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Student Rights & Responsibilities
It is important to understand your rights and responsibilities as a borrower of Federal student loans.
Student Responsibilities
- When signing a promissory note, the borrower is agreeing to repay the loan even if he/she does not complete the education or cannot get a job after completing the program.
- The borrower must make payments in the full amount on the loan even if a bill or repayment notice is not received.
- In case of a deferment or forbearance, payments must continue until the borrower is notified that the request has been granted. The loan servicer should be made aware in the event of graduation, withdrawal from school, or dropping below half-time status; a change of name, address, or Social Security number; or transfer to another school.
- Entrance counseling must be received before being given a first loan disbursement, and exit counseling before leaving school.
- In case of a default on a loan, the lender may take action to recover the money, including notifying national credit bureaus of the default. This affects the credit rating for a long time. For example, the borrower may find it very difficult to borrow money from a bank to buy a car or a house.
- In addition, if in default, the U.S. Department of Education might ask the Internal Revenue Service to withhold a U.S. individual income tax refund and apply it to the amount owed, or the agency holding the loan may ask the employer of the borrower to deduct payments from his/her paycheck. Also, the borrower in default is liable for expenses incurred in collecting the loan. In addition, a borrower who decides to return to school is not entitled to receive any more federal student aid. Legal action might also be taken against the borrower in default.
Student Rights
A student, before leaving school, will be provided with the following information:
- The amount of the total debt, the interest rate, and the total interest on the loan.
- If applicable, the name of the lender or agency holding the loans, where to send payments, and where to write or call with questions.
- An explanation of fees, such as late charges and collection or litigation costs, if delinquent or in default.
- An explanation of available refinancing or consolidation options.
- A statement stating that the borrower can repay the loan at any time without penalty.
Other information that may be given includes:
- Anticipated monthly payments and when they are due.
- Repayment options.
- Notification that the borrower must provide an expected permanent address, the name and address of an expected employer, and any corrections to the school's records.