Loan Borrower 's Rights and Responsibilities

All students should know that borrowing funds to attend college has some major responsibilities and rights. Therefore, we suggest that you familiarize yourself with the following sections:

Loan Consolidation and Refinancing Loan
Default and its Consequences
Second Chances for Defaulted Loans
Loan Repayment Information
Loan Consolidation and Refinancing Loan

Loan Consolidation and Refinancing Loan consolidation allows the student to combine all loans obtained from more than one lender and/or from several federal programs into one loan. On the plus side, consolidation may extend your repayment period and reduce your monthly payment amount while centralizing your payments. On the negative side, receiving a longer repayment period means that you will pay more interest on your debt over the life of your loan, you will lose some deferment entitlements, and you will forfeit all rights to interest subsidized deferments available under your original loans. You should consider all of your options carefully before deciding to consolidate your loans. Loans from the following programs may be consolidated:

  • Federal Direct Loans (DLSUB, DUNSB)
  • Federally Insured Student Loans (FISL)
  • Federal Stafford Student Loans (STAFF)
  • Federal Supplemental Loans for Students (SLS)
  • Federal PLUS loans and Auxiliary Loans to Assist Students (ALAS)
  • Federal Perkins Loans,also known as National Direct/Defense Student Loans (NDSL)
  • Nursing Student Loans (NSLP); Health Profession Student Loans (HPSL)
Default and its Consequences

A default occurs when a student fails to make monthly payments for 270 days during a period of repayment and the Department of Education or lender concludes that the student no longer intends to honor the obligation.

The Department of Education or lender may declare the student's entire unpaid principal and interest due and payable. The consequences of defaulting on your student loan are as follows:
  1. Your default will be reported to a credit bureau. This will affect your future ability to borrow.
  2. Your lender or holder of your loan may initiate legal action to force you to repay your loan.
  3. You will not be eligible to receive financial assistance from any Title IV Programs at any institution. This includes at all institutions that participate in Federal Perkins Loan and Federal Stafford Loan Programs. Other Title IV Programs are the Federal Pell Grant, Federal SEOG, Federal/State Work-Study, and the Federal Direct Loan Programs.
  4. Your eligibility for repayment options and benefits such as deferment and/or interest benefits will no longer be available to you.
  5. Your state and/or federal income tax refunds will be withheld.
  6. Your wages will be garnished.
  7. You will be liable for all costs associated with the collection of the loan.
  8. Your professional/career licenses may be denied.
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Second Chances for Defaulted Loans for Students who have Defaulted on their Student Loans

There may be a second chance to receive Title IV financial aid.

Provisions under the Reauthorization Act provide solutions for students who make satisfactory payments on their defaulted student loans to participate in the Loan Rehabilitation Program. The student must contact the lender or institution that is currently holding the loan and make satisfactory payments for a period determined by the lender (usually 6-12 months).

After the borrower has completed this payment schedule, your loan can be taken out of default and you may again be eligible for financial aid. All inquiries about the Loan Rehabilitation Program should be made through your lending institution. Students may also contact the Department of Education about the Direct Student Loan Consolidation for their defaulted loans by calling:1-800-557-7392.

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Loan Repayment Information

Most loans postpone payment while the borrower is enrolled for at least half-time study, volunteer service, Peace Corps, or military service. The sample repayment table on the next page gives you an idea of how the length of repayment and the amount of payment increases with the amount borrowed. Please note that the payments are approximate amounts only.

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