Financial Aid Step 3

Stafford Entrance Topic 3 of 6: Understanding Student Loan Borrowing

You must repay your loans, even if you:

Generally, federal student loans may not be cancelled or discharged due to bankruptcy.

Always borrow conservatively!

Once you are out of school, you will have to repay the loan. Develop a budget you can afford and stick with it. This will keep you from accumulating large debts and help you manage your student loan payments when you have finished school. Contact your school’s Financial Aid Office or visit the Mapping Your Future site for personal financial planning information.

You may reduce or cancel your loan at any time before you receive the loan funds. If your school receives your loan monies electronically, you must be notified when these funds are applied to your school account.

There are many forms of financial aid: scholarships, grants, work-study, and loans. Become familiar with all types of aid. Please contact your school’s Financial Aid Office for such information.

Maintain Satisfactory Academic Progress

To be eligible for federal financial aid, you must maintain satisfactory academic progress toward a certificate or degree. Each school must publish a standard for evaluating satisfactory progress that must contain a maximum time frame for program completion and a minimum quality standard, such as grade point average. Please obtain and review a current copy of your school’s standards.

Withdrawals and Refunds

The law specifies the amount of financial assistance you earn each academic year and how your school determines your eligibility. If you withdraw, the school uses a specific formula to calculate how much aid you’ve earned to that point. If you received less assistance than the amount that you earned, you will be able to receive those additional funds. If you received more assistance than you earned, the excess funds must be returned to the lender or program.

If you cease attendance at your school before the end of your loan period, your school may be required to refund all or part of your loan to your lender. The order in which unearned federal funds must be returned is: Unsubsidized Stafford, Subsidized Stafford, Unsubsidized Direct Stafford, Subsidized Direct Stafford, Perkins, PLUS, Direct PLUS, Pell Grants, SEOG Program, and other Title IV grant and loan programs. Please contact your school for their published refund policy.

Loan Servicers and Loan Sales

Frequently, lenders hire servicers, under contract, to maintain student loan records and files. Your servicer may be responsible for processing payments or deferments, among other duties.

To increase the amount of funds available for new loans, a lender may sell your loan to a secondary market. If your loan is sold to a new holder, you will be notified in writing. You must direct future correspondence to the new holder.

IIEI Financial Aid Home
Step 1 - Stafford Entrance Topic 1 of 6: Applying for a Federal Stafford Loan
Step 2 - Stafford Entrance Topic 2 of 6: Loan Types
Step 3 - Stafford Entrance Topic 3 of 6: Understanding Student Loan Borrowing
Step 4 - Stafford Entrance Topic 4 of 6: Repayment of Your Student Loan
Step 5 - Stafford Entrance Topic 5 of 6: Solutions for Loan Repayment Problems
Step 6 - Stafford Entrance Topic 6 of 6: Delinquency and Default
Step 7 - Review what you’ve read and take the Financial Aid Entrance Quiz