Your loan(s) are serious obligations that must be repaid in a timely manner. Inability to pay is no excuse for defaulting. With the availability of various loan provisions, assistance can be provided until you regain the ability to repay your obligation.
The first step is to become knowledgeable about your loan(s) and the available provisions. Prior to leaving Penn State, you are required to complete Loan Exit Counseling. Loan Exit Counseling helps you by providing information about loan repayment and available provisions. It is important to complete and review your exit information prior to entering repayment of your loan(s).
In addition to deferments/cancellations, your loan(s) may be eligible for consolidation. All of your federal loans may be combined into one convenient payment that is often lower than the sum of your individual payments. Since consolidation is not the best alternative for everyone, it is recommended to review the pros and cons of consolidation before making a decision. University loans are not eligible for federal consolidation.
It is your responsibility to ensure your loans are current and up to date. The consequences of defaulting may be irreversible. If you are unable to find a solution that meets your needs or need assistance in understanding your options, please contact us for assistance.
Plan Your Finances
A college education is an investment in your future. Most Penn State students and their families rely on educational loans to finance their degree.
Get a return on your investment
If you begin with the end in mind, you will understand the impact of your borrowing and spending habits.
- Remember the big picture-your education will take time to complete. Consider the length of time it will take to earn your degree.
- You do not have to borrow the maximum amount the lender will approve.
- Be aware of your ability to repay your loan debt after earning your degree.
- Consider the earning potential in your field of study.
- Create a realistic budget. Live within your means.
Beware of credit cards
As a college student, you may be inundated with offers from credit card companies promoting free gifts to apply. Although a credit card may be useful in emergencies and can help you establish credit, the lure of "easy money" offered by credit cards and a "Buy now-Pay later" attitude has contributed to financial problems for many college students.
- You Can Deal With It
- C.A.R.E. (Credit Abuse Resistance Education)
- iGrad (Financial Literacy for College Students and Recent Graduates)
- Department of Education Financial Awareness Counseling Tool
Consequences of Defaulting
Definition of Default
- Failure to make a scheduled payment when due under the repayment schedule established by the institution or;
- Failure to submit to the institution, on or before the payment due date, documentation that qualifies the loan for a deferment, forbearance or cancellation provision listed on the master promissory note (MPN).
The following actions may occur on a loan in default:
- Assessment of a $5.00 per month fee.
- Placement of a hold on your academic records that will cause transcripts to be withheld and future registration denied.
- Delinquency reported to a national credit bureau. Credit ratings remain on the Credit Bureau records for approximately seven years following the date of first delinquency. Delinquencies may affect your ability to obtain future loans and employment.
- Ineligibility for future Title IV financial aid until the loan is out of default.
- Placement of the loan with a licensed collection agency. Collection fees charged by the agency can be up to 30% of your loan balance if placed for the first time and 40% for subsequent collection efforts and/or litigation.
- Assessment of litigation and court costs. Per Federal Regulations, these costs are charged to the student/borrower.
- Assignment to the Department of Education. Our office is not authorized to service any account assigned to the Department of Education. The deferment and cancellation provisions on the MPN become invalid. The Department of Education is also authorized to garnish various funds (wages, income tax refunds, etc.) to recover the outstanding balance of assigned loans.