Student Loan Clarification
September 20, 2023 10:52 AM   Subscribe

Are there outside organizations/non-profit who assist students in understanding the current state of their student loans.

I am looking for assistance as to where I stand with my student loan with both the government and my universtity.

I applied for loan for an amount that would cover the costs for the two year program. A sum of money was returned to me by the University financial aid department. I assumed their decision was based along the lines of "we received an amount of money that was much more than we needed for your tuition. We are returning to you the excess. Apply this when it comes time to pay your tuition at the end of your studies"

I have spoken with school financial advisors who have seemingly verified this. Yet something doesn't seem right.

I am also getting different dates from FAFSA as to when I begin paying back my student loan.

I am looking for someone to help me understand the whole picture.

1) Explain why the money was returned.
2) Explain how this effects future tuition payments along with my future responsibilities
3) Explain when my loan payments actually begin. (this may all have to do with Biden plan. At one point I was told my payments would begin once I finsihed school in Summer, 2024. I have been recently told that my payments would begin next month. And my loan was recently tansferred to a different carrier)

Right now it seems I am being guided by two or more unconnected bubbles
posted by goalyeehah to Education (4 answers total) 7 users marked this as a favorite
 
You can try TISLA (freestudentloanadvice.org).
posted by 8603 at 11:37 AM on September 20, 2023 [1 favorite]


I am currently a college student, started in June, and while I'm not a financial advisor I can explain from my experience:

1) Student loans are based on a need-based calculation and not strictly the tuition; my loans were also larger than the literal cost of tuition. This is to cover books, parking passes, lab fees, etc. Any money that the school has in your account which doesn't immediately pay your due amounts will be sent to you because the school doesn't want to be responsible for your money.

There are rules about what you can use that money for but as long as it's school related you are OK. Like, my degree plan uses a lot of technology so I budgeted the overpayment to buy better equipment than I could have afforded on my own.

Also: if they're federal loans and you don't want responsibility for having that money around, it is acceptable to ask the finance office to use the unused amount and reduce your loan amount within a certain amount of time after it is issued. Or, you can hold onto it and use it to pay back the loan when it comes due, or pay future tuition and not take out more loans later. But, your loan amount is the literal amount of money you got as the result of your FAFSA, both paying school bills directly and any cash sent to you for other school-related costs, so you'll pay interest on all that money some day in the future.

2) You're not saying where the money is coming from regarding future tuition, but if you got this extra money and want to use it to pay for future tuition, that counts under #1's "you have to use loan money to pay for school". Your responsibility is to use this money for school related costs, and that's pretty flexible as long as it's obviously for school.

3) You are not required to pay back your loans while you are actively a student, so student loan payments begin after you stop being an enrolled student; if you get notices that you have payments due from the service provider, somebody forgot to file a deferment for you; you can talk to the service provider about this. However depending on the loan you got interest may be compiling while you're a student, and nobody will stop you from making payments while you're in school to reduce interest in the future. So, getting a very large amount up front could cost you money in the future if interest is not also deferred while you're a student. The student loan provider can answer this.

Note that I also got conflicting emails from my student loan service provider too -- but log into the service provider and it will tell you when your next payment is due, if it's due in October it will already say so, and if that's the case you should ask them for deferment.

The FAFSA isn't 100% of the paperwork for student loans -- there's a lot of other paperwork and agreements once the loan is created which likely contain answers a lot of your questions; for example, a quick review of my own promissory note has sections which cover most of your questions, and my disclosure statement outlines how to return a portion of the loan to reduce the size of the loan. Ultimately, these documents are what counts, even if you can get outside advice.
posted by AzraelBrown at 12:07 PM on September 20, 2023


There's some information here in this article I heard the other day: https://www.npr.org/2023/09/18/1200076867/federal-student-loan-borrowers-prepare-to-resume-repaying-their-loans

EDIT: with some links to orgs that can help
posted by Snowishberlin at 2:39 PM on September 20, 2023


The loan servicers are a mess right now. After a ~3 year pause during the pandemic, payments are resuming for a lot of people as of next month (October). Payments won't be resuming for you, provided that you are in school at least half time. As long as you maintain at least half time enrollment, you won't have to start payment until after graduation and after your grace period. Most of the time, the grace period is six months. Before graduation you will receive an email instructing you to do exit counseling, so you will know what to expect.

Your student loan servicer should "know" that you are still in school. However, there's probably a form that you can fill out on their website if they have the wrong info. You shouldn't have to fill out this form. However with the current state of things (and potential upcoming government shutdown) this internet stranger thinks you might want to consider double checking with your loan servicer to be extra safe.

The following is assuming you are in a graduate level program (and not an undergraduate level one)...

While the Federal government sets a relatively low max amount for undergraduate loans, the maximum amount is much more generous for graduate level loans. The same amount of money for "living expenses" could last someone with more modest expenses (or additional income/savings) two years and her classmate a semester.

There are some implications of borrowing all semesters at once. One is that interest accrues from the date you start borrowing. There are also two types of graduate loans (Direct Unsubsidized Loans and Graduate Plus). The former is preferable since it has a lower interest rate. However, you can only borrow ~20k of Direct Unsubsizied loans each academic year. In addition, the interest rates change each year.
posted by oceano at 5:30 PM on September 20, 2023


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