Welcome to the “Educational Loans” section of our Website, and join us for an overview of one topic that most college students have to consider while financing their education.  An educational loan is one of the most valuable resources for students and parents, and it has been since it was first introduced into federal legislation to the Congress of the United States in the late 1950’s, in response to the launch of  “Sputnick.”

Educational loans were developed specifically for college students and parents and are repayable at competitively low interest rates.  They are simple to apply for (via the FAFSA), are readily available, and generally offer a variety of repayment options.  The majority of loans that are based on financial need, the subsidized ones, require no repayment of principle or payment of interest while the student is in school, as long as he/she is attending at least half-time (generally six credits per term).  Unsubsidized loans require quarterly interest payments (not principle) while the student is in attendance.  The principle on both a type of loans become repayable after a grace period, generally after the student graduates or enrolls for less than six credits per term. 

For college students and parents, the two largest educational loan programs are the William D. Ford Federal Direct Student Loan Program, and the Federal Family Educational Loan Program (FFELP).  Long Island University offers loans through the Federal Direct Student Loan Program, and also offers loans through the Federal Perkins Student Loan and for pharmacy majors, the Health Professions Student Loan Programs.  The federal government guarantees all of these loans, and most are based on demonstrated financial need.

To help our students and parents become informed borrowers, we offer the following information on the educational programs.  We have provided information that we hope will explain loan borrowing from the application process through the repayment process, and hope that we can help families make the best loan choices for their student. This and additional information is also available in our publication “Financial Aid Guide” which is sent to all students with their award notices each year.

Loan Default – A Great Risk to a Student’s Financial Future:

If a student fails to make loan payments on time or if he/she defaults on repaying loans, the consequences are serious.  One or more of these penalties can be imposed:

• Your account may be turned over to a collection agency, increasing your total debt by late fees, additional interest, court costs, collection fees, attorney’s fees, and other costs.
• Your debt will be reported to credit bureaus as delinquent, which may damage your credit rating making it difficult for you to obtain a car loan or a home mortgage.
• The federal government can retain your federal tax refunds.
• Your employer, at the request of the federal government can withhold (garnish) part of your wages and give them to the federal government as payment.
• The federal government can take legal action against you.
• You will not be eligible for further federal student financial aid.

Because being declared in default has such severe repercussions on a credit rating and history, students are urged to always stay in touch with their lender (or the federal government’s processor) to remain in good repayment status.

Student Rights and Responsibilities:

Borrowing educational loans is a serious undertaking and there are rights and responsibilities that are connected to it that all students should be aware of.  They should:

• Know that their Federal Direct Student Loan(s) is a loan and must be repaid, and fully accept that responsibility
• Understand that my student loan is to be used to pay for their training and necessary living expenses
• Understand repayment will generally begin for the Federal Direct Student Loan Borrowers following a six month grace period
• Inform their lender if their address, telephone number, or name changes, if they leave school, transfer, or drop below half-time status, or if they change graduation dates
• Not be in default on any other loan(s) from any federal Title IV student loan programs
• Understand the concept of a master promissory note and the fact that they may have several loans made under this note
• Understand that they may cancel all or a portion of their loan by informing their school within 14 days after the date they receive a disbursement notice or by the first of the payment period, whichever is later
• Notify their lender if:
• withdraw, graduate or fail to enroll in school
• register for or drop to a less than half-time status.
• transfer to another school
• change their name, address, phone number or Social Security number
• change their expected date of graduation

Students also have the responsibility to:

• make monthly payments on their loan after they leave school, unless they have a deferment or forbearance.
• notify the U.S. Department of Education Direct Loan Servicing Center of anything that might alter their eligibility for an existing deferment.

Consolidating Educational Student Loans:

Consolidation allows a student to make only one monthly payment to cover all federal loans (including non-direct federal student loans).  A federal direct consolidation loan can also simplify repayment for some borrowers – particularly those who have both Federal Direct Federal Student Loans and other federal educational loans.  Regardless of how many federal educational loans being repaid, the student may benefit from consolidating the loans into a single account because he/she:

• Can qualify even if you’re still in school.
• The interest rate on a Federal Direct Consolidation Loan for which an application is received between February 1, 1999 and June 30, 2003 is based on the weighted average of the interest rates on the loans being consolidated, rounded to the   highest one-eighth of one percent.  This rate shall not exceed 8.25 percent.
• May pay based on income.
• Have more repayment choices than ever before.
• Can change the repayment plan at any time.
• Will get everything on one monthly statement.
• Can qualify even if in default.
• Will never have a penalty for early payoff of the loan.
• Will have no minimum or maximum amounts governing consolidation.

By consolidating education loans, a student will have only one payment, one place to send a monthly payment and only one telephone call to report a change of address or telephone number, request a deferment or forbearance, or ask a question about a loan(s)

If interested in a Direct Consolidation Loan, a student should call the Direct Loan Origination Center’s Consolidation Department at: 1-800-557-7392

Up-to-date information is also available on the Direct Loan website at:  www.loanconsolidation.ed.gov/  
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