Know your student loan rights

Recent college graduates who face a tough job market need to know their options for repaying their federal student loans.

By MSN Money Partner Mar 19, 2013 12:24PM

This post comes from Aaron Crowe at partner site Credit.com.

 

Credit.com logoThanks in part to high rates of unemployment and underemployment, more students are deferring repayment of student loans -- at a time when students are graduating with more debt than ever before.

 

Image: Graduation cap (© Stephen Wisbauer/Getty Images)However, there are other reasons why a TransUnion study found that more than half of student loan accounts are in deferred status. For one, the large loan amounts don't register with them, says Tom Yarnell, director of financial aid at Otterbein University in Westerville, Ohio.

 

"I don't think they realize how long it takes to pay it back and the amount they'll have to pay back," Yarnell says. "Students at that age level have their eyes on something other than the borrowing amount and are pretty sure they'll be able to get a job and pay the loan back."

 

The loan amounts can be overwhelming. Student loan balances increased 75% between 2007 and 2012, with the average debt per borrower increasing by 30% to $23,829, according to the TransUnion study.

 

But there is some good news for students -- for those who have federal student loans, anyway. The interest rates on those loans are lower than private loan interest rates because they are subsidized by the federal government, and borrowers have more legal rights with federal loans than they do with private loans.

 

Here are nine rights students have for federal loans:

 

1. The right to loan counseling

Federal laws require loan providers to spell out the terms of loans to borrowers, but student loans are unique because they require borrowers to complete entrance and exit counseling before and after they get a loan so that they understand the terms, says Helen Nunn, director of financial aid at Susquehanna University in Selinsgrove, Pa. The National Student Loan Data System provides online counseling to explain loan terms and rights, and responsibilities of repayment.

 

"Once they get that far into the funnel, that they're actually signing up and receiving loan funds, there's quite a bit of information and counseling they have to do," Nunn says.

 

2. Right to contact your loan servicer

This right applies to all types of loans. But with federal student loans, the servicers that are contracted by the Department of Education to coordinate billing make it easy to contact them to answer questions, Nunn says. They also provide a lot of information. 

 

"The loan servicer sends them all kinds of disclosures," says Greg Gearhart, director of financial aid at Messiah College in Grantham, Pa.

 

3. Right to defer payment

If you're in graduate school or the military, loan payments can be deferred until you're out. A hardship deferment can also be given to the unemployed, and forbearance is available if a borrower is sick and unable to work. Forbearance allows monthly payments to be discontinued or shrunk for up to 12 months. Interest will still accrue during that time. 

 

4. Right to pay based on what you earn

Several programs can help with loan payments if you can't afford the loans you have. The "pay as you earn" plan puts the monthly payment at 10% of your discretionary income based on your income and family size. The income-based repayment plan is based on 15% of discretionary income. The income-contingent repayment plan is based on 20% of monthly discretionary income and is meant for low-income borrowers who don't qualify for the other plans.

 

Under the plans, if the balance isn't paid off by the end of the loan terms (20 to 25 years), then the remainder is forgiven.

 

5. Right to consolidate loans

If you have several federal student loans, you can consolidate them into a single monthly payment, making bill paying easier.

6. Right to loan forgiveness

If you work in law enforcement, early-childhood education, public health, emergency management, the military, school-based services and other public service jobs, you may be eligible to have your student loan balance forgiven if you've made 120 payments under the Public Service Loan Forgiveness Program

 

Teachers in low-income communities can have up to $17,500 in loans forgiven under the Teacher Loan Forgiveness Program.

 

7. Right to change payment schedule

The standard loan payment schedule is for 10 years. An extended repayment plan can increase it to 25 years, which will decrease the monthly payment but increase the interest paid on the loan. For a grad with an increasing income, payments can be graduated and start low with increases every two years.

 

8. Right to deduct interest

Under IRS rules, federal student loan interest payments can be deducted from taxable income.

 

9. Right to repay early

This may sound like a no-brainer, but it's a right that borrowers don't always have. Student loans can be repaid early with no penalty.

 

Federal student loan delinquency rates rose 27% from 2007 to 2012, according to TransUnion, while private student loan delinquency rates dropped 2% during the same time. The potential worry, a TransUnion official says, is that such high delinquency rates for student loans could spill over into mortgages and other debt.

 

Student loan borrowers who know their rights, hopefully, won't fall behind.

 

More on Credit.com and MSN Money:

VIDEO ON MSN MONEY

41Comments
Mar 19, 2013 3:19PM
avatar
$23,000 is not a lot of money for a 4 year education. How many of you idiots who write this s hit have spent more on a car?
Mar 20, 2013 9:15AM
avatar
You also have the right to pay them back.  It was a loan, not a grant.
Mar 19, 2013 8:42PM
avatar
I agree, $23k is nothing for a 4-year degree.  What I can't understand are these kids who have $50k+ in debt for student loans.  How can you possibly think going to a private school out-of-state financially makes sense?  Go to community college first, then to a local state school.  Unless your parents are willing to pay for the whole thing.  Also, work p/t while you are in school to help offset costs, then live with your parents for the first couple years after you graduate to pay down your debts.  That is the path I followed 12 years ago and I had no problems with debt. 
Mar 20, 2013 11:48AM
avatar
It's all about making smart decision which your major and what school you go to. If for some reason you decide to major in French literature or something of the link go to a public/state school. No offense you won't be making enough money as a barista to pay off private school loans. If you are looking into medicine, sciences, or engineering, you have the option  of public or private since those fields pay higher and are more stable. Another option is if you really like a subject that is more or less not a big money maker but a passion minor in it and major in something practical.
Mar 19, 2013 9:25PM
avatar

I've done extensive research in the Income Based Repayment Plan (IBR).  My wife just finished graduate school with $150,000 student loan debt.  The normal 10 year monthly payment would be $1760, but under the IBR plan she will only pay $400.  The problem is the payment does not cover the interest which is about $800 per month.  This places the loan into negative amortization.  Over 25 years the loan balloons to $247,000.  The government says it will forgive the balance, but you have to pay taxes on that amount.  I project that $247,000 will push us into a 35% tax bracket adding $86,450 to our tax bill.  We will have to set asside an additional $288 per month over 25 years to pay the taxes alone.  Also, what if after 20 years the government says it can't afford to payoff these student loans and cancels the program?  We will be stuck with a $200,000 debt. 

 

My wife and I have decided to use the IBR plan for the first 3 years, because the interest is forgiven during that time.  This will allow us to have kids and delay her working full time for a few years.  I understand we have a unique situation.  I want to inform others who graduate from medical, law, or any other high cost graduate program about the IBR trap.  You can't hide from the tax man.   

May 2, 2013 9:12AM
avatar
Where is the author pulling these figures?  All of my friends who attended a public school university have more than this amount of debt, and if any grad school played a role than far greater than this.  The nonsense with the new program to pay based on income - this program encourages the borrower to not increase their salary, as if the salary goes up then the monthly payments go up, and the borrower winds up owing more because whatever was not paid before accrues interest.  Here's a thought....why don't the feds control interest on these student loans to a minimum of 1%?  Why are student loans interest so high?  For the federal government to make money off of students (who are just trying to make themselves employable - it is nearly impossible in present times to get ahead without at least an undergrad degree, and even that is pushing it)?  Right now my student loans include about 40% toward the principal every month and around 60% toward interest.  I will be in my 60's by the time I am done.  That is just wrong.  If the housing market could lower interest for home refinances, then students and former students should be allowed to refinance to a much lower rate, and not be stuck paying at higher rates. 
Mar 20, 2013 9:19AM
avatar

Don't buy what you can't afford.  This includes education.  Community Colleges, state universities, are good ways to save money.

 

Work while going through school.  Don't borrow extra money for "living expenses". 

 

Don't complain your loans debt is too much, you borrowed it.

Mar 20, 2013 11:40AM
avatar
If you are looking to borrow money for your education stay far away from Wells Fargo.  Be late with a payment and you will be treated like dirt.  Their collection people will call at all hours of the day and night.  They will talk abusively  to you and your family members.  One of their collector was so abusive they left my 85 year old mother in tears when they called her regarding the loan she co-signed. 
Mar 20, 2013 11:06PM
avatar
jdmeck...$23000 is just the individual student loan.  Not counting what amount the parent loan may have covered....or the avg. amount reduced by the amount of students who pay part of their tuition up front. 
Mar 20, 2013 1:47AM
avatar
Judging from the rules for Federal loans it looks like the borrower gets to rip off the American taxpayer.
Mar 20, 2013 11:08AM
avatar
I owed $50K and not making enough to pay off the loan. Can I file bankruptcy?
Mon 10:12 PM
avatar



On the 4th of January this year ,I was having a little problem with my land lord and our case was in court so i needed to get a house of mine so that i can be free
from my land lord's problems and harassment. finally..
I am giving this testimony not for too much reason but just to fulfill my own bargain of the promise i made to MRS QUEENETH STARK LOAN COUNCIL AGENCY that i was gonna
carry out as soon as i get my loan within 48 hours as they insisted and guaranteed.
I do not have much to say but the issue is that i never believed or thought that i was gonna get a real loan without been scammed this time like my other lenders did.
I lost $4500 dollars in 3 months and due to this i loosed all interest and i never believed that i was gonna get a loan online and all effort to get a loan from my bank was not possible cos i have been blacklisted.... the issue is that if i start on talking about all that i have been through ... i wont be able to complete it because i have really been through a lot .
I was surfing through the internet some few days back and i saw an advert from the Mrs queeneth stark loan agency claiming to be loan providers to all loan seekers , i thought it wasn't real so i forgot about it but something kept on telling me to try my luck  teh very last time and after 2 days of my thoughts i went back to that site
and i applied  through there email address which is mrsqueenethstarkloanagency@admin.in.th and everything went on but until now i was still scared because i never wanted to experience what i had experienced before.Finally i gave in because i needed a loan so bad and not minding how it was gonna come through but fortunately for me, I got my loan so easily and so quick without problems or delays WITHIN 48 HOUR from the MRS QUEENETH STARK LOAN AGENCY.. All i wanna say is that God Bless You All especially Mrs Queeneth Stark for been honest to me and also a very big thank you MR David Bruce who is the personal assistant to MRS STARK For keeping to your words by giving me that loan of $ 70,000.00 dollars at the exact time you gave . here is there email address just in case if you are in the situation and doubt i was in before i got my loan or if you are also i need of a loan too . mrsqueenethstarkloanagency@admin.in.th and you can also reach me on my personal email too just in case
you wanna talk to me and please feel free because i am a very free fellow. my email is chadelliotjunior@gmail.com


Mon 10:11 PM
avatar



On the 4th of January this year ,I was having a little problem with my land lord and our case was in court so i needed to get a house of mine so that i can be free
from my land lord's problems and harassment. finally..
I am giving this testimony not for too much reason but just to fulfill my own bargain of the promise i made to MRS QUEENETH STARK LOAN COUNCIL AGENCY that i was gonna
carry out as soon as i get my loan within 48 hours as they insisted and guaranteed.
I do not have much to say but the issue is that i never believed or thought that i was gonna get a real loan without been scammed this time like my other lenders did.
I lost $4500 dollars in 3 months and due to this i loosed all interest and i never believed that i was gonna get a loan online and all effort to get a loan from my bank was not possible cos i have been blacklisted.... the issue is that if i start on talking about all that i have been through ... i wont be able to complete it because i have really been through a lot .
I was surfing through the internet some few days back and i saw an advert from the Mrs queeneth stark loan agency claiming to be loan providers to all loan seekers , i thought it wasn't real so i forgot about it but something kept on telling me to try my luck  teh very last time and after 2 days of my thoughts i went back to that site
and i applied  through there email address which is mrsqueenethstarkloanagency@admin.in.th and everything went on but until now i was still scared because i never wanted to experience what i had experienced before.Finally i gave in because i needed a loan so bad and not minding how it was gonna come through but fortunately for me, I got my loan so easily and so quick without problems or delays WITHIN 48 HOUR from the MRS QUEENETH STARK LOAN AGENCY.. All i wanna say is that God Bless You All especially Mrs Queeneth Stark for been honest to me and also a very big thank you MR David Bruce who is the personal assistant to MRS STARK For keeping to your words by giving me that loan of $ 70,000.00 dollars at the exact time you gave . here is there email address just in case if you are in the situation and doubt i was in before i got my loan or if you are also i need of a loan too . mrsqueenethstarkloanagency@admin.in.th and you can also reach me on my personal email too just in case
you wanna talk to me and please feel free because i am a very free fellow. my email is chadelliotjunior@gmail.com


Apr 3, 2014 11:19PM
avatar
How my search for a real loan lender was actualized: I am Engr Belen Drilon by name, A born citizen of New Zealand, But due to my business i reside and i live in Canada. I have been here with my family for the past 25 years now for business. Before i really move on with my success story. I will want to first of all let everyone know that i am not joking with my story. Almost six months ago, I was in a critical search for a genuine loan lending company were i can obtain a loan of $120,000.00 Dollars, On this search i was not lucky to contact this reliable and dedicated loan firm that has taken helping those in need of loan there sole responsibility without failing them. During my search i contact four loan lenders online that promised me loan but at the end of it all i was aware they were fraudsters and complete scammers from Nigeria that were reported to the FBI by me when i found out that they out online to rip were they did not sow. But before i could realize this, I have lost over $17,500.00 dollars to them. Anyway i am so happy now as i am smiling now, Because i finally meet with this reliable loan company called Nort Jeje loan Investment who finally granted me my desired loan amount of $120,000.00 for the period of 16 Years. To be honest with all that are in-search of a real and genuine loan company, I was in a very big doubt when i contact them online after reading through there advert were they said they offer loan to the world, Oh !! I will never forget on the 2/1/2014 which was in the afternoon my time when i was suffing through the internet when i came across the advert that was posted by them. I don't really know what take my attention to that advert, Because i vowed to God that i will never contact any loan lender online again, That they are all con artist and rip off. But this day that i read through the advert of this loan firm know as Nort Jeje loan Investment, A spirits inside of me direct me to contact them and when i did, I told them all i have been through online trying to get loan and they personally sympathize with me and said to me that i should be lucky and thank God for directing me to them finally, As they are giving me a 100% assurance that after this loan process has been done, That i will get my loan show up on my banking information's that i sent to them during the period of processing my loan amount. I am so happy and i don't even know what to say about this dynamic loan firm anymore that i came in-contact with that grant me my loan amount without any trace of scam activities. I am so sure that if this advert that i am dropping on this website is seen by the board of directors of this loan firm they will be impressed as i promised to testify of there goodness if they can grant my huge dream loan amount that has taken my business to the next level now. To all you loan seekers out there that need loan to speed up his / her business, settle long period accumulated bills / debts and to be financially stable, i urge you all today and now to stop searching as i and my wife is telling you all in the name of God for those that are Christians like us and to the Muslims, we are telling you all in the name of Allah if i am right, not to fall a victim to those scammers / rip off artist out there online, As be wise to kindly send your loan application to Nort Jeje loan Investment as you are not going to regret doing this at all. The kind of loans they grant to customers are as follows: Personal Loan, Business Start-up or Expansion, Education, Debt Consolidation, Hard Money Loans, etc. Save yourself from the scam loan lenders online and send your loan application to : nortjeje@hotmail.com for your loan amount..
Apr 3, 2014 11:18PM
avatar
I am Engr Belen Drilon by name, A born citizen of New Zealand, But due to my business i reside and i live in Canada. I have to tell the world about what pleased me most about my experience with Nort Jeje Loans, It was their fantastic low rates of granting loans to the world. I compared their rates to other title loan stores locally and online, and theirs was the lowest i found. Their service was courteous, professional, durable and above all complete. Nort Jeje loans were Prof Ahmad Jongi is the head of the department of grant loans, Many thanks to you and your team for finally granting me my dream loan amount i have searched for months back. Thanks again to you all, I mean the entire staff of Nort Jeje loans. Without any benefit of doubt in me, I will want to recommend this loan firm that has really surprised me with my loan amount after meeting up with there terms and conditions without any form of scam activities. There email is as follows: nortjeje@hotmail.com to anyone in need of a speedy and secure loan.
Mar 19, 2013 9:32PM
avatar
How about the rights of lenders?  Since mine has, had the power before I addressed the issue, to put me on deferment automatically whenever I signed up for any accredited learning institution, I imagine our rights pale in comparison to theirs.

"Under IRS rules federal student loan interest payments can be deducted from taxable income."
Just don't do too well for yourself right.  What's the cutoff now, 62k?

Number 6...  Right to cronyism.

Number 7...  Right to have to remind the lender to increase your payment every two years.  For some reason, it seems to slip their mind when you're paying them interest for many years.

Number 12...  The right of the lender to create an incomprehensible amortization table.  20 bucks principle, 200 interest today, 80 / 140 tomorrow.



Mar 19, 2013 9:16PM
avatar
They forgot #10 - the right to work your way through school and pay as you go, incurring no debt along the way.

4 years tuition at a public university - $28k
4 years room and board - $20k
Books and fees for 4 years - $6k
Working your butt off and graduating debt free in 4 years - priceless!


Mar 20, 2013 10:15AM
avatar
You also have the right to not take out student loans. How about working and paying cash for your tuition?!
Mar 20, 2013 11:52AM
avatar
Here at Student Debt Relief we are able to get your student loans out of default with in 4-6 weeks through several government programs you may qualify for, this will allow you to file your taxes this year and receive a monthly payment that can go as low as $25. This will clear up your credit report and you will then be able to qualify for additional finical aid please give me a call 1-855-429-9577 .
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.