Life After College
Terms and Conditions of your Loans
The student loans you have borrowed are low interest federal loans which must be repaid after graduation or when you cease to be enrolled on at least a half time basis.
The interest rate for all borrowers under the Stafford Loan programs that borrowed before July 1, 2006 is variable and will go no higher than 8.25%. Any loans disbursed after July 1, 2006 have a fixed interest rate. The interest rate is set every July for the next academic year.
If you have a Subsidized Federal Stafford Loan your principal and interest will be deferred until 6 months after you graduate or cease to be enrolled as at least a half-time student. If you have an Unsubsidized Federal Stafford Loan and you chose to have the interest capitalized, interest will begin to accrue immediately after disbursement. If you chose to pay the interest while you were enrolled, you will be billed on a monthly or quarterly basis depending on the lender/servicer. The principal is deferred as with the Subsidized Stafford Loan above. Repayment of both principal and interest begins 6 months after graduation or you cease to be enrolled.
There is a 10-year repayment period for both the Subsidized and the Unsubsidized Stafford loan.
Secondary Markets and Loan Servicers
Once the second semester portion of your Stafford Loan has been sent to the school, your lender may decide to sell your loan to another entity called a secondary market in order to replenish funding for future loans. Two such organizations are Sallie Mae and Nellie Mae. These companies will take over the servicing of your loan throughout your repayment period. They, in turn, may hire an additional agency to handle the servicing. If you had a previous loan, you have probably done business with either Education Loan Servicing Inc. (ELSI) or the Loan Servicing Center (Sallie Mae). Servicers handle all the repayments, deferments and any questions you may have. Should your loan be sold, you will be notified by mail from both the lender and the secondary market that bought your loan. Once your loan is sold, all future loans will be sold to the same agency and will be serviced by the same servicer provided you stay with the same lender. Your lender continues to be the original bank from which you borrowed.
In situations where there has been a bank merger or buy-out you may find yourself with two servicers or secondary markets. Another exception to the single servicer rule can also take place when a servicer ceases to operate. This has been the case with Education Loan Services Inc (ELSI) shutting their doors. Lenders have been given the opportunity to choose a new servicer for their loan portfolios. In some cases, a student's loans have become separated.
The Consequences of Multiple Borrowing
As mentioned in the previous section it is important to stay with the same lender throughout your educational borrowing. Borrowing through multiple lenders can get confusing during repayment and therefore it will be harder to track who you need to contact. There are many agencies involved in the student loan programs as we mentioned and you may be contacted by several of them.
When you borrow under the Stafford Loan Program you may be dealing with the original lender, a secondary market and a servicer at any given time. Current regulations stipulate that a lender can only sell your loans to one secondary market and contract with one servicer so it will be easier for you to stay organized. If you borrowed from different lenders during your undergraduate and or graduate school enrollment, however, the new lenders are not required to keep your previous loans together with your current loans.
If you do have more than one lender, servicer and/or secondary market when you are finished with your education, you can ask one of the lenders or secondary markets to sell their portion of your loans to your preferred lender, thereby combining your Stafford Loans and reducing the amount of paperwork you will have to track.
You must inform your lender of any changes in your status
It is extremely important to remember that you must inform your lender of any changes in your enrollment status, home address and once you are in repayment on your loans, any changes in employment. If you do not notify them of any changes, they will be sending your statements to the wrong address and you, not they will be at fault.
It is also important to document any conversations you have with the lender or servicer. Write down the date, name of the person with whom you spoke and what transpired. If you complete forms or send letters, make sure to make a copy before mailing and call the recipient to make sure everything was received. We have provided a Loan Communication Record Sheet at the end of this document to help you.
Conditions for Deferment, Forbearance and Cancellation
As a borrower you have the right to ask for a deferment of your loan if you are unable to find employment, are experiencing economic hardship or become temporarily or totally disabled while in repayment. You are also eligible if you continue your education on at least a half-time basis or if you serve in the Armed Services, Peace Corps or Vista after graduation. During an approved deferment period both principal and interest are deferred.
If you borrowed a Stafford Loan prior to enrolling as a graduate student at WPI and you have not started repayment on those loans, the interest and principal of your current and previous loans will continued to be deferred until six months after graduation but you must have the appropriate deferment forms completed by the Registrar's Office at the beginning of each semester.
If you were already into repayment on your previous loans prior to enrolling in the graduate program at WPI, you must be enrolled as a full-time student in order to be eligible for deferment. You will not, however, regain the six months grace period on those loans. Only the loans you borrow now will be eligible for that grace period.
If you are enrolled on a part-time basis you may be eligible for a forbearance while enrolled. You may also ask for a forbearance if you are temporarily unable to make your payments at any time during your repayment period. A forbearance is usually a short-term deferment that allows you to defer the principal and pay interest only during that period.
Certain branches of the military as well as law enforcement may offer partial cancellations of your loans based on the number of years of service. Some public service careers such as public health service and teaching in low income areas may also offer partial cancellations.
Consequences of Delinquency and Default
If you keep in touch with the lender or servicer with deferments and forbearances available, there is no reason for you to become delinquent in your payments or go into default. But if you do miss payments your lender or servicer will contact you. If you continue to miss payments without making contact your credit will be ruined for as long as 7 years. This means that you will not be eligible for car loans, mortgages, or credit cards. You will also not be eligible for additional Stafford Loans.
Remember that your lender and servicer are there to help you. If you are having difficulty making your payments do not be embarrassed to call. If you don't make the call, the repercussions will last a long time.
Personal Financial Planning
Personal financial planning and setting up expense budgets for yourself can be beneficial to you now as well after you graduate. By calculating a weekly or monthly budget and staying within that budget, you might be able to borrow less in student loans.
Learning conservative spending now on items such as clothing and entertainment will reduce the need for a credit card. Charging items on credit can be very expensive. Unless each charge is paid in full at the end of the month, you may be charged as much as 18% interest on the remaining balance. Making the minimum payment each month will add to your cost as the payment will generally only cover the interest and not reduce the principal. Students who do use credit cards must be able to make the payments from their own resources. Financial Aid cannot be used to pay off your credit cards, especially when used for "luxury" items.
Once you graduate it becomes important to know how much money you have to pay your bills. Remember that the monthly payments for your Stafford Loans must be figured into your budget as well.
There is one more vital thing you need to remember:
Read and Save All of Your Loan Documents
It is important that you read and understand everything sent to you from WPI or from your lender or servicer. If you don't understand the material, please ask questions right away. You can either check with our office or call the lender or servicer who mailed the material to you. A small misunderstanding could cost you a good credit rating.