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1. Subsidized Stafford Loan -- in which the federal government pays the interest while you are enrolled at least half-time in school, during your grace period, and during authorized deferments. Subsidized Stafford loans are based on financial need.
2. Unsubsidized Stafford Loan -- in which you are responsible for all the interest that accrues on the loan. Unsubsidized loans are not based on financial need.

Three Rivers Federal Credit Union offers student loans through NelNet. Click here for more information or to apply.

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What if I change schools?
If you decide to continue your education by either changing schools or returning to school, you must notify the holder of your student loans. You will benefit because your student loans can be placed in deferment - so you may be able to postpone payments upon returning to school.

This can save you time and money if you have Federal Subsidized Stafford Loans. You'll have to be enrolled at least half-time (six hours at most schools).

The process is simple, just xall your lender or the holder of your student loans and ask them to send the form for an in-school deferment to you. Submit the form to the registrar's office at the college you plan to attend. You may receive notices from your lender(s) about payments that are due. Let them know you returned to school and continue to make payments until your deferment is processed. They will update your account when they receive the deferment form.

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What if I drop out of school?
If you withdraw from school, drop below a half-time status or graduate, you enter into your Grace Period, which begins on your last official date of attendance as noted by your school's registrar. Your grace period is the time before you must begin making payments on your loans. All Federal Stafford Loans have a six (6) month grace period. Other loans have different grace periods, so it's important to know your loan type and your grace period.

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What if I default on my loan?
When you fail to make payments on your loans - usually by being delinquent, or late, for 270 days (about 9 months) - you are in default on your student loan. If your lender cannot communicate with you, your loans can go into default and you may not even know it. That's why it is so important to keep an updated address and phone number on file with your lender.

After default occurs, the lender may be reimbursed for the unpaid balance of your loan. Then the guaranty agency and/or federal government will come after the money you owe. They can be relentless, and they can take drastic actions now and in the future. Consequences of Default:

• The entire amount of your loan, including interest, will become immediately due and payable.
• They can refuse all deferments and forbearances.
• They can stop you from obtaining more student assistance.
• They can take your federal and state tax refunds.
• They will report your default to credit agencies and ruin your credit rating for up to seven years - which practically eliminates any chance of new bank credit or loans (including auto loans, credit cards, even store credit!).
• They can use collection agencies and force you to pay attorney fees, court costs, penalties, and additional interest.
• They can garnish (or keep) your wages.
• They can take legal action against you.

If you do default, start immediately to repair the damage before it gets worse! Contact your guaranty agency and work with them to establish a workable repayment schedule. By making twelve (12) consecutive, on-time, full payments, you could obtain rehabilitation. That will restore your status (and benefits) as a good borrower.

What if I miss a payment?
Contact your lender immediately! You may incur late charges which are added to the balance of the loan, so you will be paying interest on them over time. If you miss one payment, you may have a double payment plus your late charge due on your next due date. If you miss two payments, you will have a triple payment, plus two late charges due on your third due date.

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What if I foresee difficulty making my payments?
If you are concerned that making your payments may become difficult, contact your lender or guaranty agency immediately - while you can still take advantage of other options. By taking early action to help yourself, you will encourage your lender or guaranty agency to help you avoid default. Some options that are available to you are:

• Deferments - which let you postpone monthly payments.
• Forbearance - which allows you to reduce or delay payments.
• Forgiveness - which eliminates your obligation to repay all or part of your loan (Forgiveness is primarily granted for permanent and total disability or death).
• Changing your repayment plan - to either Standard Repayment, Income Sensitive, or Graduated Repayment.
• Consolidation Loan - which allows you to combine your loans, often extending your repayment and offering smaller monthly payments.
• Serialization - similar to a consolidation loan, but does not typically include consolidation charges.

The most important thing to do is to contact your lender or guaranty agency before any problems arise! This will allow you to work together to find a suitable solution.

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What is a deferment and how do I apply?
A deferment entitles you to postpone monthly payments. Deferments are important because they give flexibility. For example, on Federal Subsidized Stafford Loans, the federal government pays your interest during a deferment. And the time your loan is in deferment is not counted in the maximum period you have to pay the loan back. So it is worthwhile to protect your deferment rights, just as you would be careful with your grace period. You can apply for a deferment for a number of reasons, such as:

• Education (continuing your education)
• Public Service
• In-School
• Family/Parental Leave
• Disability
• Unemployment
• Economic Hardship

To obtain a deferment in a timely way, file your request form a month or two before you want it to start. For an in-school deferment, file your form when your enrollment status is verified by the registrar's office. A deferment may be renewed, but not for longer than the time limit for that specific deferment. For example, a deferment for economic hardship may be renewed for a maximum of three consecutive years.

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What is forbearance and how do I apply?

A borrower who is willing but unable to make payments and does not qualify for a deferment, may request forbearance from the lender. Forbearance allows payments to stop temporarily or decrease in amount for a specific length of time. The lender may grant forbearance of principal, interest or both. The borrower is always responsible for repayment of accrued interest charges and can make interest-only payments, or the interest will be added on to the principal.

Unlike deferment, forbearance is not an entitlement. It is something the lender may choose to do for the borrower if the borrower is sincere in meeting his/her loan obligation and if the borrower's circumstances indicate forbearance would be helpful. Forbearances are processed for a maximum of twelve months, but will not eliminate any prior derogatory credit history.

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How can I change my repayment plan?
There are three standard repayment plans offered on Federal Stafford Loans; they are:

1. Standard Repayment - requires you to pay a set monthly amount (with a minimum of at least $50) for up to a maximum of 10 years. However, this set amount may be changed depending on your interest rate, number of payments and total principal balance.
   
2. Income Sensitive - is adjusted yearly - for up to 10 years - according to your annual income and the amount of your loan. If this plan requires more than 10 years to complete your repayment, your lender can put your loan in forbearance to lengthen your repayment time up to five additional years.
3. Graduated Repayment - begins with smaller monthly payments, and then enlarges the payments over 10 years. The amount of your loan determines how often and by how much your payments increase.

• NOTE: First time Stafford borrowers (as of 10/7/98) who accumulate outstanding loans totaling more than $30,000 may choose to use an Extended Repayment Plan, which allow borrowers to take up to 25 years to repay their loans. Borrowers may choose from either a Standard or Graduated Repayment Plan.

Other payment options include prepaying on your loan. You can make prepayments on your loan at anytime without penalty. You benefit significantly if you make prepayments on Federal Subsidized Loans because no interest accrues on these loans. So you are paying off the principal faster.

Some lenders offer other special benefits or incentives. For example, if you pay each month with an automatic withdrawal from your checking account, or if you make payments on time for several years, you may be able to obtain a lower interest rate or fee refund. In addition, some lenders may offer Serialization, which allows you to combine loans into one repayment schedule without the additional charges of consolidation.

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What is a consolidation loan and how can I get one?
A Consolidation Loan is exactly what it sounds like - a loan that consolidates all or part of your loans and debt into one easy payment. Consolidation loans typically add time to your repayment schedule and usually offer a lower monthly payment. You can obtain a consolidated loan anytime after school, providing you haven't defaulted on any loans.

If you and your spouse both have eligible student loans, you can also obtain a Spousal Consolidated Loan. Both of you will be held jointly and severably liable for repayment of a Spousal Consolidated Loan. This means that you would be held responsible for repaying the portion of debt owed by a disabled spouse, deceased spouse or ex-spouse.

There are some other disadvantages to a Consolidation Loan as well. Because you are paying less over a longer period of time, your repayment total will probably be more than the original payback amount. Additionally, some deferments are not available with a Consolidated Loan. So while they typically lower monthly payments and can help you out of your current situation, you'll need to assess your individual needs to determine your best course of action

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How is the interest calculated on my loan?
The interest on student loans is variable, which means it is subject to increase or decrease based on the economy. Interest accrues daily and is calculated on the number of days between the receipt of each payment.

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How can I help my child pay for school?
Paying for a college education can be a stressful undertaking for students and the parents. One of the most important things for a student to realize is what they borrow they have to pay back - with interest. A student loan seems like easy money, but it's tough starting out your career in debt. As parents, it's important to assist your child both financially and with good money management advice. Encourage them to keep borrowing to a minimum as student loans are intended to fill in the gaps in college funding, rather than to provide the main source of paying for school.

If you want to help your child pay for school, you may want to consider a PLUS loan - Parent Loans for Undergraduate Students. PLUS loans are designed for parents or legal guardians of undergraduate, dependent students to borrow funds in their own name. The parent borrower's credit bureau report will be reviewed and must meet the lender's guidelines. Repayment of principal and interest begins 60 days after the final disbursement of the PLUS loan. Some lenders may have alternative repayment options available so it's wise to shop around for lenders. The advantage of PLUS loans, is that they typically have lower interest rates than regular commercial loans since they are backed by the federal government.

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