Stafford loans
June 30, 2011 8:20 AM   Subscribe

Stafford loans. My step-daughter says that Stafford loans are forgiven upon graduation. This is OPPOSITE of anything that I've ever heard about student loans. Which is right?
posted by anonymous to Education (29 answers total) 2 users marked this as a favorite
 
Anecdotally, my Stafford loans actually became due after graduation.
posted by motsque at 8:22 AM on June 30, 2011 [10 favorites]


You are right. They are not forgiven unless you're permanently disabled (and I believe that there are a few other special programs that offer partial loan forgiveness to encourage you to go into certain professions)
posted by the young rope-rider at 8:22 AM on June 30, 2011


like the others said. the government pays the lender if the student defaults, but I wouldn't call that "forgiven".
posted by changeling at 8:24 AM on June 30, 2011


Not even remotely. They would let you borrow a ton of money, then once you graduate not make you pay it back? Some teachers can apply for loan forgiveness, but please inform your step daughter that she will have to pay back this money she is borrowing, and it ain't going to be cheap.
posted by King Bee at 8:25 AM on June 30, 2011 [2 favorites]


They are not forgiven. She has to pay them back.

She has, however, a six month grace period from the date of graduation before she has to START paying them back. Could she be thinking of this?

But in about five months, she'll receive notice that in another month, she'll receive her first statement and an approximate amount of what that first bill will be.
posted by zizzle at 8:26 AM on June 30, 2011


Ha -- I wish! But alas, I can report that I pay on my Stafford loans monthly. TYRR is right -- there are a few professions in targeted geographic areas (such as nursing in my state, teaching in some places, Peace Corps., etc.) that will allow some of them to be forgiven. But most of us will be paying the minimums for a lifetime!
posted by M.C. Lo-Carb! at 8:26 AM on June 30, 2011


Is it possible that your step-daughter just doesn't know what the word "forgiven" means?
posted by madcaptenor at 8:26 AM on June 30, 2011 [4 favorites]


Your step-daughter is completely wrong. Stafford loans must be repaid and come due a few months after graduation. In fact, unsubsidized Stafford loans even accrue interest while you're in school, so that $10,000 you borrow the first year becomes more like $13,000 by the time you graduate (assuming the current 6.8% interest rate for Stafford loans).

There are very few ways to get student loans forgiven. Death, permanent disability, working for 10 years in public interest (while making payments), and making payments for 25 years under an income-based repayment plan are the main ways.
posted by jedicus at 8:27 AM on June 30, 2011


Even the cases mentioned above in which the loan is "forgiven", it isn't really. It's just paid off by someone else. As in, for example, the case where the student enters the teaching profession - the state will have a fund for paying this off.

Bop your step-daughter over the head with this:
All student loans must be repaid, period. DEFAULTING ON A STUDENT LOAN IS THE WORST FINANCIAL THING YOU CAN DO IN YOUR LIFE. Amazingly, it messes you up even worse than defaulting on a mortgage and having your house foreclosed on. You also can't even get out of paying a student loan thorough bankruptcy. It's kind of insane.
posted by Citrus at 8:39 AM on June 30, 2011


The word your step-daughter is probably looking for is "forbearance":
Forbearance: Forbearance is a temporary postponement or reduction of payments for a period of time because you are experiencing financial difficulty. You can receive forbearance if you’re not eligible for a deferment. Unlike deferment, whether your loans are subsidized or unsubsidized, interest accrues, and you’re responsible for repaying it. Your loan holder can grant forbearance in intervals of up to 12 months at a time for up to 3 years. You have to apply to your loan servicer for forbearance, and you must continue to make payments until you've been notified your forbearance has been granted.
As an aside -- 6.8% interest!!?? In a sluggish economy, with no other lending going on (and few that carry explicit repayment guarantees from the government)? WTF?
posted by notyou at 8:40 AM on June 30, 2011


It's also possible she's thinking of the teacher's Stafford loan forgiveness program. Even under this program, you need to be working for 5+ years so some payment will be required.
posted by jmd82 at 8:58 AM on June 30, 2011


As an aside -- 6.8% interest!!?? In a sluggish economy, with no other lending going on (and few that carry explicit repayment guarantees from the government)? WTF?

Rates are set by statute since July 1 2006. Prior to that they were indexed to treasuries, which meant that some lucky people consolidated thier loans at something like 1.89% around 2003-2005. Other people after 2006 got stuck with 6.8 or if youre like me with Grad PLUS loans, 7.5%.

Also, they are in no way forgiven. Ever. Unless you qualify for certain exceptions.
posted by T.D. Strange at 8:58 AM on June 30, 2011


So, is she asking you to sign something?
posted by cooker girl at 9:17 AM on June 30, 2011


Can't really imagine how, unless she's buttering you up to ask you to co-sign something, or maybe she's setting up for a big-surprise-meltdown when the loans really aren't forgiven, and she asks you to bail her out after graduation when the payments come due.

Without knowing the person in question that seems uncharitable, but I suppose it's a possibility.
posted by Kadin2048 at 9:19 AM on June 30, 2011


If you don't sign anything, I'm pretty positive you won't be on the hook. Creditors might hound you a little if she never pays them back, but legally I doubt there is anything they can do to you.

Honestly, I think she is confusing the 6-month post graduation with a forgiveness. Even bankruptcy cannot get rid of student loans. As a parent, please make sure she understands this. Sit next to her and have her do this. Continue to sit with her until she understands that she will be on the hook for these loans. Tell her you aren't sure what is correct but that as her parent it is your responsibility to figure it out with her.
posted by InsanePenguin at 9:20 AM on June 30, 2011


OK, is there someway that she is going to hook me for this?

Don't sign anything. As others have said, if she doesn't pay and she's listed you as a reference, the creditors might eventually bug you a little via phone in order to see if that will get her to cough up the money (back when I was busy defaulting on my loans and ruining my own credit in my 20s, my creditors did this a few times), but if you're not the cosigner then it's not your debt.

I agree with everyone who says she's confusing "forbearance" with "forgiveness." Student loans absolutely have forbearance periods.
posted by scody at 9:23 AM on June 30, 2011


Oh, and tell her that if she ever has a problem being able to pay them for a few months, for the love of god CALL THEM. I managed to tank my credit score by ignoring them for three months and they reported them to the credit bureaus. THEN I called them and was begging forgiveness. The lady was incredibly helpful and said "Sure, I'll make your account current and you'll just need to continue with your regular payments." They moved the three I missed to the end of my loan, effectively pushing my payment schedule back three months. She also said that, had I called when I knew I wasn't going to be able to pay, she would have happily put a short forbearance on the account.

This applies to just about everything in life, I've found. Don't ignore, just call. The worst that will happen is that they will say they can't help you and you'll be just as screwed as you were to begin with. The best that can happen is you alert them to something that you know will happen and they'll help you work around it.
posted by InsanePenguin at 9:38 AM on June 30, 2011 [6 favorites]


If your spouse co-signs her loans, and if you are in a community property state, then you could potentially be on the hook even without personally signing.
posted by Emera Gratia at 9:50 AM on June 30, 2011 [4 favorites]


Also, anecdotally, not only are they not "forgiven", but even if the person dies, they don't go away that easiler, either. My mother died and getting the banks off my back to pay them back after her death was a huge, disruptive disaster!!
posted by TinWhistle at 10:15 AM on June 30, 2011


Huh?? Totally incorrect. To echo others, Stafford loans are never forgiven and will remain alive long past the borrower's death. Even filing bankruptcy will not dismiss the darned things.

I know that in the past, in some professions such as teaching, there were related loan-forgiveness programs (for instance, if one volunteered to teach in an underserved community) but I'm not even sure these exist in the current economy.
posted by chez shoes at 11:27 AM on June 30, 2011


This link might help.

The public service thing is the way to go unless she's getting into a very high-paid field.
posted by mareli at 11:31 AM on June 30, 2011


Oh, and tell her that if she ever has a problem being able to pay them for a few months, for the love of god CALL THEM.

It's also worth noting there are a variety of replayment plans. Some or even $xxx every month, whereas some are $x to start with and $xxxxxxx to end with. There are options.
posted by jmd82 at 3:27 PM on June 30, 2011


Is it possible that your step-daughter just doesn't know what the word "forgiven" means?

Is it possible that your step-daughter just doesn't know what the word "loan" means?
posted by ethnomethodologist at 3:59 PM on June 30, 2011 [2 favorites]


Stafford loans are never forgiven and will remain alive long past the borrower's death

Uhh, not true. Death is one of the very few circumstances in which student loan debts are forgiven. I used to work for a student loan servicing entity.
posted by Lobster Garden at 4:51 PM on June 30, 2011


I think the two of you need to visit the Financial Aid office at her school (or prospective school) and get loan counseling. She needs to learn this stuff for the reasons everyone above has said, and you need to know that she's learned it for your own piece of mind.
posted by smirkette at 6:19 PM on June 30, 2011


Even teachers who agree to teach in an urban district for 5 years can't get all of their loans taken out towards their certification (I think the limit is 20k) or professional development forgiven. She is unfortunately (for all of us) sorely mistaken.
posted by chosemerveilleux at 7:51 PM on June 30, 2011


It's possible that your stepdaughter wouldn't qualify for Stafford loans without some adult (you, your spouse) cosigning for them. That might be what this is about.
posted by polexa at 9:24 PM on June 30, 2011


The Feds require her to go through loan counseling every time she's awarded a Stafford loan through her school. The school will not finish processing the loan without this, and the counseling is extremely specific (and requires you to answer quiz-like questions about each section!) about repayment terms and conditions. It does not say that your loans are forgiven except in case of total and permanent disability.

Stafford loans aren't for parents. They're for the student. Parent loans are PLUS loans. You and your step-daughter should both read more about Stafford loans from the government's own site.
posted by asciident at 11:08 PM on June 30, 2011


Oops, this sentence is sort of unclear upon reread: "It does not say that your loans are forgiven except in case of total and permanent disability."

I mean to say: the terms (and counseling) say that the loans will not be forgiven, except in case of disability.
posted by asciident at 11:14 PM on June 30, 2011


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