Your Federal Student Loans
Conditions for Stafford and PLUS loan cancellation/discharge and amount forgiven
Borrower’s total and permanent
disability or death.+
For a PLUS Loan, circumstances include
the death, but not disability, of the
student for whom the parents borrowed.
Full-time teacher for ﬁve consecutive
years in a designated elementary or
secondary school or educational service
agency serving students from low-
income families. Must meet additional
Teaching at an educational service
agency may count toward the required
ﬁve consecutive years only if the
consecutive ﬁve-year period includes
teaching service at an educational
service agency performed after the
2007–08 academic year.
Up to $5,000 (up to $17,500 for teachers
in certain specialties) of the total loan
amount outstanding after completion of
the ﬁfth year
Under the Direct Consolidation Loan
programs, only the portion of the
consolidation loan used to repay eligible
Direct Loans qualiﬁes for
For Direct and FFEL Stafford Loan
borrowers with no outstanding balance
on a Direct or FFEL Loan on Oct. 1,
1998, or on the date they received a loan
on, or after that date. At least one of the
ﬁve consecutive years of teaching in an
elementary/secondary school must occur
after the 1997–98 academic year. Teaching
at an educational service agency may count
toward the required ﬁve consecutive years
only if the consecutive ﬁve-year period
includes teaching service at an educational
service agency performed after the 2007–08
PLUS Loans are not eligible.
To ﬁnd out whether your school is
considered a low-income school,
go to: www.studentaid.ed.gov/tc.
Or call 1-800-4-FED-AID
Bankruptcy (in rare cases)
Cancellation is possible only
if the bankruptcy court rules
that repayment would cause
Closed school (before student could
complete program of study) or false loan
This is for loans received on or after
Jan. 1, 1986.
False loan certiﬁcation includes identity
This is effective July 1, 2006.
School does not make required return of
loan funds to the lender.
Up to the amount that the school was
required to return.
This is for loans received on or after
Jan. 1, 1986.
Loan forgiveness for public
100 percent of the remaining outstanding For a borrower not in default and who
balance on an eligible Direct Loan. FFEL
borrowers may qualify by consolidating
into the Direct Loan Program.
makes 120 monthly payments, under
certain repayment plans, on the loan while
the borrower is employed full-time in a
public service job after Oct. 1, 2007.
+ Total and permanent disability is deﬁned as the inability to work and earn money because of an illness or injury that is expected to
continue indeﬁnitely or result in death. Your loan may be discharged if you are determined to be totally and permanently disabled based
on a physician’s certiﬁcation, and if you meet certain other requirements during a three-year conditional discharge period.
Further information on teaching service cancellation options can be found at
A loan, whether in default or not, cannot be discharged in bankruptcy in most cases.
How do I ﬁnd out if I can get a loan discharge or cancellation?
A晴er reviewing the conditions, if you think you qualify, contact your loan servicer.
For Perkins Loans check with the school that made you the loan or with the school’s loan
servicing agent. For other loans contact the loan servicer.
Accrue When interest on your loan adds to the amount you owe. 周e phrase “interest
accruing on your loan” means that the amount of interest due on your loan is accumulating.
Aggregate loan limit 周e maximum total outstanding loan debt you can have when
Borrower An individual who signed and agreed to the terms in the promissory note
and is responsible for repaying a loan.
Capitalization Adding unpaid interest to the loan amount borrowed.
Capitalization increases the unpaid principal balance of your loan and interest is charged
on the increased principal amount. 周is occurs at the end of a deferment, forbearance, or
grace period on unsubsidized loans, and at the end of a forbearance period on any type of
loan, subsidized or unsubsidized. 周is increases the total amount you will repay over the
life of your loan. To save money, pay interest before it’s capitalized.
Consolidation 周e process of combining one or more eligible federal education loans
into a single new loan.
Cost of Attendance (COA) 周e total amount it will cost you to go to school—usually
expressed as a yearly ﬁgure. It’s determined using rules established by law. 周e COA
includes tuition and fees; on campus room and board (or a housing and food allowance
for oﬀ-campus students); and allowances for books, supplies, transportation, loan fees,
and, if applicable, dependent care. It also includes miscellaneous and personal expenses,
including an allowance for the rental or purchase of a personal computer. Costs related
to a disability also are covered. 周e COA includes reasonable costs for eligible study-
abroad programs as well. For students attending less than half-time, the COA includes
tuition and fees and an allowance for books, supplies, transportation, and dependent
care expenses; and also can include room and board for up to three semesters, or
the equivalent, at the institution—but no more than two of those semesters, or the
equivalent, may be consecutive. Talk to the ﬁnancial aid administrator at the school
you’re planning to attend if you have any unusual expenses that might aﬀect your cost
Credit A summary of a person’s ﬁnancial strength, including his or her history of
paying bills, routinely used to assess a person's ability to repay future loans. Students
o晴en are turned down for private loans because they have not established a credit
history and have no income with which to repay debts. People who pay their bills a晴er
the due date, have defaulted on debts, or declared bankruptcy are usually judged to
have poor credit. Several private companies gather consumers’ ﬁnancial information to
create reports used by businesses and lenders to determine how much to lend and how
much interest to charge each consumer. Federal law requires credit rating agencies to
provide consumers with one free report regarding their credit each year.
Credit Bureau Organization that tracks and reports the manner in which borrowers
repay their loans (not only student loans).
Your Federal Student Loans
Data Release Number Your DRN is a four-digit number assigned to your application
by Federal Student Aid. It will appear close to the top right-hand corner on the ﬁrst
page of your paper or electronic Student Aid Report (SAR). If you ﬁle electronically,
you also will ﬁnd your DRN below the Conﬁrmation Number on your submission
You will need the DRN if you contact the Federal Student Aid Information Center to
make corrections to your mailing address or to the schools you listed on your FAFSA.
周e DRN also allows you to release your FAFSA data to schools you did not list on your
Default Failure to repay a loan according to the terms of the promissory note. 周ere
can be serious legal consequences for student-loan defaulters.
Deferment A postponement of payment on a loan that is allowed under certain
conditions and during which interest does not accrue for subsidized loans.
Delinquent Your loan payments are not received by the due dates. If your accounts
have become delinquent and you are unable to make payments consider deferment,
forbearance, or switching repayment plans. Accounts remain delinquent until
borrowers bring their accounts current with payments, deferment, or forbearance.
Dependent Student Student who does not meet any of the criteria for an independent
student. An independent student is deﬁned as being any of the following: at least
24years old, married, a graduate or professional student, a veteran, a member of the
armed forces, an orphan, a ward of the court, someone with legal dependents other
than a spouse, an emancipated minor, or is homeless or at risk of being homeless. If
you answer “No” to any of these questions, you are a dependent student. Please see the
fact sheet “Am I Dependent or Independent?” at www.studentaid.ed.gov/pubs for more
Direct Consolidation Loan Federal program that allows you to combine one or more
federal student loans into one new Direct Consolidation Loan. Only one monthly
payment is made to the U.S.Department of Education. In certain circumstances,
students who have loans under the Federal Family Education Loan Program (FFEL)
may consolidate them into Direct Loans.
Direct PLUS Loan Unsubsidized loans available to parents of dependent students, and to
students enrolled in graduate or professional programs. 周ese loans are available regardless
of ﬁnancial need and the amount of eligibility depends on the total cost of education.
Direct Subsidized Loan Also known as the Federal Direct Subsidized Staﬀord Loan.
A loan from the U.S.Department of Education made on the basis of the student’s
ﬁnancial need and other speciﬁc eligibility requirements. 周e federal government does
not charge interest on these loans while borrowers are enrolled at least half-time,
during a six-month grace period, or during authorized periods of deferment.
Direct Unsubsidized Loan Also known as the Federal Direct Unsubsidized Staﬀord
Loan. A federally ﬁnanced student loan made to students meeting speciﬁc eligibility
requirements. Interest is charged throughout the life of the loan. 周e borrower may
choose to pay the interest charged on the loan during in-school, grace, deferment, and
forbearance periods, or allow the interest to be capitalized (added to the loan principal).
Disbursement Payment of loan proceeds to the borrower by the school. During
consolidation, this term refers to sending payoﬀs to the loan holders of the underlying
loans being consolidated.
Due Date (Payment Due Date) Date during the month when payment of your current
due amount must be received. If you have any past due amounts or fees or outstanding
charges, these are due immediately.
Monthly payments must be received by the payment due date. 周erefore, if you do not
have your payments debited electronically from a bank account, you may want to mail
your payments well in advance to ensure they arrive and are applied to your account(s)
by the due date(s).
Entrance Counseling An information session which takes place before the loan
is disbursed and is required for ﬁrst-time borrowers. 周e session explains your
responsibilities and rights as a student borrower.
Exit Counseling Borrower receives a notice about exit counseling when borrower
graduates or attends school less than half-time. At this session, the borrower will be
given information on your loans and when repayment begins.
Expected Family Contribution (EFC) An index used to determine your eligibility for
federal student aid during one school year. You receive an EFC based on the processing
results of your FAFSA. Your EFC is reported to you on your Student Aid Report (SAR).
FAFSA see Free Application for Federal Student Aid
FAFSA4caster An online tool designed to help students and families ﬁnancially
plan for college, you can get an early estimate of your federal student aid eligibility
by using FAFSA4caster.
Federal Family Education Loan Program
(FFEL Program) A federal program that
provided loans to eligible student and parent borrowers. 周e program consisted of
Federal Subsidized and Unsubsidized Staﬀord Loans, Federal PLUS Loans, and Federal
Subsidized and Unsubsidized Consolidation Loans. Funds were provided by private
lenders, such as banks, credit unions, and other private ﬁnancial institutions. 周e loans
were backed by the federal government.
Note: As of July1,2010, no new loans were made under the FFEL Program.
Financial Aid Administrator (FAA) An individual who works at a college or career
school and is responsible for preparing and communicating information on student
loans, grants or scholarships, and employment programs. 周e FAA and staﬀ help
students apply for and receive student aid. 周e FAA is also capable of analyzing student
needs and making professional judgment changes when necessary.
Forbearance A period during which your monthly loan payments are temporarily
suspended or reduced. You may qualify for forbearance if you are unable to make loan
payments due to certain types of ﬁnancial hardships.
Your Federal Student Loans
Free Application for Federal Student Aid (FAFSA) 周e FAFSA or FAFSA on the Web,
the online version, is the FREE application used to apply for federal student aid.
Grace Period A six-month period that begins on the day a晴er you, the Staﬀord Loan
Program borrower, cease to be enrolled as at least a half-time student at an eligible
institution and ends on the day before the repayment period begins.
(1) An enrolled student who is carrying a half-time academic workload, as
determined by the institution, that amounts to at least half of the workload of the
applicable minimum requirement outlined in the deﬁnition of a full-time student.
(2) A student enrolled solely in a program of study by correspondence who is
carrying a workload of at least 12 hours of work per week, or is earning at least
six credit hours per semester, trimester, or quarter. However, regardless of the
work, no student enrolled solely in correspondence study is considered more than
a half-time student.
周ese minimum requirements apply to undergraduate students.
Independent Student Must meet any of the following criteria: at least 24 years old, married,
a graduate or professional student, a veteran, a member of the armed forces, an orphan,
a ward of the court, someone with legal dependents other than a spouse, an emancipated
minor, or is homeless or at risk of homelessness. Please see the fact sheet “Am I Dependent
or Independent?” at www.studentaid.ed.gov/pubs for more detailed information.
Interest A loan expense charged by the lender and paid by the borrower for the use
of borrowed money. 周e expense is calculated as a percentage of the unpaid principal
amount (loan amount), which includes the original amount borrowed and any
capitalized interest (unpaid interest added to the principal loan amount). Accrued
interest is interest that accumulates on the unpaid principal balance of the loan.
Interest Rate 周e current rate at which interest is calculated on your loan(s).
Lender 周e organization that made the loan initially. 周e lender could be the
borrower’s school (for Federal Perkins Loans); a bank, credit union, or other lending
institution; or the U.S. Department of Education.
Loan Money borrowed from a lending institution or the U.S. Department of Education
that must be repaid.
Loan Fee A fee payable by the borrower that is deducted proportionately from each
Loan Servicer An organization that administers and collects education loans payments
on behalf of the lender.
National Student Loan Data System (NSLDS) A centralized database that stores
information on all Department loans and grants. NSLDS also contains borrowers’
school enrollment information. Borrowers can access this information online using
their Department of Education PIN at www.nslds.ed.gov.
Parent Borrower Parents that have at least one PLUS Loan to ﬁnance their dependent
Partial Financial Hardship A circumstance in which:
for an unmarried borrower or a married borrower who ﬁles an individual federal tax
return, the annual amount due on all of the borrower's eligible loans—as calculated
under a standard repayment plan based on a 10-year repayment period, using the
greater of either the amount due at the time the borrower initially entered repayment
or at the time the borrower elects the income-based repayment plan—exceeds a certain
percentage of the diﬀerence between the borrower's adjusted gross income and the
poverty guideline for the borrower's family size; or
for a married borrower who ﬁles a joint federal tax return with his or her spouse, the
annual amount due on all of the borrower's eligible loans and, if applicable, the spouse's
eligible loans—as calculated under a standard repayment plan based on a 10-year
repayment period, using the greater of either the amount due at the time the loans
initially entered repayment or at the time the borrower or spouse elects the income-
based repayment plan—exceeds a certain percentage of the diﬀerence between the
borrower's and spouse's adjusted gross income, and the poverty guideline for the
borrower's family size.
Eligible loan means any outstanding loan made to a borrower under the FFEL or Direct
Loan programs except for a defaulted loan, an FFEL or Direct PLUS Loan made to
a parent borrower, or an FFEL or Direct Consolidation Loan that repaid an FFEL or
Direct PLUS Loan made to a parent borrower.
Past Due 周e amount that you were scheduled to pay in previous month(s) but did
not. 周e past due amount is also called the delinquent amount. Your account is
considered “delinquent” if you have missed any monthly payments. Past Due amounts
are due immediately.
Payment Due Date 周e date during the month when payment of your current due
amount must be received. If you have any past due amounts or fees and outstanding
charges, these are due immediately. Monthly payments must be received by the
payment due date. 周erefore, if you do not have your payments debited electronically
from a bank account, you may want to mail your payments well in advance to ensure
they arrive and are applied to your account(s) by the due date.
Perkins Loans Formerly known as National Defense Student Loan, or National
Direct Student Loan. Federal Perkins Loans are low-interest (5%) loans for both
undergraduate and graduate students with exceptional ﬁnancial need. Your school is
the lender. 周e loans are made with government funds with a share contributed by the
school. You must repay these loans to your school.
PIN (Federal Student Aid PIN) Serves as your identiﬁer to allow access to personal
information in various U.S.Department of Education systems.
Your PIN also acts as your digital signature with some online forms. Use your PIN to
electronically sign your online FAFSA, consolidation loan application and promissory
note and deferment or forbearance forms.
If you do not already have a PIN, you can request one online at www.pin.ed.gov.
周e PIN you receive will be your universal U.S. Department of Education PIN.
Your Federal Student Loans
Prepayment 周e amount in excess of the amount due on a loan. If borrowers have
more than one federal student loan, they must specify which loan they are prepaying.
Like all other federal student loan payments, a prepayment will ﬁrst be applied to any
outstanding fees and charges, next to outstanding interest, and then to the principal
balance of the loan(s). 周ere is never a penalty for prepaying principal or interest on
federal student loans.
Promissory Note A binding legal document you sign when you get a student loan.
It contains the loan terms and conditions under which you’re borrowing and the terms
under which you agree to pay back the loan. It will include deferment and cancellation
provisions available to the borrower. It’s very important to read and save this document
because you’ll need to refer to it later when you begin repaying your loan or at other times
when you need information about provisions of the loan, such as deferments or forbearances.
Refund 周e total amount of funds returned to the loan program as unused for the
student’s education expenses.
Rehabilitation 周e process of bringing a loan out of default and removing the default
notation on a borrower’s credit report. To rehabilitate a Direct or an FFEL Loan, you
must make at least nine full payments of an agreed amount within 20 days of their
monthly due dates over a 10-month period to the U.S. Department of Education.
To rehabilitate a Perkins Loan, you must make nine, on-time, monthly payments of
an agreed amount to the Department. Rehabilitation terms and conditions vary for
other loan types and can be obtained from the loan servicer.
Repayment Incentive A beneﬁt that the U.S. Department of Education oﬀers
borrowers to encourage them to repay their loans on time. Under a repayment
incentive program, the interest rate charged on borrowers’ loans might be reduced.
Some repayment incentive programs require borrowers to make a certain number of
payments on time to keep the beneﬁts of the repayment incentive.
Repayment Plan An agreed schedule between a borrower and a lender on repayment
of a loan. Changing repayment plans is a good way to manage your loan debt when your
ﬁnancial circumstances change to a less favorable status. For example, you can usually lower
your monthly payment by changing to another repayment plan that has a longer term in
which to repay the loan. 周ere are no penalties for changing repayment plans.
Repayment Schedule A statement provided by the loan servicer to the borrower that
lists the amount borrowed, the amount of monthly payments, and the date payments
Repayment Term 周e number of months it will take to repay your federal student loans
under a speciﬁc repayment plan.
Servicer An entity designated to track and collect a loan on behalf of a loan holder.
Simple Daily Interest 周e method used to calculate interest on your student loans.
To learn more about how interest is calculated, see page 19.
Documents you may be interested
Documents you may be interested