do not graduate, have trouble finding a job after graduation, or just didn’t like your school. If you do not make any payments on your student loans for 270 days and do not make special arrangements with your lender to get a deferment or forbearance, your loans will be in default. Defaulting on your student loans has serious consequences.
Federal Guide to Defaulted Student Loans
Two options available for postponing repayment of your student loans are deferments and forbearances. If you are thinking about defaulting on your student loans, ask the lender whether you are eligible for a deferment or forbearance before you default. You cannot receive a deferment or forbearance if your loan is in default. If you default on your loans, you are no longer eligible for deferments and forbearances.
For more information about deferments and forbearances, contact the financial aid office at the school that issued the loan and/or the original lender or current servicer of your loan.
Deferments
During deferment, the lender allows you to postpone repaying the principal of your loan for a specific period of time.
Most federal loan programs allow students to defer their loans while they are in school at least half time. For Perkins Loans and Subsidized Stafford Loans, no interest accrues during the deferment period because the federal government pays the interest. For other loan programs, such as the unsubsidized Stafford loan, the interest still accrues during the deferment period. Students can postpone the interest payments on such loans by capitalizing the interest, which increases the size of the loan. (Capitalizing the interest adds it to the loan principle. This increases the amount of the debt, which means you’ll be paying interest on interest, in addition to interest on the principal.)
Deferments are commonly granted for
- students who are enrolled in undergraduate or graduate school
- disabled students who are participating in a rehabilitation training program
- unemployment
- economic hardship
These deferments are for the FFELP and FDSLP loans, not the Perkins loan. Other deferments may also be available; contact your lender for details. Note also that there are limits on the length of a deferment.
Deferments are not granted automatically. You must submit an application and provide documentation to support your request for a deferment. Do not stop making payments on your student loans until after you are notified that your deferment has been granted.
Forbearances
During forbearance, the lender allows you to postpone or reduce your payments, but the interest charges continue to accrue. The federal government does not pay the interest charges on the loan during the forbearance period. You must continue paying the interest charges during the forbearance period. Note also that there are limits on the length of forbearance. Forbearances are typically granted in 12-month intervals for up to three years.
Forbearances are not granted automatically. You must submit an application and provide documentation to support your request for a deferment. Forbearances are granted at the lender’s discretion, usually in cases of extreme financial hardship or other unusual circumstances when the borrower does not qualify for a deferment. Do not stop making payments on your student loans until after you are notified that your forbearance has been granted.
