Section Menu
The Hidden Truths of Student Loans
You may be unfamiliar with the facts about student loans. Educate yourself on some important points to ensure you start out on the right path.
Your servicer is there to help.
The servicer plays a crucial part with your student loan; they are not just about collecting money! Servicers are there to help you with all of your student loan questions and concerns. Their main goal is to help you keep your account in good standing and work with you anyway they can. JUST CALL THEM for assistance. Remember, you are not alone.
Find out who your servicer is at StudentAid.gov
If you withdraw from school, you still have to pay back your loan.
If you withdraw before completing your degree, you must still pay back your loan. A portion of your loan may be able to be returned depending on the amount of time you spent at the school. Review your school's refund policy to determine if any of the funds can be returned. Also, dropping out can impact your future salary.
Learn more about what you can earn with a degree.
If you can't find a job, you are still responsible for paying back your loan.
Regardless if you can't find a job, you are still responsible for making payments on your student loan. Fortunately, there are options that may be available to you to postpone payments under certain circumstances.
Learn more about deferments and forbearances.
NOTE: Deferment and forbearance options are different for Stafford and private loans. If you have private loans, contact your servicer to discuss your options.
The amount you have to pay back can be more than what you originally borrowed.
You are responsible for paying the interest that accrues on your unsubsidized loans from the date of disbursement.
The government pays the interest that accrues on your subsidized loan while you are in-school and during your grace and authorized periods of deferment. However, if your loan was disbursed on/after July 1, 2012 and prior to July 1, 2014, you are responsible for paying the interest that accrues during your grace period.
Any outstanding interest, for which you are responsible, that is not paid prior to the end of any periods mentioned above, will be capitalized (added to the principal balance of your loan).
If you don't pay your student loan, there are consequences.
If payments for your federal loans become 270 days delinquent, your lender/loan servicer will take steps to place the loan in default. Don't let this happen! If you have difficulty making your loan payments, contact your servicer immediately. Defaulting on your student loans will have devastating consequences, such as:
- Damage to your credit rating.
This affects your ability to get future loans, such as an auto loan or mortgage, obtain housing and even employment. - Garnishment of your wages.
Yes, the lender/servicer has the right to take money directly from your pay check to help repay your federal loans and they don't need your permission to do so. - Withholding of your tax refunds.
Looking forward to a big payday at tax time? Not if your loans are in default. Your tax refund can be directed to your lender/servicer to help pay your federal loans. - Loss of eligibility for federal and state financial aid.
If you ever want to go back to school and receive financial aid to help with the costs, you might not qualify if your loan is in default.
If you declare bankruptcy, your loans most likely won't "go away".
Student loans can be difficult to discharge in bankruptcy, which means you may still be responsible for repayment of the debt. You should consult a bankruptcy attorney regarding the impact of bankruptcy on your student loans, including whether they may be dischargeable.
Be cautious of Alternative (Private) Loans.
Private Education Loans—loans issued through banks or credit unions—can help bridge the gap when savings, grants, scholarships, and federal loans do not meet your college costs.
Be aware that Private Education Loans are generally more expensive than federal loans, and the rules for paying them back are usually stricter. These loans have different repayment, deferment and forbearance options than Stafford loans. An interest rate on a Private Loan can change any time throughout the year, if the rate is variable.
Carefully review the loan program information ahead of time so you know what the "rules" are before you apply!