Rights and Responsibilities for Federal Student Loan Borrowers
As federal student loan borrower, we ask that you take time to read the following information which will benefit and help you understand the William D. Ford Federal Direct Loan Program. If after reading this information, you still have questions about the student loan program, you are welcome to visit one of your Financial Aid Counselors.
The Direct Loan program is provided by the U.S. Department of Education to enable a student to pay for education after high school. Eligible students borrow directly from the U.S. Department of Education to attend participating schools after filing their Free Application for Federal Student Aid (FAFSA). Students cannot exceed the annual and aggregate loan limits established by the Federal Government. Direct Loans include the following types of federal student loans:
- Direct Subsidized Loans – While in school, you are not responsible for accrued interest. Available only for undergraduates.
- Direct Unsubsidized Loans – You are responsible for all the accrued interest from the day of disbursement.
- Direct PLUS Loans – credit-based loans available for graduate students or parents of dependent undergraduates.
You repay your Direct Loan(s) to the U.S. Department of Education via a Servicer they assign to you. Before you take out a loan, it’s important to understand that a loan is a legal obligation that you will be responsible for repaying with interest.
The maximum amount of financial aid you can receive from federal, state, institutional, and/or outside sources cannot exceed the Cost of Attendance (COA) for the year. Your COA is an estimate of the costs you will incur in order to attend school here at UT Health San Antonio. This will include amounts for tuition, fees, books, health insurance, room and board, transportation, and miscellaneous expenses. Students cannot receive any federal or state aid over and above their COA for an award year. Because of this regulation, students who receive awards that would make their total aid exceed their COA will have their loans reduced to prevent an over-award. The Veteran Services and Financial Aid (VSFA) office will adjust your financial aid, including returning loan proceeds already received, and notify you by email of the changes made and why. Click here to review the COA budgets for your academic program.
Things you need to know:
In order to participate in the federal student loan programs an entrance counseling session must be completed before you can receive funds at www.studentloans.gov. You will also be required to complete the exit counseling session at the same website when you graduate or drop below half-time enrollment levels. Students who fail to complete it within 30 days of the initial notice will be emailed a link to the Exit Counseling Guide. Additional details are below for students who cease halftime enrollment levels and its consequences.
Master Promissory Note
The Master Promissory Note is a binding legal document that you must sign before you may receive a federal student loan. There is one MPN for Direct Subsidized/Unsubsidized Loans and a different MPN for Direct PLUS Loans. These may be signed electronically at www.studentloans.gov.
The MPN can be used to make one or more loans for one or more academic years (for up to 10 years). It lists the terms and conditions under which you agree to repay the loan in full and will explain your rights and responsibilities as a borrower. It’s important to read and save your MPN because you’ll need to refer to it later when you begin repaying your loan or at other times when you need information about the provisions of the loan, such as the requirements for a deferment or forbearance. If you do not want to receive more than one federal student loan under the same MPN, you must notify VSFA or your loan servicer in writing each academic year.
For each federal student loan that you receive under an MPN, you’ll receive a disclosure statement that provides specific information about that loan, including the loan amount, loan fees, and the expected disbursement dates and amounts from the federal government. Other disclosures will be provided to you throughout the loan process.
You must be enrolled in school at least half-time to receive Direct Loans and to keep your loan(s) out of repayment. If your enrollment in school drops below half-time you may have to begin making payments unless you qualify for postponement of payments. Typically this 6-month period is called a grace period or a deferment period, depending on the type of loan you received. Refer to the UT Health San Antonio Catalog for your specific program’s definition of half-time enrollment.
Federal student loans made after June 30, 2006, have fixed interest rates. Direct Loans are “simple daily interest” loans (this means that interest accrues daily). The amount of interest that accrues per day is calculated by dividing the interest rate on your loan (as a decimal) by the number of days in a year, and then multiplying that by the outstanding principal balance. For example, on a $7,500 Direct Unsubsidized Loan with a 6.8% interest rate, the amount of interest that accrues per day is $1.39: (0.068 / 365) * $7,500 = $1.39.
Option to pay interest while in school
You have the right to pay interest on your Direct Unsubsidized and Direct PLUS Loans while you are in school to save money and help you pay off your loan faster. Making payments while you are not required to do so (while you are in school, during your grace period, or during a period of deferment or forbearance) instead of allowing interest to be capitalized (added to the principal balance) can substantially reduce the cost of your federal student loan over time.
You have a choice of several repayment plans that are designed to meet your needs. The amount you pay and the length of time to repay your loans will vary depending on the repayment plan you choose. There are traditional repayment plans in which the same monthly payment amount for the entire repayment term are calculated up-front and disclosed to you. There are also income-driven plans you may be eligible for based on your income and family size. Although you may select or be assigned a repayment plan when you first begin repaying your student loan, you can change repayment plans at any time by contacting your servicer. You also have the right to pay the loan on a shorter time schedule or in full without any prepayment penalties.
Stay In Touch With Your Federal Loan Servicer
Open all your mail and read everything pertaining to your federal student loans. Signing up for electronic correspondence can help you ensure that you never miss an important letter or bill. Visit the National Student Loan Data System (NSLDS) to review your federal loan details and to obtain your Servicer(s)’ contact information. Your servicer can help you answer questions in connection with your loans. VSFA is also available to help you with your loan-related questions; our contact information is listed at the end of this notice.
It is very important that you understand the serious nature of your federal student loan debt. You MUST make your federal student loan payments on time and they must be paid in full. It is your responsibility to make the payments even if you do NOT receive a notice from a servicer. That is why it is so important that you always keep your contact information current with your servicer. Your federal student loan becomes delinquent the first day after you miss a payment. If a federal student loan is delinquent for more than 270 days, it goes into default, which will have serious consequences shown below:
- You will be required to immediately repay the entire unpaid amount of your loan.
- The federal government may sue you, take all or part of your federal and state tax refunds and other federal or state payments, and/or garnish your wages so that your employer is required to send us part of your salary to pay off your loan.
- You will be required to pay reasonable collection fees and costs, plus court costs and attorney fees.
- You may be denied a professional license.
- You will lose eligibility for other federal student aid and assistance under most federal benefit programs.
- You will lose eligibility for loan deferments.
- Your default will be reported to national consumer reporting agencies (credit bureaus).
If you have trouble making your monthly payment, you should immediately contact your federal loan servicer.
Contact upon withdrawal
It is critical that you contact the following entities if you withdraw from your academic program or take a Leave of Absence:
- Notify your Academic Program Coordinator
- Notify the Office of the Registrar
- Notify VSFA
- If you fail to complete at least 60% of a term, VSFA must determine how much of your aid, if any, must be returned to the federal aid programs based on the percentage of the term you completed. Once you complete 60% of the term, you are considered to have earned 100% of your aid. The federal regulations determine the order of program funds that are returned.
- Notify your federal loan servicer. You can obtain the contact information for your federal loan servicer on the National Student Loan Data System.
Exit Counseling – when borrower drops below halftime enrollment
You have a choice of several repayment plans that are designed to meet your needs which were discussed earlier in this notice. The average national loan balance for a student who attended a four-year public institution is $26,949 with an average interest rate of 3.9%. On average, the standard payment plan amount is $272 per month and the graduated payment plan is $152 per month. For a complete listing of the payment plans available to you and your monthly payment amount, contact your servicer.
A deferment or forbearance allows you to temporarily stop making payments on your federal student loans and does not negatively impact your credit. Contact your servicers to discuss your eligibility and the terms and conditions of the different types of postponement options.
You may qualify for a deferment if you fall under one or more of the following categories:
- Enrolled at least half-time at an eligible postsecondary school.
- In a full-time course of study in a graduate fellowship program.
- In an approved full-time rehabilitation program for individuals with disabilities.
- Unemployed or unable to find full-time employment (for a maximum of three years).
- Experiencing economic hardship (including Peace Corps service) as defined by federal regulations.
- Serving on active duty during a war or other military operation or national emergency and, if you were serving on or after October 1, 2007, for an additional 180-day period following the demobilization date for your qualifying service.
- Performing qualifying National Guard duty during a war or other military operation or national emergency and, if you were serving on or after October 1, 2007, for an additional 180-day period following the demobilization date for your qualifying service.
- A member of the National Guard or other reserve component of the U.S. Armed Forces (current or retired) and you are called or ordered to active duty while you are enrolled at least half-time at an eligible school or within 6 months of having been enrolled at least half-time, during the 13 months following the conclusion of your active duty service, or until you return to enrolled student status on at least a half-time basis, whichever is earlier.
You may qualify for forbearance if you:
- You are unable to make your scheduled loan payments for reasons including, but not limited to, financial hardship and illness.
- You are serving in a medical or dental internship or residency program, and you meet specific requirements.
- The total amount you owe each month for all of the student loans you received under Title IV of the Act is 20% or more of your total monthly gross income (for a maximum of three years).
- You are serving in an approved AmeriCorps position.
- You are performing teaching service that would qualify for loan forgiveness under the requirements of the Teacher Loan Forgiveness Program.
- You qualify for partial repayment of your loans under the Student Loan Repayment Program, as administered by the Department of Defense.
- You are called to active duty in the U.S. Armed Forces.
Forgive, Cancel or Discharge Your Debts
Under certain circumstances, you may have all or part of your federal student loans forgiven or discharged. Contact your federal loan servicer for details. Forgiveness programs include Teacher Loan Forgiveness and Public Service Loan Forgiveness. A loan could be cancelled or discharged as a result of total and permanent disability, death, or school related discharge (due to fraud). For a full list of the conditions for forgiveness and discharge/cancellation, contact your servicer. The Federal Perkins Loan has a more extensive Cancellation programs such as the Full-Time Nurse or Medical Technician. For UT Health San Antonio-issued Perkins Loans, contact Heartland ECSI: www.heartlandecsi.com
If you have multiple federal student loans, you can consolidate them into a single Direct Consolidation Loan. A Direct Consolidation Loan will simplify repayment if you are making separate loan payments to different loan servicers, as you’ll only have one monthly payment to make. There may be tradeoffs, however, so you’ll want to learn about the advantages and possible disadvantages of consolidation before you consolidate. More Direct Consolidation Loan information is available on StudentAid.gov.
Debt Management Tips
Having a spending plan, or budget, is the groundwork for managing your debt. One benefit of budgeting is that it helps you determine if you have the resources to spend on items that you want versus those you need. Start by making a list of things you’d like to save up for. Identify whether each item on the list is something you absolutely need or is really a want. If you decide you want something, ask yourself if you will still be happy you bought the item in a month. Next, prioritize each item on the list. Once you have set your priorities, you can then determine whether you should incorporate each item into your budget.
Use credit cards wisely. Think very carefully before you decide to get your first credit card. Is a credit card really necessary, or would another payment option work just as well? If you receive a credit card offer in the mail, don’t feel obligated to accept it. Limit the number of cards you get. Don’t spend more on your credit card than you can afford to pay in full on a monthly basis. Responsible use of credit cards can be a shopping convenience and help you establish a solid credit rating and avoid financial problems. Consider signing up for electronic payment reminders, balance notices, and billing statement notifications from your credit card provider.
Educational Tax Incentives
In addition to paying your taxes through payroll deductions, you must also file a tax return with the Internal Revenue Service (IRS) on your taxable income. The federal government offers:
- Tax deductions for educational expenses and on interest you pay on your federal student loans.
- Tax credits for educational expenses while attending school.
You should contact a tax advisor or visit IRS Tax Benefits for Education for detailed information on tax credits, deductions or other tax benefits for postsecondary students.
Resolving Student Loan Disputes
If you think there might be an issue with your federal student loan, first collect and review all of your loan paperwork, then identify and document what you think the problem is. Call your loan servicer to discuss the issue.
As a last resort, if you are unable to resolve the issue by working with your loan servicer, you may contact the Federal Student Aid (FSA) Ombudsman for assistance. The FSA Ombudsman works with federal student loan borrowers to resolve disputes or issues from an impartial, independent viewpoint. You can reach FSA’s Ombudsman at:
FSA Ombudsman Group
P.O. Box 1843
Monticello, KY 42633