Loans
Federal Stafford Loans
Both undergraduate and graduate students can benefit from low-interest, government guaranteed Stafford Loans. All students are eligible for Federal Stafford loans if they are enrolled at least half-time in an eligible program. Depending on you family's financial situation, you may be eligible for one or both loans:
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Based on financial need. The government pays the interest while you're in school, in deferment, or during your grace period.
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Available to all students regardless of income. You are responsible for all interest that accrues while you are in school, in deferment, or during your grace period
PLUS (Parent Loan for Undergraduate Students) Loans are affordable, low-interest educational loans designed to help parents pay for their child's education. Eligibility for these government-guaranteed loans is not based on financial need, borrowing is based on a good credit history.
Alternative Loans
Alternative loans are private loans through a lending institution and not part of federal government progams. Alternative loans are more expensive than federal government guaranteed loans and should only be used when all other options have been exhausted. Alternative loans are in the student's name and a cosigner is usually required.
Alternative Loans
You've applied for scholarships, researched grants, and talked to the Financial Aid Office about federal student loans, but you still need money to help pay for your education. Now what? At Grace University we understand that educational costs are an investment in the furture and we look forward to helping you make your college education affordable. An alternative loan may just be what you need to help fund your education.
Alternative loans are private loans through a lending institution and not part of a federal government program. Alternative loans are more expensive than federal government guaranteed loans and should only be used when all other options have been exhausted.
Loan Basics
Over the years, there has been an increase in the percentage of financial aid awarded in the form of loans. Low interest rates have made borrowing attractive for students and families. Loan programs make it possible for millions of students, who previously could not afford it, to obtain a post-secondary education. By spreading the cost of their education over the term of the loan, they can attend the school of their choice.
Loan Consolidation
Under these programs, you are able to combine one or more loans into one larger loan with more lenient terms. These programs simplify loan repayment by combining several types of loans that may have different terms and repayment schedules or may have been made by a variety of lenders. Advantages include a lower interest rate and lower monthly payments on consolidation loans. Also, the amount of time to repay may be lengthier than the single loan. Consolidation loans should result in more manageable debt, enabling you to avoid defaulting on your loans.
Features of the Consolidation Loan
- A consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years.
- The minimum monthly payment may be lower than the combined payments of your other loans.
- The amount of the time to repay the loan can be extended from 12 to 30 years.
- Although a smaller monthly payment may make a loan easier to repay, extending the term of a loan may result in a higher interest rate.
- The interest rate on a Consolidation Loan is based on the weighted average interest rate of the loans being consolidated, rounded to the next nearest higher one-eighth of one percent and capped at 8.25%.
If you consolidate eligible loans before you enter repayment, you may receive a lower interest rate. The difference between your interest rate during your in-school or grace period and during the repayment period can be as high as 0.6 percent. Rounding up the weighted average can potentially cost the student as much as 0.12%.
To find out more about Loan Consolidation, check with your lender.
Alternatives
Consolidation simplifies the repayment process, but may result in a slight increase in the interest rate. Students who are having trouble making their payments should consider some of the alternate repayment terms provided for federal loans.
Default
Borrowers who do not make payments for 180 days are considered to be in default, regardless of the circumstances.
To avoid being in default, make special arrangements with your lender to get a deferment or forbearance. Defaulting on your student loans has serious consequences.
Federal Guide to Defaulted Student Loans
The US Department of Education Debt Collection Service publishes the Guide to Defaulted Student Loans to help students repay their defaulted student loans. It includes information about repaying a defaulted student loan, loan consolidation, loan cancellation and discharge, the consequences of default, and resolving disputes, among other topics. 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, damaging your credit rating and making it difficult to obtain a car or house, and other credit cards. It also may impact your ability to land a job.
- 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 garnisheed. Your federal and state income tax refunds may be withheld.
- You'll be ineligible for deferments.
- Federal interest benefits will be denied.
- You may not be able to renew a professional license that you hold.
- You become ineligible for Title IV student aid until you repay the loan or make arrangements to repay what you already owe. This involves paying at least six consecutive, on-time, monthly payments. And of course, you will still owe the full amount of your loan.
Preventing Default
Take the following steps to prevent defaulting on your loan.
- 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 impact the repayment of your loan, including changing your address, and/or name or leaving or transferring to another school.
- Consider applying for a deferment or forbearance on your loans. It is preferable to defer your payments then to default on your loan.
These options won't be available after you default.
- Consider a consolidation loan as well as alternate repayment options, such as a graduated repayment, income sensitive repayment, and income contingent repayment.
- Keep careful records of your loan. Save copies of all letters, canceled checks, promissory notes, notices of disbursement and other forms.
Postponing Repayment
Deferments and forbearances are available if you're seeking to postpone the repayment of your student loans. Find out details before you decide to default on loans. If your loan is already in default, you will not be eligible for deferment and forbearances.
For more information, contact the financial aid office at the school that issued the loan and/or the original lender or current servicer of your loan.
In-School Loan Deferment
An In-School Loan Deferment allows you to postpone repaying a loan for a period of time for a specific reason. Most federal loan programs allow students to defer their loans while they are in school at least half time. The federal government pays the interest on the Perkins Loans and Subsidized Stafford Loans during the deferment period.
Interest still accrues during the deferment period on loans such as the Unsubsidized Stafford loan. Interest payments can be postponed and capitalized (added to the principal) at the start of repayment.
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
- Teaching in a “designated shortage” area
- Service in the armed forces
- Parental leave
These deferments apply to the Stafford and Direct loans, but not the Perkins loan.
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 you've been notified that you've been granted a deferment. There are limits on the length of a deferment.
Other deferments may also be available; contact your lender for details.
Forbearance
One of the alternatives to defaulting on a loan is to request a forebearance. If your lender grants your request for a forberance, you will not have to make any payments on your loan until the forbearance expires. Interest charges continue to accrue, however.
Forbearances are typically granted in six month intervals for up to three years.
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.
Forgiveness
The federal government will consider forgiving part or all of an educational loan under certain circumstances. These include:
- Performing volunteer work in organizations listed below
- Serving in the armed forces
- Teaching in a public or private non-profit elementary or secondary school that has been designated as a low-income school
- Working full time for at least two full consecutive years as a child care provider at a facility that serves a low-income community
- Practicing medicine in designated communities.
Volunteer Work
Volunteering in one of these organizations provides an opportunity for loan forgiveness. These volunteer organizations offer loan forgiveness. Contact them for more information:
AmeriCorps
AmeriCorps is a network of national service programs that engages more than 50,000 Americans each year in intensive service to meet critical needs in education, public safety, health, and the environment. Serve for 12 months and receive up to $7,400 in stipends plus $4,725 to be used towards your loan. Call 1-800-942-2677.
Peace Corps
Volunteers who have outstanding debts under one of the federally administered or guaranteed student loan programs qualify for certain relief during their Peace Corps service. Different rules apply to each type of loan. Contact the Peace Corps at 1111 20th St., NW, Washington, DC 20526 or 1-800-424-8580.
Volunteers in Service to America (VISTA)
Volunteer with non-profit groups such as a shelter for abused or battered women, a health clinic for low-income families or a disadvantaged school. You'll receive an education award of $4,725 that can be used to pay off a student loan. Call 1-800-942-2677 or 1-202-606-5000.
Military
Students who are in the Army National Guard may be eligible to receive up to $10,000 from its Student Loan Repayment Program.
Teaching
In 1998 Congress appropriated funds for a student loan forgiveness program for teachers. The program is intended to encourage teachers to enter and continue in the teaching profession.
To be eligible:
- You must be a full-time teacher for five complete, consecutive academic year, with at least one year of teaching after the 1997-1998 academic year.
- You received the loan to be forgiven before the end of your fifth academic year of qualifying teaching service.
- Your outstanding loan was borrowed on or after Ocotober 1st, 1998.
- You have been teaching at an elementary or secondary school that is listed in the Annual Directory of Designated Schools for Teacher Cancellations Benefits at www.ifap.ed.gov.
- You have made satisfactory repayment arrangements on your defaulted students loans with your lender.
- You have not received a benefit for the same teaching service under the Americorps program of Subtitle D of Title 1 of the National and Community Service Act of 1990.
Another teacher loan forgiveness program offered by the National Defense Education Act allows students who become full-time teachers in designated elementary or secondary schools serving students from low-income families to have a portion of their Perkins Loan forgiven. This also applies to full time special education teachers who teach children with disabilities in public or other non-profit elementary or secondary schools.
This program forgives up to 100% of a student's loan. Contact your school district's administration or FSA for Students to learn more.
Legal and Medical Studies
The National Association for Public Interest Law has information regarding law schools' policies on forgiving or extending the loans of students who serve in public interest or non-profit positions. Contact them at 2120 L Street. NW, Suite 450, Washington, DC, 20037; 1-202-466-3686).
Fully-trained health professionals who have outstanding educational loans are eligible to compete for repayment of those loans if they choose to serve in a community of greatest need in the National Health Service Corps.
Occupational and physical therapists also qualify for student loans. Contact the American Physical Therapy Association, 1111 North Fairfax St., Alexandria, VA 22314-1488; 1-800-999-2782 or the American Occupational Therapy Association, P.O. Box 31220, 47200 Montgomery Lane, Bethesda, MD 20824-1220; 1-301-652-2682.
Repayment
There are four repayment plans for federal loans: Standard Repayment, Extended Repayment, Graduated Repayment, and Income Contingent Repayment. The Extended, Graduated, and Income Contingent plans offer lower monthly payments which extends the term of the loan and increases the total amount of interest paid over the lifetime of the loan.
You have the opportunity to change your repayment annually, as long as the maximum loan term for the new plan is longer than the amount of time your loans have already been in repayment.
The repayment plans are as follows:
Standard Repayment
A 10-year repayment period
An interest rate of 8.25%
Minimum monthly payment of $50
Extended Repayment
Minimum monthly payment of $50
Loan term of 12 to 30 years
Smaller payments over a longer period of time but more interest to pay
Graduated Repayment
Payments are lower at the beginning of your repayment period and increase every two years
Loan term is 12 to 30 years
Minimum monthly payment is $25
Monthly payment can be no less than 50% and no more than 150% of the monthly payment under the standard repayment plan
Income Contingent Repayment
Payments based on income and balance of loan and fluctuates with your annual level of income
Payments must at least equal the interest accrued on the loan between scheduled payments
The loan term is up to 25 years
$50 minimum monthly payment
Loan Counseling
Both Entrance and Exit Counseling sessions will only take around 20-25 minutes of your time. You will have to take a multiple choice quiz which is "open book", so you can't fail.
Click on the title below to connect to an Individual Loan Counseling Session
Loan Entrance Counseling
The Federal Government requires all students be counseled regarding your rights and responsibilities as a student loan borrower before you borrow. You student loan money will not be applied to your bill until this federal requirement is taken care of.
Loan Exit Counseling
Before you graduate (or if you drop below half-time attendance), regulations require that you complete an exit counseling session. The counseling session provides information about how to manage your student loans after college.
