Frequently Asked Questions About Student Loans

The following list of frequently asked questions is provided courtesy of the Student Loan Guarantee Foundation of Arkansas.

Q1. Why is my loan scheduled to be disbursed in two separate payments?

A1: Federal regulations require schools to disburse FFELP loans in two, separate disbursements. The second disbursement may not occur before the midpoint date of the loan period, or must coincide with the beginning of a payment period (such as the beginning of a semester). Typically, a semester-based school will deliver the first disbursement of a Fall/Spring loan at the beginning of the fall semester. The second disbursement of the loan will be delivered to the student at the beginning of the spring semester.

Q2: After a loan application is submitted, how long does it take to receive the loan proceeds?

A2: The length of time it takes to process a loan application varies according to several factors. It depends on whether or not the school you are attending processes financial aid electronically or sends applications by mail, if loan funds will be sent to your school by Electronic Funds Transfer or paper check, and whether or not you have chosen a lender that participates with SLGFA's disbursement services. Additionally, any errors contained on the loan application can slow down the processing time. However, as a general rule, loan applications are processed and funds disbursed within a seven to ten working day time frame.

Q3: If a borrower dies, or suffers a serious, debilitating accident, who is responsible for repaying their loans?

A3: In the event of a borrower's total and permanent disability or death, the holder of the loan (lender or servicer), files a claim for payment with the guarantee agency and the guarantor pays the loan in full. A borrower that is subjected to total and permanent disability must provide, to the lender, a physician's certification of the disability. If a borrower dies, the lender must receive a copy of the death certificate or other proof of death acceptable under applicable state law.

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Q4: Are there any loans, grants or scholarships available to students that have already completed their training?

A4: Federal Family Education Loans, as well as all types of Federal Title IV aid, are only available for students enrolled at least half-time in an eligible program at an eligible institution. You should check with the financial aid office at the institution you attended to determine if there is any non-federal, financial aid available to students that have completed their course of study. For further financial aid information, you may wish to look at the website links available on SLGFA's website. Go to the Students & Parents section, and click on "Links to Related WWW Sites". Be sure to access the U.S. Department of Education's Web Page from the link on SLGFA's website. From there, you can do a search on the Life Long Learning Tax Credit and employer paid tuition.

Q5: I am currently paying back my loan, but the payments are too high and I am having trouble making the payments on time. Is there anything I can do to get my monthly payments lowered?

A5: Yes. You should contact the holder of your loan and ask about the various repayment options for FFELP borrowers. Additionally, you may qualify for a deferment or forbearance. Your lender or servicer will be happy to discuss the many options that are available to you. Additionally, SLGFA's Caller Information and Assistance Department (1-800-622-3446) will be happy to assist you in any way. It is very important to remain current on your loan repayment obligations, so please call your lender or SLGFA as soon as you can.

Q6: When a borrower defaults on a student loan, does the guarantor collect payments on just the principal, or is the borrower still obligated to pay interest?

A6: A defaulted student loan continues to accrue daily interest. Also, a 25% collection charge on the principal and interest is added to the balance owed by the borrower. Defaulting on a student loan has very serious consequences. Defaulted loans may be subject to collection by IRS tax refund offset, wage garnishment, a collection agency, or legal proceedings. Defaulting on your student loan will make you ineligible for deferments, additional student aid, damage your credit record and could hinder your ability to find a job.

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Q7: I am in my final year of school. How much can I borrow?

A7: There are several factors that determine how much you may borrow in your final year of study. There is an annual loan limit you will be subjected to, as well as a maximum aggregate (cumulative) loan limit. Your grade level determines the loan amount a school certifies. Additionally, the school must determine your cost of attendance and other aid that you will receive. Schedule an appointment with a Financial Aid Officer at your institution to discuss your aid eligibility. Additionally, you may want to refer to SLGFA's website for further information. Go to the Students & Parents Section, click on "Investing in Your Future", then click on "Maximum Annual Loan Amounts for Students and Parents".

Q8: Is it possible for SLGFA to e-mail the status of my student loan to me?

A8: Yes. Whether you need to check on when your loan funds will be disbursed, when your loan will enter repayment, or whether your loan is delinquent, your loan status can be e-mailed to you. Your status will be sent directly to your e-mail address. It will not be posted to the SLGFA Information Exchange located on the SLGFA website. Additionally, you may call SLGFA's Caller Information and Assistance Department (1-800-622-3446) to determine the status of your loan.

Q9: I work in an impoverished district and was told that I could get a deferment or might qualify for student loan forgiveness?

A9: Within the FFELP program, a teacher shortage area deferment is intended to cover full-time teaching in a public or non-profit private elementary or secondary school in a teacher shortage area defined by the U.S. Department of Education, as recommended by the chief state school officer of the state.

Recently, the Higher Education Amendments of 1998 provided for a loan forgiveness program for FFELP borrowers who are not in default and who have been employed as a full-time teacher for five consecutive years in a school that qualifies for loan cancellation under the Perkins Loan Program. The amount forgiven cannot exceed $5,000 of the aggregate loan amount that is outstanding after completion of the fifth complete year of teaching. The five-year period only applies to any new Federal Stafford Loan borrower. A new borrower is defined in federal regulation as a borrower that did not have an outstanding student loan balance on October 7, 1998.

Under the Federal Perkins Loan program regulations, a borrower may have repayment of their loan canceled if the borrower teaches full-time for a complete academic year in a designated elementary or secondary school having a high concentration of students from low-income families. The Department of Education publishes a list each year that designates on a state-by-state basis the schools at which a borrower may teach during the school year to qualify for deferment or cancellation benefits.

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Q10: How do I make payments?

A10: Lenders use different methods. Most commonly, borrowers are issued coupon books or monthly statements. Some lenders may be able to automatically withdraw payments from your checking account. If the lender offers you a choice of payment options, choose the one that is most convenient for you.

Q11: Will I always make my payments to the same lender?

A11: Not necessarily. Sometimes lenders sell loans to other lending institutions or secondary markets. This frees up capital so the lender can make more student loans. If your loan is sold, you will be notified and given instructions for making payments. After such notification, make all subsequent communications with this new holder of the loan. The sale of your loan does not affect the amount you will pay or the terms of repayment, provided you do not default on your loan obligation.

Q12: What is loan servicing?

A12: Some lenders and secondary markets employ servicers to manage their student loan portfolios. Unlike a loan that has been sold, under servicing, the lender retains ownership of its loans but contracts administrative functions such as billing, inquiries, etc. Whether your loan is serviced by your original lender, a secondary market or a servicing contractor, maintain close contact with the appropriate party.

Q13: What if I cannot make a payment?

A13: Lenders realize that borrowers may have financial problems from time to time. A borrower who is genuinely unable to make payment but sincerely wishes to honor the federal loan obligation will find the lender to be cooperative. It is in no one's best interest for borrowers to default. Contact your lender for help as soon as problems arise. The worst thing you can do is fail to make a payment without explanation. You may be entitled to deferments or forbearances that temporarily suspend or reduce your payments during financial hardship. Your lender can assist you and provide the appropriate forms. 

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Q14: What happens if I fall behind on my payments?

A14: If you fail to make timely payments and your account becomes 270 days delinquent, you will be in default. Your account will be assigned to a guarantor for collection. Your default will be reported to a national credit bureau and will become part of your credit record, making it difficult for you to get other types of credit. You will no longer qualify for federal or state postsecondary educational financial aid. Your wages may be garnished; future income tax refunds may be taken, and your assets may be seized. Federal student loans are generally non-dischargeable in bankruptcy proceedings.

Q15: Are there restrictions on how I use my loan money?

A15: Yes. Proceeds from the FFELP must be used for education related expenses (e.g. tuition, fees, books, room and board, etc.).

Q16: Can I get a refund if I do not complete the school term?

A16: Every school is required to have a refund policy. Before you enroll, you should obtain a copy of the school's refund policy. If you withdrew and are eligible for a refund, the school will send the refund to the holder of your loan, who will apply the refund to the outstanding balance of your loan.

Q17: If I transfer schools, will my student loans automatically transfer?

A17: No. Your current school will not transfer your loans automatically. If you are considering transferring, discuss this with your lender, the financial aid office at your current school and the financial aid office at the school you intend to transfer.

Q18: I know I must repay my loan even if I leave school because I am dissatisfied with my program of study. Whom do I contact to discuss my concerns?

A18: If you have questions about your school's study programs, you must contact the guarantee agency for your loan (Student Loan Guarantee Foundation of Arkansas at 1-800-622-3446 or contact the United States Department of Education Inspector General's Office at 1-800-647-8733).

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