Borrow Wisely for Your Education & Know Your Repayment Options
SUM Bible College and Theological Seminary is committed to offering affordable tuition and fees. In addition, the college offers Federal grants and institutional scholarships. SUM also believes its adult Christian learners may have the resources to pay for personal living expenses while attending college and should “borrow wisely” and prudently. However, some students may find the need to borrow a Federal direct student loan to assist in covering the costs of their education expenses. This “Financial Literacy” webpage is designed as a Q&A to provide you with useful information on your student rights and responsibilities as a Federal student loan borrower and provide you with repayment options should you have difficulty repaying your student loan so you can avoid delinquency and default. Most importantly, it is designed to help you “borrow wisely” while attending SUM.
Personal financial planning is more than just being able to balance a checkbook, compare prices, or obtain employment. It also includes skills like long-term vision and planning for the future, and the discipline to use those skills every day. Being aware of short-term and long-term education costs associated with student loans and other debts will help secure a strong financial future.
Remember: Federal student loans must be repaid. Failure to repay your federal student loan will result in default. While in default, the federal government can seize your tax refund, garnish your wages, place liens on your property, as well as damage your credit. Default may also affect your ability to get a good job.
With the many deferment, forbearance and repayment options available, there is no reason any student borrower should default on their loans. The information provided below is designed to assist you in being a responsible borrower while understanding your repayment options:
What every student loan borrower needs to know
Before you borrow, or if you have already borrowed a student loan, the below Q&A will provide you with some “financial literacy.” In other words, it will provide you with useful tips and information on your student loan repayment options, rights, and responsibilities as well as the consequences of defaulting on your student loan. It will also help answer your questions you may have about your loans while in school, during a leave of absence, should you need to withdraw and what to do after you complete your degree program.
- How much should I borrow?
- How do I track and manage my loans?
- How do I consolidate my student loans?
- How do I repay my student loans?
- When should I begin repaying my loans?
- What is loan deferment and forbearance?
- What is loan default?
- What if I default on my student loans?
- How do I get help with my loan problems?
- What if I need legal help with my student loans?
How Much Should I Borrow?
We strongly encourage you to carefully review your education costs and borrow only what is needed. For example, do you really need a student loan for personal expenses or housing if you already have the resources to pay for them?
It is important to estimate and project your repayment obligations prior to borrowing. Borrowing in excess of what is needed means you must repay more at a later date. Your monthly payments will be higher and you may be paying over a longer period of time due to the interest that accrues on your loans.
For federal student and parent loans, borrowers should be aware of the repayment options that are available. In addition, there are a number of deferment or forbearance provisions available once the loan is in repayment.
*Remember, loans must be repaid even if you did not complete your program and/or degree.*
How do I track and manage my Loans?
To keep track of your student loans or to contact your loan servicer for repayment, log onto the National Student Loan Data System (NSLDS) at www.studentaid.gov or call the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243; TTY 1-800-730-8913). You will use the same FSA User ID from your FAFSA to access the NSLDS website. NSLDS will not only show you all of the federal loans you borrowed but also who your loan servicer is for your loan(s). The service is the assigned entity you will be corresponding with to coordinate repayment.
How do I consolidate my Loans?
If you have borrowed more than one loan such as a Federal Subsidized Loan, Unsubsidized Loan, and/or a Federal PLUS/Grad PLUS Loan, you can consolidate them all into one loan repayment.
The Direct Loan Consolidation program offers a way for you to combine all your loans into one consolidated loan with one point of repayment. This loan consolidation program will be available to you once you graduate or finish college and begin repayment.
There are advantages and disadvantages to loan consolidation and we recommend that you research this option carefully before proceeding. Visit www.studentaid.gov and click on the “Repayment & Consolidation” tab for more information and to complete a Consolidation Loan Application and Promissory Note.
Who is eligible for loan consolidation?
To qualify for a Direct Consolidation Loan, borrowers must have at least one Federal Direct Loan that is in grace, repayment, deferment, or default status. Loans that are in an in-school status cannot be included in a Direct Consolidation Loan. For more information and to complete a loan consolidation application visit https://studentaid.ed.gov/sa/repay-loans/consolidation
How do I repay my Student Loans?
Your loan servicer will provide you with information about repayment and will notify you of the date your loan repayment begins. It is very important that you make your full loan payment on time either monthly (which is usually when you’ll pay) or according to your repayment schedule. If you don’t, you could end up in default, which has serious consequences (see “What is Loan Default?” below). Student loans are real loans—just like a car loan or mortgage. The major difference is that you must pay the loan back to the Federal government. And unlike a car loan or mortgage, you cannot declare or write it off in bankruptcy court.
When Should I begin repaying my Loans?
You don’t have to start making payments until six months after you graduate, leave school or drop below half-time enrollment. During any period when you’re not required to make payments, interest will accrue on your loan(s). You have the option to pay the interest or have it capitalized to the principal. For more information, contact your loan servicer or visit www.studentaid.gov.
Your loan servicer will contact you via phone, email, and mail on when your first payment will begin. If you are not sure who your loan servicer is or the total you must repay, you can visit the National Student Loan Database (NSLDS) at www.nslds.ed.gov. You will need your FSA User ID to log into NSLDS.
What Repayment Plans are available to me?
When the time comes to start repaying your student loan(s), you can select a repayment plan that is right for you and your financial situation. There are a number of different types of repayment options as described below. For more information, please visit https://studentaid.ed.gov/sa/repay-loans/understand/plans and www.studentaid.gov to complete the application process.
With the standard plan, you’ll pay a fixed amount each month until your loans are paid in full. In general, the minimum monthly repayment will be at least $50 and you’ll have up to 10 years to repay your loan(s).
Your monthly payment under the standard plan may be higher than it would be under the other plans because your loans will be repaid in the shortest time. For that reason, having a 10-year limit on repayment, you may pay the least interest.
Under the extended plan, you’ll pay a fixed annual or graduated repayment amount over a period not to exceed 25 years. If you’re a Direct Loan borrower, you must have more than $30,000 in outstanding Direct Loans to participate in this program
Your fixed monthly payment is lower than it would be under the Standard Plan, but you’ll ultimately pay more for your loan because of the interest that accumulates during the longer repayment period.
This is a good plan if you will need to make smaller monthly payments. Because the repayment period will be 25 years, your monthly payments will be less than with the standard plan. However, you may pay more in interest because you’re taking longer to repay the loans. Remember that the longer your loans are in repayment, the more interest you will pay.
With this plan, your payments start out low and increase every two years. The length of your repayment period will be up to ten years. If you expect your income to increase steadily over time, this plan may be right for you.
Your monthly payment will never be less than the amount of interest that accrues between payments. Although your monthly payment will gradually increase, no single payment under this plan will be more than three times greater than any other payment.
Income Based Repayment (IBR)
Income Based Repayment is a new repayment plan for the major types of federal loans made to students. Under IBR, the required monthly payment is capped at an amount that is intended to be affordable based on income and family size.
You are eligible for IBR if the monthly repayment amount under IBR will be less than the monthly amount calculated under a 10-year standard repayment plan. If you repay under the IBR plan for 25 years and meet other requirements you may have any remaining balance of your loan(s) cancelled.
Additionally, if you work in public service and have reduced loan payments through IBR, the remaining balance after ten years in a public service job could be canceled.
Income Contingent Repayment (ICR)
Under Income Contingent Repayment your monthly repayment will be the lesser of 20% of your discretionary income or the amount you would pay on a fixed payment plan over 12 years adjusted according to your income. Payments are recalculated each year and are based on your updated income, family size, and the total amount of your Direct Loan(s).
What is Loan Deferment and Forbearance?
At times, life happens and unexpected circumstances occur. An injury, a death, divorce, or loss of a job may impact your ability to make your monthly student loan payments. Should this occur, or if you simply wish to return back to college, consider loan deferment or forbearance. Deferment and/or forbearance temporarily suspend your monthly loan payment.
There are deferment and forbearance options to prevent falling into default status. For more information, please visit the Federal student aid website at: https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance
Below is a brief description of the types of options available:
Deferment = a postponement of payment on a loan that is allowed under certain conditions and during which interest does not accrue for subsidized loans. This request can be made if you are returning to school and are enrolled in at least half-time status. Please contact your loan servicer for more information.
Forbearance = a period during which your monthly loan payments are temporarily suspended or reduced. You may qualify for forbearance if you are willing but not able to make loan payments due to certain types of financial hardships.
A complete list of Direct Loan deferment and forbearance types and eligibility criteria can be reviewed at www.studentaid.gov.
Repayment Plan = Changing repayment plans is a good way to manage your loan debt when your financial circumstances change. For example, you can usually lower your monthly payment by changing to another repayment plan with a longer term to repay the loan. There are no penalties for changing repayment plans.
What is Loan Default?
Loan default is failure to repay a loan according to terms of the Master Promissory Note. There can be serious legal consequences for student loan defaulters, especially because they have borrowed from the Federal government. Some of these consequences include having tax refunds withheld, liens on your assets, your wages garnished, your credit destroyed, and you will not be allowed to receive Federal student aid anywhere in the country until the default is paid or a reinstatement plan is arranged.
What if I default on my Loan?
If you default, it means you failed to make payments on your student loan according to the terms of your promissory note, the binding legal document you signed at the time you took out your loan. In other words, you failed to make your loan payments as scheduled. Your school, the financial institution that made or owns your loan, your loan guarantor, and the federal government all can take action to recover the money you owe.
Consequences of Default:
- National credit bureaus can be notified of your default, which will harm your credit rating, making it hard to buy a car or a house.
- You will be ineligible for additional federal student aid if you decide to return to school.
- Your wages may be garnished
- You may have liens on your assets as you owe the Federal government
- State and federal income tax refunds can be withheld and applied toward the amount you owe.
- You will have to pay late fees and collection costs on top of what you already owe. You can be sued.
How do I get help if I need assistance or have problems with my loan(s)?
The SUM Bible College and Theological Seminary Office of Financial Aid is here to assist. We can provide you with additional information and resources to avoid delinquency and default. Contact us at [email protected] or call 916-306-0578.
You may also contact the Federal student aid programs at 1-800-4FED-AID should you need assistance with your FSA User ID, logging into NSLDS or have a question about your Federal student loan.
If you continue to experience difficulty with your federal student loan, contact the FSA Ombudsman at the US Department of Education. The FSA Ombudsman is dedicated to helping students resolve disputes and other problems with federal student loans.
The FSA Ombudsman will research your problem in an impartial and objective manner and will try to develop a fair solution. The FSA Ombudsman does not have the authority to impose a solution. Nevertheless, many students have found the FSA Ombudsman to be helpful in resolving disputes with lenders.
You can contact the FSA Ombudsman by phone at 1-877-557-2575, by fax at 1-202-275-0549, by mail at U.S. Department of Education, FSA Ombudsman, 830 First Street, NE, Fourth Floor, Washington, DC 20202-5144, by visiting fsahelp.ed.gov or by e-mail at: [email protected].
For more information and to learn what actions to take if you default on your loans visit https://studentaid.ed.gov/sa/repay-loans/default
The below links provide additional Financial Literacy Resources on loan repayment and maintaining good credit:
- https://studentaid.ed.gov/sa/repay-loans – Provides valuable information on how to manage your loans
- https://www.cashcourse.org/Landing/gclid/EAIaIQobChMI74Xe1qqz3QIVUm5-Ch0nNApsEAAYAiAAEgJGu_D_BwE – CashCourse.org serves as a great resource for students as it speaks to many of the common financial pitfalls they may be encountering during their college years.
- https://www.mappingyourfuture.org/ – Mapping Your Future is a free resource for career, college, financial aid, and money management information. The goal is to help individuals achieve life-long success by empowering students, families, and schools with web-based information and services.
- http://www.youcandealwithit.com/ – YouCanDealWithIt.com provides practical advice about paying for college and managing your debt.
- https://www.creditkarma.com/ – Request a free annual credit report. This will allow you to pull your credit report and check your FICO score.
Remember, you are responsible for repaying your student loans as agreed to on your signed Master Promissory Note(s). Please keep your contact information up to date with your loan servicer to ensure you receive important correspondence. When in doubt, contact your loan servicer. Staying in touch with your loan servicer will maintain a good relationship and decrease the chances of loan default.
For more information on SUM’s Federally required “Consumer Disclosures,” please visit: Consumer Disclosures – SUM Bible College and Theological Seminary