Federal Stafford and PLUS Loan Questions

Before you or your parents borrow, make sure you understand all the terms of the loan. The following questions and answers will give you a basic understanding of FFELs and Direct Loans.

How much can I get?

Pell Grants for the 2003-2004 award year (July 1, 2003 to June 30, 2004) will depend on program funding. The maximum Pell Grant for the 2002-2003 award year was $4,000. The amount you get will depend not only on your financial need, but also on your costs to attend school, your status as a full-time or part-time student, and your plans to attend school for a full academic year or less. You can receive only one Pell Grant in an award year.

If I'm eligible, how will I get the Pell Grant money?

Your school can apply Pell Grant funds to your school costs, pay you directly (usually by check), or combine these methods. The school must tell you in writing how much your award will be and how and when you’ll be paid. Schools must disburse funds at least once per term (semester, trimester, or quarter). Schools that do not use semesters, trimesters, or quarters must disburse funds at least twice per academic year.

Other than interest, is there a charge for loans?

You or your parents will pay a fee of up to 4 percent, deducted proportionately from each loan disbursement. A portion of this fee goes to the federal government to help reduce the cost of the loans. Also, if you or your parents don’t make loan payments as scheduled, you might be charged late fees and collection costs.

How are loans repaid?

There are several ways to repay your loan. Your choices are

  • a 10-year plan with a minimum monthly payment of $50
  • a graduated plan with a monthly payment that starts out low and then increases gradually during the repayment period
  • a plan that bases the monthly payment amount on how much money you make. (Direct PLUS Loan borrowers are not eligible to repay their loans under this plan.)

What if someone has trouble repaying?

Under certain circumstances, you can receive a deferment or forbearance on your loan. During a deferment, no payments are required. If you have a subsidized loan, the federal government will pay the interest that accumulates during the deferment. If your loan is unsubsidized, you’ll be responsible for the interest on the loan during the deferment. Your parents will be responsible for the interest on their PLUS Loan if they have a deferment. No borrower can receive a deferment if the loan is in default (that is, if he or she has not repaid the loan according to its terms).

During forbearance, payments are postponed or reduced, or they might be extended. The government does not pay any interest during forbearance; you’re responsible for paying it on your student loan, and your parents are responsible for paying it on their PLUS Loan.

Deferment and forbearance periods don’t count as part of the repayment period. For more details on deferments and forbearances, see The Student Guide, 2003-2004, which also explains our loan programs and the loan application process in greater detail. You can access the Guide online at http://studentaid.ed.gov/students/publications/student_guide/index.html You can also get a paper copy of The Student Guide; check with your college or career school or call the Federal Student Aid Information Center 1-800-4-FED-AID (1-800-433-3243).

Can the loans ever be canceled?

A FFEL or Direct Loan can be canceled only under the following conditions:

  • The borrower dies, or the student dies on whose behalf a parent borrowed.
  • The borrower becomes totally and permanently disabled.
  • The student is a full-time teacher for five consecutive years in a designated elementary or secondary school serving students from low-income families. (This provision does not apply to PLUS Loan borrowers.)
  • The loan is discharged in bankruptcy (however, cancellation is possible only if the bankruptcy court rules that repayment would cause undue hardship).
  • The student’s school closes before the student completes the program.
  • The school falsely certifies the loan

In addition, if a school does not make a required return of loan funds to the lender, a portion of the FFEL or Direct Loan—up to the amount the school was required to return— can be canceled. Even if you drop out of the program of study at the school, don’t like the school or the program of study, or don’t obtain employment after completing the program of study, these loans must be repaid. No cancellation is available for these reasons.

Repayment assistance (not a cancellation, but another way to repay) might be available if you serve in the military. For more information, contact your recruiting officer.

Another type of repayment assistance (again, not a cancellation) is available through the U.S. Department of Health and Human Services’ Nursing Education Loan Repayment Program (NELRP). This program will help repay student loans for registered nurses in exchange for their service in eligible facilities located in areas experiencing a shortage of nurses. For more information, call NELRP, toll-free, at 1-866-813-3753 or visit www.bhpr.hrsa.gov/nursing/loanrepay.htm

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