Borrowing a student loan is sometimes hard to do, especially when you are not financially independent. It can be your first experience to borrow money in the form of student loans. Certainly, borrowing a student loan will be easy, as long as you meet the uses and terms.
When you have a plan to borrow the student loan, make sure to understand what you should meet. Generally, every loan in any form will have important documents as a form of agreement between the borrower and the lender. So as with student loans, a borrower should comply with these important documents.
What Is the Master Promissory Note (MPN)?
One of the important documents in student loans that you should meet is the Master Promissory Note (MPN). The MPN is a legally binding document which contains information about your rights and responsibilities as a student loan borrower. This document should be understood, as it emphasizes that you agree to repay the loans.
Here’s what is in the MPN!
The Borrower Rights talk about a number of the student’s options. Certainly, this option is concerned with making the students successfully manage the student loan debt. The student’s options here include:
- The right to stop payment with a deferment or forbearance temporarily
- The right to reduced payments by switching repayment plans
- Depending on your financial circumstance and other conditions
- The right to loan cancellation, forgiveness or discharge in certain situations
When you borrowed the student loan, it means that you have a responsibility to repay your loan. Of course, you have to be responsible to repay your loan regardless of whether you feel dissatisfied with the education you received or you have graduated from college.
As a federal student loan borrower, you remain responsible to know when you should begin your repayment and also your required payments. However, it’s very important for you to prepare your repayment when you get ready to graduate or also out of school.
You also have to notify your loan servicer about the change of your address. It means that if you move to another place and do not receive your student loan bills, you remain responsible to make your required payments.
Aside from that, as a student loan borrower, you also need to inform your loan servicer and school if your name or contact information changes, after a change in employment, if you transfer or out of school or even any change which could impact your loan.
Your last responsibility as a federal student loan borrower, you have to inform your school’s financial aid office when you stop attending your classes, out of classes or also do not enroll as planned. Certainly, you are responsible to notify your financial aid office when your expected graduation date changes.
Learn More About Student Loan Types
There are a number of student loan types that the student can choose. Certainly, it’s highly recommended for the student to learn and explore the different types of loans before they enter into a loan agreement.
However, it’s such an important thing to exhaust all federal student aid before they accept alternative loans. Here are the primary loan types:
A Stafford Loan is a federal loan offered by the government where you can directly borrow the loan from the United States Department of Education. This student loan type is commonly intended for eligible students who are enrolled in accredited American Institutions of higher education in helping finance their education.
Moreover, the federal Stafford loans or also known as the Direct Loans is a common way to help pay for college. In this case, the government also uses some student loan servicer for handling the customer service and collections of its loans.
If you are interested to choose this student loan type, you should know that there are two different types of Stafford Loans, here are they:
- Subsidized Stafford Loan
This type of Stafford loan is offered to undergraduate students who point financial need. You need to know that the interest will begin to increase after six-month grace period and throughout the repayment period. In fact, the federal government have to pay the interest while the students are in school or during periods of deferment.
- Unsubsidized Loan
The Unsubsidized Loan is offered to undergraduate students and also graduate students. This type of loan does not require borrowers to indicate their financial need. The interest will increase while the students are enrolled in school. Certainly, the students should pay for it, not by the government.
The Perkins loans are the federal student loans which are issued by universities and colleges directly. This type of loan is intended for the students who demonstrate their financial need seriously.
This loan is offered to both undergraduate and graduate students who meet the requirements for Perkins Loans especially when they demonstrate considerable financial need. Here’s for Perkins Loans simulation:
- For undergraduate students, they will get a loan up to $5,500 a year with a maximum of 27,500.
- For graduate students, they will get a loan upto $8,000 per year with a maximum of $60,000.
Plus loan is a direct loan offered by the federal government to graduate or professional degree students or also parents of dependent undergraduate students to help them pay for education expenses. This type of loan has a fixed interest rate which is not subsidized. In other words, the interest will increase while the student is enrolled in school.
The Private Loan is offered by a private organization such as credit union, bank or also state-based or state-affiliated organization. Just like a federal loan, this private loan also has terms and conditions which are set by the lender.
This is non-federal aid which is offered by the borrower’s school. This type of loan does not offer the same benefits as federal loans. In this case, the loan servicer could be the borrower’s school. The interest rate and repayment options will differ by the school.
This loan is offered by state agencies. This student loan type generally gives low interest rates and sometimes with in-school deferments. It offers the flexibility of repayment options once graduation based on loan forgiveness for public service, income and also deferment for financial hardship.