Student Loans: You Better Know What You're Signing Up For!
As your seniors head off to college in the fall, you better arm them with the information they need to succeed financially during and after college. The biggest issue they will deal with in college: Student Loans. They will be required to go through an online “counseling” process which I would describe as “too little, too late” just before their loan is disbursed. I was trying to come up with a fun way (Ok, I might be stretching it here) to get them to review what in industry parlance is known as the “MPN” or Master Promissory Note for their student loans. It is 7 printed pages long so rather than have them read straight through, how about a Scavenger Hunt where they will review the Note so they can complete this FAQ (frequently asked questions). Each of the questions below can be answered within the note:
- What types of loans are covered by this loan agreement?
- What are at least FOUR examples of personal information that you will need to know to complete this form?
- Where can you find the interest rate and the fees associated with this loan?
- Who will notify you about the amount and type of student loan that you are eligible for?
- Can a borrower cancel or reduce the loan amount that they receive? How would they do this?
- What are the educational uses that this loan can be used for?
- Am I allowed to start paying on my loan while I am in school? What might be one reason this is a good idea?
- What is the maximum interest rate on the loans for undergraduates?
- What is a grace period and how does it apply to your loan? When do you need to start repaying on your loans?
- After what time period is your loan considered to be in default? What happens when your loan is in default?
- Which type of loan: Direct Subsidized or Direct Unsubsidized is based on financial need? What does the term “subsidized” refer to?
- What choices do you have when it comes to repayment plans?
- What changes in information are you required to provide to your financial aid office?
- What’s the maximum that a dependent undergraduate can borrow over their college career? independent undergraduate?
- When do Direct Unsubsidized Loans start to accrue interest?
- What happens if you decide to repay your loan through automatic withdrawal?
- What website can you go to in order to estimate your repayment?
- What’s the difference between deferment and a forbearance?
- What’s the significance of your loan information being reported to the consumer reporting agencies?
- True or False. Student loans are almost always discharged when the borrower goes into bankruptcy proceedings.
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.
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