Parents
15. How can I help my child pay for school?

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Frequently given answers

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.

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 under Forms 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?
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.

• 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.

Q5: What if I miss a payment on my loan?
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?

Q6: What if I foresee difficulty 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:

• 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.

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 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

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.

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 capitalized (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 installed.

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

Q9: 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 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 balance.
   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 be $126.70.
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.

To change your repayment type, you must contact your lender.

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 additional loans.

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

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.

Q12: How is the interest calculated on my loan?
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?
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?
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?
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.