Funding Your Education 1997-98

Stafford and PLUS Loan Questions

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Other than interest, is there a charge for loans?

How are these loans repaid?

Can payments be postponed?

Can a Stafford Loan or PLUS Loan be canceled?

Before you or your parents borrow, make sure you understand all of the terms of the loan. The following questions and answers will give you a basic understanding of Stafford Loans and PLUS Loans.

Other than interest, is there a charge for loans?

You or your parents will pay a fee of up to 4%, deducted proportionately from each disbursement of a loan. A portion of this fee goes to the federal government to help reduce the cost of the loans. Also, if you or your parents don't make loan payments when they're scheduled, you may be charged late fees and collection costs.

How are these loans repaid?

You can choose to repay your loan on one of the following plans:

• a 10-year plan with a minimum monthly payment of $50,
  
• a graduated plan with a monthly payment that starts out low and then increases gradually during the repayment period, or
  
• a plan that bases the monthly payment amount on how much money you make.

Your parents can repay a PLUS Loan on either of the first two plans.

With a Direct Loan, you or your parents can also choose a plan with a minimum $50 monthly payment amount and more than 10 years to repay.

No matter which plan you choose, your repayment period begins when your first payment is due, and deferment and forbearance periods (postponements of repayment) do not count as part of that period. For more information, contact the financial aid office at the school you plan to attend.

Can payments be postponed?

Under certain circumstances, you can receive a deferment or forbearance on your loan. During a deferment, no payments are required. If you have a subsidized loan, the federal government will pay the interest that accrues during the deferment. If your loan is unsubsidized, you'll be responsible for the interest on the loan during the deferment. Your parents will be responsible for the interest on their PLUS Loan during a deferment. Neither you nor your parents can receive a deferment if your loan is in default (that is, if you don't repay it according to the terms you agreed to). During forbearance, payments are postponed or reduced. The government does not pay the interest; you are responsible for it on your Stafford Loan, and your parents are responsible for it on their PLUS Loan.

For more detailed information on deferments and forbearances, see The Student Guide, 1997-98. Your college or career school might be able to give you a copy, or you can just call our Federal Student Aid Information Center toll-free and ask for one. The telephone number is

1-800/4-FED-AID (1-800/433-3243)
a toll-free number

Can a Stafford Loan or PLUS Loan be canceled?

A Stafford or PLUS Loan can be canceled (1) if the borrower dies (or the student on whose behalf a parent borrowed dies), (2) if the borrower becomes totally and permanently disabled, (3) if the loan is discharged in bankruptcy, (4) if your school closes before you complete your program, or (5) if the school falsely certifies the loan.

If your parents are co-borrowers for a PLUS Loan, the loan can be canceled under the first two circumstances only if you die or if both parents die or become totally and permanently disabled.

Even if you don't complete the program of study at the school, don't like the school or the program of study, or don't obtain employment after completing the program of study, these loans must nonetheless be repaid. Neither loan can be canceled based on any of the reasons stated.

Repayment assistance (not a cancellation, but another way to repay) may be available if you serve in the military. For more information, contact your recruiting officer.

PLUS Loans (Loans for Parents) | Applying for Financial Aid