James asks…
Direct Loans Billing Statement…?
I just received a billing statement from Direct Loans (Student Loans) and it’s asking for a payment? I just started college and I’m on the Standard Repayment Plan. Why is it asking me for payment (200 dollars!) Do I just ignore this letter until I graduate?
Also, for some reason it’s says “NET DISBURSEMENT ACTIVITY $4,000.00”. That should not be there, I don’t know why it added extra money. Does anyone have any idea why it’s there?
Turns out it was a loan for my parents which makes it even worse.
Nagesh answers:
You should never disregard a legitimate bill. Often, it will just cost you more later (late fees and penalties) and be more difficult to fix.
I assume this is for a direct Stafford loan. You should notify Direct Loans that you are in school. It may require that you complete an “in-school deferment form” and submit that to Direct Loan Servicing.
If you can – show the bill to your financial aid office and ask them for direction. As long as you remain in school at least 1/2 time or more – you can defer your federal student loans.
Paul asks…
old student loan????
i was 17 years old a minor when this loan was taken out and my grandmother was the primary its been 15 years and know there going after my tax return what should i do i dont even have the origanal contract and my grandmother has long since passed the school closed befor i could even finnish and they where supposed to find me job placement but the shut down and folded up there tents this has been hauntingh me for 15 years and could realy use some help what can i do please if u can or refer me to some one who can i feel i should not have to pay this of because i was a minor ??? thank u edmund brunning
Nagesh answers:
Closed School
If you received a Federal Perkins Loan Direct Loan or FFEL Program Loan on or after January 1, 1986, you may qualify for a Closed School discharge if you (or the student for whom a parent received a PLUS loan) could not complete the program of study for which the loan was intended because the school at which you (or student) were enrolled, closed while you were in attendance, or you (or student) withdrew from the school, or were on an approved leave of absence, not more than 90 days prior to the date the school closed. You must not have completed the program of study through a teach-out at another school or by transferring academic credits or hours earned at the closed school to another school.
If your loan is discharged, you will not owe any more payments on the loan, and you will get a refund of payments you made in the past. Also, if the loan is discharged, the servicing agency will tell credit reporting agencies that the loan was discharged, and any adverse credit history resulting from nonpayment of the discharged loan will be deleted. In addition, your discharged loan will not prevent you from applying for federal student financial aid.
If you believe that a school you attended may have closed, you may be able to use the Closed School Database to confirm this and to determine the date the school closed. Please note that the closed school list includes only schools that at one time participated in the federal student aid programs administered by the U.S. Department of Education. A closed school that never participated in the programs administered by the Department will not be on this database.
Please visit our Closed School Information section for more information on this topic.
You may request an “Loan Discharge Application: School Closure” by clicking here or by contacting us to request an application.
Daniel asks…
Confused about Direct Loan Subsidized, PLZ help?
So i took out a loan for college, direct subsidized loan for 3500..the interest starts like this…This loan is based on financial need. The federal government pays the interest on the loan while the student attends school. The variable interest rate is adjusted each year. For the Academic Year 2010 – 2011, the rate is 4.5%. Borrowers are charged an origination fee of 1.0%, less a rebate of 0.5%, for total fee of 0.5%.
now my question, is the interested computer yearly so each yr it would be 4.8% times 3500 unless the interest rate changes? and secondly, who do i have to pay this loan to after i graduate? please help me out, i am very confused
Hey,,, Thanks alot i was really confused but now i got it. so Basicall after this grace period i have to pay the Dept. Of Education only $3500.. the amount does not change, right? because i would think the principle amount changes.
Nagesh answers:
When you graduate(or drop out, or go below half time), you have a grace period of like, six months, then you have to start paying back the loan. The loan amount that you will owe at that time will still be $3500. You don’t accrue interest on it while you are in school. The government pays the bank the interest while you are in school. So even though the interest rate may change, you don’t have to worry about it. If you take out unsubsidized loans, then they will accrue interest. When you graduate, you will probably have multiple loans, so you will consolidate them at that time, and get a fixed interest rate at that time. As for who you pay the loan to, they usually have you pick a bank. But there are companies who ‘service’ the loan for the banks who are financing them. These are really the people and websites you deal with. You can call your school and ask them, or you can just wait until you get the loan statement in the mail. Two major ones are the EAS or SAF. They usually send them out once a semester. But the bank you currently have the loan with will probably sell your loan to another bank, so the bank may change while you are in school. But when you consolidate your loans, you can do it through the Department of Education, so you will pay them, or whatever private bank you might choose.
Helen asks…
Does prepaying some of a PLUS loan reduce the overall amount paid in the long run?
My dad says prepaying on a PLUS loan shortens the length of repayment, but does not reduce the overall cost paid. I disagree with him and think that prepaying on a PLUS loan both shortens the length of repayment AND reduces the overall cost paid. Who is correct?
I understand that prepaying pays down the accrued interest, but does that mean it does not get rid of the principal? Prepaying CAN get rid of the principal, right (even though it might take a lot of money to do so)?
Nagesh answers:
I have the exact answer you need. I worked for Direct Loans for 7 years servicing Parent PLUS loans. The answer to this question applies to Stafford loans too.
First: you need to understand that interest accrues daily. Every day, even when your loan is prepaid.Prepaid means you made extra payments previously so you do not have to make any payments for now. (example monthly pyment for June is $50, you send $200 and it gets posted on 06/15/07. Now if you choose to prepay your loan, your payment covered June, July, Augut and Sept. Your next payment is due in Oct for $50.00. Your $200.00 payment covered any interest you accrued from the date of your May payment thru 06/14/07. Now because you choose to preay your loan and interest accrues daily, your next payment due on 10/15/07 is stil l$50.00, however, you will first pay any interest your loan accrued from 06/15/07 thru 10/14/07.
This is why Prepay is not always smart. It works best for those who may be out of teh country for a couple months and will be be available to make their payments on time.
My suggestion is this: If you have the funds to make a large payment, then do so! You cut down your PBO and therefor have a smaller balance to accrue interest on. BUT keep making your monthly payments. That is how you will pay down your loan quicker.
Donna asks…
direct parent plus loan?
Hello.
I have borrowed under the direct parent plus loan program from fedloan servicing.
If I change repayment plans to lower monthly payments, then is it possible to change it back again at a later time? I guess what I’m asking is, is there a limit to how many times you can change repayment plans?
Thanks in advance for any help.
I wanted to change to lower monthly payments for the time being because I am tight w/ money right now. Changing to lower monthly payments means that I will pay more interests in the long run, though, so once I can find a way to earn more money then I wanted to change it back to the higher payment.
However, you are completely correct that I could just pay more amounts once I do earn more money instead of going through the hassle of changing it back again. I did not think about that possibility.
Nagesh answers:
Why would you want to change it to higher payments?
Are you aware that you can just pay extra towards a loan on your own?
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