In order to borrow money through Federal Perkins Loan(s) and/or Federal Stafford Loan(s), you must sign a legal document called a promissory note, or Master Promissory Note (MPN) agreeing to repay the loans. The agreement is a binding contract even if you:
- Do not graduate
- Are not satisfied with the education you received
- Are not able to get a job or the job you want
- File bankruptcy
There are loan repayment options available to help you not default on your loans, but it is up to you to take advantage of these options. Your lender is willing to work with you to help you make your monthly payments by allowing you to suspend your payments for a period of time (either through deferment or forbearance) or to consolidate your loans, but you must initiate this assistance by contacting them to let them know your situation.
Loan consolidation can help you not default because it allows you to refinance any or all outstanding federal student loans and create a single new loan with one monthly payment, instead of several. The new loan will have a fixed interest rate, new terms and may have an extended repayment period of up to 30 years. Ask your lender about consolidation options.
Consequences of defaulting on your student loans are serious and can affect your lifestyle for many years.
Helpful Hints
- Know your lenders contact information. If you are uncertain, contact the financial aid office at the college through which you obtained the loan(s).
- Don’t wait to call your lender if you cannot make a monthly payment. Lenders have options available to help you and they are willing to work with you to keep you out of default.
- Notify your lender when you change your address, telephone number or name -- that way you will always receive your statements and your lender can contact you easily.
- Set up your loan payments as a direct, electronic withdrawal from your bank account. In addition to saving stamps, you may qualify for reduced interest and your payments will never get lost in the mail or be late.
Don’t be afraid to get on the phone and talk to your lender. It can prevent your loans from going into default, it can save you years of ruined credit, and will allow you to receive federal student aid in the future if you decide to go back to college.
Our
Loan Repayment Guide will help you understand what you need to know about the benefits of a good repayment record and the penalties if you do not pay off your loan in accordance with its terms.