Q1: How do I go about getting a Federal student loan?
A student loan is a loan that the federal government insures. In other words, you do
not need collateral as in a traditional loan. In addition, the interest rates are
often lower and in many cases, the government will actually pay the interest on the
loan for the entire time you are enrolled full time in college. In order to apply for
and be eligible for a student loan, you must first submit a FAFSA (Free
Application for Federal Student Aid) - see
www.fafsa.ed.gov for more
information and to apply on line. This form will help the government determine your
financial need. Upon approval, you may then apply for a number of other federally
supported financial aid programs. The most common type of student loan is the
Stafford Loan. The Stafford loan is a low-interest loan and comes in two
Another type of student loan is the PLUS loan (Parent Loan for Undergraduate
Students). In this instance, the loan for the student is taken out by the parent(s)
at a low, government interest rate. For more information on these loans, see
How can I help my child pay for college (Q15).
- 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.
- Unsubsidized Stafford Loan -- in which you are responsible for all
the interest that accrues on the loan. Unsubsidized loans are not based on
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Q2: What if I want to change schools?
If you decide to continue your higher 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 use the online Deferment Form found
or call your lender or the holder of your student
loans and ask them to send the form for an in-school deferment
to you. After you fill out the form, turn it into the registrar's
office at the college you plan to attend. Remember that most schools
won't certify the form until you've been enrolled for a few weeks.
Therefore, you may receive notices from your lender(s) about payments
that are due. Let them know that you are back in school and continue
to make payments until your deferment is processed. They will update
your account when they receive the deferment form. Because deferments
are so important for students, they are usually the first mail that
lenders process each day!
Be sure to follow up with your lender and confirm that they have
received the deferment form. (Always verify that you are in good
standing with your lender. Also, if you have moved, this is a good
time to update your address with the lender.)
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Q3: What if I drop out of school?
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If you withdraw from school, drop below a half-time status or graduate, you enter into
your Grace Period. Your grace period begins on your last official date of
attendance as noted by your school's registrar. Your school will notify the lender of
this date, and thus begins your grace period. 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.
This grace period is a very advantageous time for you! It can give you time to prepare
for your loan repayment, to apply for a deferment, to re-enroll in school, or to
contact your lender if you foresee difficulty in making your payments see
(What if I foresee difficulty in making payments). If you decide to
return to school any time during this six month period, the calendar stops and you
begin another six month grace period when you leave school, graduate, withdraw or drop
below half-time status again.
Q4: 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
- 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
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Q5: What if I miss a payment on my loan?
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Q6: What if I foresee difficulty making my payments?
If you miss a payment on your loan, 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. So
as you can see, if you miss payments, you'll have a substantially
larger amount due at one time! If you are having trouble making your
payments, or foresee trouble ahead, see What if I foresee difficulty in making my payments?
If you encounter hardship and 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, see Repayment information for further details:
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
- 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
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Q7: What is a deferment and how do I apply?
A deferment entitles you to postpone monthly payments on your student loan. Deferments
are important because they give you flexibility - and save you money! 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. (Your Grace Period is the time
after you leave school, withdraw, graduate or drop below half-time until you have to
start making payments on your loan. A Federal Stafford Loan has a six month grace
You can apply for a deferment for a number of reasons, such as:
- Education (continuing your education)
- Public Service
- Family/Parental Leave
- Economic Hardship
Note that some deferments are not available with a consolidation loan, and that you can
lose your deferment rights if you default on your loans.
To obtain a deferment in a timely way, file your request form (see
Forms) a month or two before
you want the deferment 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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Q8: What is forbearance and how do I apply?
A borrower who is willing but unable to make payments, and who 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. The borrower 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. Forbearance will not eliminate any prior
derogatory credit history.
Our online calculator
can help you estimate the cost of a forbearance or an unsubsidized deferment.
To apply for forbearance contact Nelnet or use the online
Forbearance Form. Your Nelnet
representative will advise you on your options and see if you qualify for a deferment
instead. If you do not qualify for a deferment, then you must complete the
Forbearance Form and forward it
to Nelnet. You may also contact us by e-mail.
You must have Adobe Acrobat Reader installed to view and print this form. It's free from
the Adobe site, click on the banner below to download it if you do not already have it
When your form is complete, mail it to the Correspondence Address listed on your
monthly statement. Once approved, the forbearance status will be reflected on your next
month's statement. You may also obtain this information through the automated account
status option, or by contacting a Customer Service Agent at our toll free number shown
on your account statement, or by accessing your Account information on this site
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Q9: How can I change my repayment plan?
There are three standard repayment plans offered on Federal Stafford Loans; they are:
- Standard Repayment - requires you to pay a set amount monthly (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
Don't let the $50 minimum lull you into believing that would be your payment. If
you borrowed $10,000.00 for 10 years at 9% interest, your monthly payments would
- 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.
- 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
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. Serialization allows you
to combine loans into one repayment schedule without the additional charges of
To change your repayment type, you must contact your lender.
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Q10: 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. If you
have several loans and are paying interest on each of them, it can benefit you to
consolidate and only pay one interest rate. You can obtain a consolidated loan
anytime after school separation, providing you haven't defaulted on any loans. If you
have defaulted, there is still hope. If you work with your lender and make
satisfactory repayment arrangements, you may still be eligible for a consolidation
loan. Borrowers are allowed 180 days after receiving a Consolidated Loan to add
There are some 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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Q11: How are my payments applied to my account?
Payments are first applied to any outstanding late fees (if applicable), then to any
outstanding accrued interest and lastly to the principal balance.
If you choose to make payments during a deferment period and you have a Federal
Subsidized Stafford Loan, the government pays all interest on your loan. Therefore,
any payments you make will go directly to your principal balance. If your loan is not
subsidized (unsubsidized Stafford, PLUS, or other), all payments will go first to
your accrued interest and then to your principal.
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Q12: How is the interest calculated on my loan?
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The interest on Stafford and PLUS loans first disbursed on or after July 1, 2006 is fixed (loans disbursed prior to this date have variable interest rates). Interest accrues daily and is calculated on the
number of days between the receipt of each payment.
Q13: Does Nelnet own my student loan?
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It is possible that Nelnet owns your student loan, although we
service loans for many lenders.
Q14: May I apply for additional loans from Nelnet?
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Yes. Nelnet offers an extensive product line of cost-saving loans. As a lender,
servicer, and educator in the student loan industry we offer a vast array of federal
and private loans with valuable borrower benefits for students and parents.
Please contact us by clicking on the link at the top of the page.
Q15: How can I help my child pay for school?
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Paying for a college education can be a stressful undertaking for both the student and
the parents. One of the most important things for a student to realize, and one of the
hardest at this point in their lives, is that 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.