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ABOUT PHENOM "The Public Higher Education Network of Massachusetts (PHENOM) unites students, families, alumni, professors, staff, and community members from our state universities, community colleges and the UMass system to advocate for high-quality, debt-free public college." -PHENOM "Who We Are"

ABOUT THIS GUIDE This guide provides information for student borrowers and those who wish to know more about the borrowing and the repayment process for student loans. This guide primarily focuses on helping Massachusetts residents navigate the student loan process. This guide was created as a social justice project by law students at Northeastern University School of Law. The guide was last updated in March 2018.

HOW TO USE THIS GUIDE This guide is meant to help Massachusetts residents navigate the complex world of student loans. Each section includes information on a different student loan topic. The sections range from financial basics to repayment, default consequences, and unfair servicer practices. A glossary of terms is provided at the end of this guide to help readers further understand student loan language. Terms that are bolded throughout this guide will be defined in the glossary. Additional resources, including legal resources and links to servicer websites, can be found at the end of this guide. Within Additional Resources, low-income and first-generation-to-college students can find organizations tailored to help with their questions and needs.

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In This Section

This section introduces you to important terms that are relevant to the information discussed throughout this guide. These terms are not the only ones you may need to know, but they represent a starting point for understanding the more complex issues addressed in the other sections of the guide.

1. What is a Loan?

2. What is Interest?

3. What is a Lender?

4. What is a Loan Servicer?

5. What is Credit?

What is a Loan?

A loan is when you borrow money that you must pay back with interest.1

What is Interest?

Interest is “[a] loan expense charged for the use of borrowed money… [that] is paid by a borrower (the one getting the loan) to a lender (the one giving out the loan).”2 In other words, borrowing money is not free! As a borrower, not only do you have to repay the money you borrow, but you also have to pay the lender for taking on the risk of providing you with a loan. This additional amount is called interest. An interest rate is the percentage that is used to calculate the interest payments that you must make as a borrower.3 There are two types of interest rates: fixed interest rates and variable interest rates. A fixed interest rate is an interest rate on a loan that remains the same either for the entire term of the loan or for part of the term. 4

1 Loans, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/loans (last visited Mar. 5, 2018). 2 Glossary, FED. STUDENT AID, https://studentaid.ed.gov/sa/glossary (last visited Mar. 5, 2018). 3 FED. STUDENT AID, Glossary, supra note 2. 4 Miranda Marquit, Fixed vs. Variable Rate: How to Make the Right Choice for Your Student Loans, STUDENT LOAN HERO, https://studentloanhero.com/featured/fixed-vs-variable-rate-student-loans-which-choose/ (last updated Jan. 18, 2018).

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A variable interest rate is an interest rate that fluctuates over time.5

What is a Lender?

A lender is an entity who gives you money that you will need to pay back.6 For example, the U.S. Department of Education is the lender of Federal Direct Loans.7 Note that a lender could be different from a loan servicer.8

What is a Loan Servicer?

A loan servicer is a company that you will make payments to during your repayment period.9 There are multiple loan servicers in the United States and you will be assigned to one when you take out your loans. Your loan servicer can assist you in choosing a repayment plan or consolidating your loans.10 When you have questions during repayment, your loan servicer is a great resource to contact! While loan servicers for federal and private loans may be different, some servicers manage both federal and private loans.

What is Credit?

Credit is the “lending of money over time, usually paid back in monthly installments.”11 Building good credit is important because it will lower the cost to borrow money, give you greater access to financial assets (otherwise known as capital), and strengthen your financial stability if you experience an emergency.12 Your credit history tells you and those who need the information whether you are responsible with your finances.13 Home mortgages, auto loans, insurance rates, and sometimes employment decisions will depend on your credit.14 As a student loan borrower, you can build good credit by paying back your loans on time.15

5 Elyssa Kirkham, Are Variable Rate Student Loans the Best Option for You, STUDENT LOAN HERO, https://studentloanhero.com/featured/variable-rate-student-loans/ (last updated Feb. 16, 2018). 6 Kat Trentina, Do You Have to Pay Back Financial Aid, STUDENT LOAN HERO, https://studentloanhero.com/featured/do-you-have-to-pay-back-financial-aid/ (last updated Nov. 21, 2017). 7 Federal Student Loan Programs, Fed. Student Aid, https://studentaid.ed.gov/sa/sites/default/files/federal-loan-programs.pdf (last visited Mar. 6, 2018). 8 Kali Hawlk, Student Loan Servicing Explained: The Difference Between Your Servicer and Lender, STUDENT LOAN HERO, https://studentloanhero.com/featured/student-loan-servicing-explained-difference/ (last updated Jan. 18, 2018). 9 Loan Servicers, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/understand/servicers (last visited Mar. 5, 2018); What Is a Student Loan Servicer?, CONSUMER FIN. PROT. BUREAU, https://www.consumerfinance.gov/ask-cfpb/what-is-student-loan-servicer-en-583/ (last updated Aug. 8, 2017). 10 FED. STUDENT AID, Loan Servicers, supra note 9. 11 To Your Credit, STUDENT FIN. SERV. UNIV. OF NEW ENGLAND, http://www.une.edu/creditsense (last visited Mar. 6, 2018). 12 Id. 13 Dori Zinn, How to Improve Your Credit with Student Loans, STUDENT LOAN HERO, https://studentloanhero.com/featured/student-loans-build-credit/ (last updated Feb. 23, 2018). 14 Id. 15 Id.

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In This Section

1. Student Loan Alternatives

2. FAFSA (Free Application for Federal Student Aid)

3. Federal Student Loans

4. Private Loans

Student Loan Alternatives

A grant is an alternative to a student loan.16 A grant is a form of financial assistance that does not need to be repaid by the recipient.17 There are a number of grant programs available to students seeking financial aid at an institution that is participating in the Title IV program.18 TYPES OF GRANTS FEDERAL PELL GRANTS These grants are need-based and are generally awarded only to undergraduate students, although there are some exceptions.19 The maximum Federal Pell Grant award changes each year and your personal award is determined based on your FAFSA.20 Note that there are some circumstances where Federal Pell Grants need to be repaid, such as when a student withdraws or drops from a full-time student to a part-time student.21 FEDERAL TRIO PROGRAMS There are six discretionary grant and support programs that are awarded to qualifying, disadvantaged students.

1. Talent Search (TS): This program encourages students to enroll in postsecondary education. Eligible participants must have completed at least five

16 Grants and Scholarships, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/grants-scholarships (last visited Mar. 5, 2018). 17 Id. 18 To find out if a school is participating in the Title IV federal student aid programs visit: Federal School Code List, INFORMATION FOR FIN. AID PROFS., https://ifap.ed.gov/ifap/fedSchoolCodeList.jsp (last visited Mar. 5, 2018). 19 FED. STUDENT AID, Grants and Scholarships, supra note 16; Federal Pell Grants, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/grants-scholarships/pell (last visited Mar. 5, 2018). 20 FED. STUDENT AID, Federal Pell Grants, supra note 19. 21 Id.

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years of elementary education or be between the ages of 11 and 27. Two-thirds of the participants are low-income or first-generation-to-college students.22

2. Upward Bound (UB): This program encourages students and veterans to

succeed in postsecondary education. Eligible participants must have completed at least eight years of elementary education or be between the ages of 13 and 19. Two-thirds of the participants are low-income or first-generation-to-college students.23

3. Student Support Services (SSS): This program’s goal is to improve graduation

rates and transfer rates. Eligible participants must be enrolled or accepted for enrollment at the grantee institution of higher education. The participants are chosen among a pool of low-income students, first-generation-to-college students, and students with disabilities.24

4. Ronald E. McNair Postbaccalaureate Achievement Program (McNair): This

program assists disadvantaged undergraduate students prepare for doctoral study. Eligible participants must be enrolled in a degree program in the grantee institution of higher education. Participants must also be either low-income students, first-generation-to-college students, or a member of a group that is underrepresented in graduate education.25

5. Educational Opportunity Centers (EOCs): This program supports high school

completion and enrollment in postsecondary education. Eligible participants must be at least 19-years-old. Two-thirds of participants are low-income or first-generation-to-college students.26

6. Staff Development: This program is designed to improve TRIO programs.

Eligible participants must be staff or leadership personnel employed in, participating in, or preparing for employment in TRIO programs or projects.27

GAINING EARLY AWARENESS AND READINESS FOR UNDERGRADUATE PROGRAMS (GEAR UP) This program helps low-income students graduate high school and prepare for and succeed in postsecondary education.28 22 Talent Search Program, U.S. DEPT. ED., https://www2.ed.gov/programs/triotalent/index.html (last updated Mar. 1, 2018). 23 Upward Bound Program, U.S. DEPT. ED., https://www2.ed.gov/programs/trioupbound/index.html (last updated Feb. 15, 2018). 24 Student Support Services Program, U.S. DEPT. ED., https://www2.ed.gov/programs/triostudsupp/index.html (last updated Mar. 28, 2017). 25 Ronald E. McNair Postbaccalaureate Achievement Program, U.S. DEPT. ED., https://www2.ed.gov/programs/triomcnair/index.html (last updated Feb. 26, 2018). 26 Educational Opportunity Centers Program, U.S. DEPT. ED., https://www2.ed.gov/programs/trioeoc/index.html (last updated Feb. 21, 2018). 27 Training Program for Federal TRIO Programs, U.S. DEPT. ED., https://www2.ed.gov/programs/triotrain/index.html (last updated Feb. 17, 2017). 28 Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP), U.S. DEPT. ED., https://www2.ed.gov/programs/gearup/index.html (last updated Mar. 22, 2017).

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FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANTS (FSEOG) This is a need-based program that is granted to students with exceptional financial need to aid them in financing their undergraduate education. There is a priority to Pell Grant recipients with the lowest expected family contributions.29 TEACHER EDUCATION ASSISTANCE FOR COLLEGE AND HIGHER EDUCATION (TEACH) GRANT This program awards scholarships to students who commit to teaching higher-needed subjects in high-needs elementary or secondary schools for four years.30 SCHOLARSHIPS FOR VETERANS’ DEPENDENTS This program awards scholarships to veterans’ dependents. Eligible participants must have a parent or guardian who was a member of the U.S. Armed Forces who died during military service in Iraq or Afghanistan after September 11, 2001. Additionally, the participants must have been younger than 24-years-old at the time of the parent’s or guardian’s death.31 Grants do not always cover the entirety of your educational expenses.32 In this event, student loans are another option to finance your education.33

29 Federal Supplemental Educational Opportunity Grant (FSEOG) Program, U.S. DEPT. ED., https://www2.ed.gov/programs/fseog/index.html (last updated Apr. 17, 2014). 30 TEACH Grants, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/grants-scholarships/teach (last visited Mar. 6, 2018). 31 Aid for Military Families, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/grants-scholarships/military#government-aid (last visited Mar. 6, 2018). 32 What Are the Different Ways to Pay for College or Graduate School?, CONSUMER FIN. PROT. BUREAU, https://www.consumerfinance.gov/ask-cfpb/what-are-the-different-ways-to-pay-for-college-or-graduate-school-en-545/ (last updated Aug. 4, 2017). 33 CONSUMER FIN. PROT. BUREAU, What Are the Different Ways to Pay for College or Graduate School?, supra note 32.

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FAFSA

OVERVIEW In order to be eligible for federal grants, federal work study aid, or federal student loans you need to fill out a Free Application for Federal Student Aid (FAFSA).34 Many states and colleges also use the information in your FAFSA in assessing your eligibility for state and college aid.35 Some private financial aid providers may also use this information in assessing your eligibility for their private aid.36 HOW DO I COMPLETE THE FAFSA? The FAFSA can be found at fafsa.ed.gov.37 As its name suggests, filling out FAFSA is free! You Can Fill Out the Form in Two Ways:

1. Online at: fafsa.gov

2. Download or Request a Copy of the Form and Submit the Completed Version Via Mail

Completed FAFSA forms should be mailed to:

Federal Student Aid Programs P.O. Box 7650 London, KY 40742-7650

You may also be able to fill out the form at your school’s financial aid office. 38

To complete the form, you will need access to personal documents, such as your Social Security Number (SSN) and your tax returns.39 If you are a dependent student, you will also need information from your parents or guardians, such as their incomes.40

34 FAFSA®: Applying for Aid, FED. STUDENT AID, https://studentaid.ed.gov/sa/fafsa (last visited Mar. 6, 2018). 35 Id. 36 Id. 37 Id. 38 Id. 39 Filling Out the FAFSA® Form, FED. STUDENT AID, https://studentaid.ed.gov/sa/fafsa/filling-out (last visited Mar. 5, 2018). 40 Id.

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FAFSA TIMELINE FAFSA is available every year from October until June.41 However, each college and state can have a different deadline for your FAFSA submission.42 Contact your college or university to confirm your FAFSA deadline. To check your state’s deadline, visit fafsa.ed.gov/deadlines.htm# Submitting the form is not the final step! After you submit, the Department of Education (DOE) creates a Student Aid Report which schools use to calculate the amount of aid you are eligible to receive.43 That amount is then communicated to you by the school in an award letter.44 To check the status of your FAFSA, you can go to the FAFSA website45 or you can contact the Federal Student Aid Information Center.46

41 Id. 42 Id. 43 FED. STUDENT AID, FAFSA®: Applying for Aid, supra note 34; Next Steps, FED. STUDENT AID, https://studentaid.ed.gov/sa/fafsa/next-steps (last visited Mar. 6, 2018). 44 Id. 45 Link to FAFSA website: https://fafsa.gov/; FED. STUDENT AID, Next Steps, supra note 43. 46 Link to Federal Student Aid Information Center: https://studentaidhelp.ed.gov/app/home/site/studentaid; FED. STUDENT AID, Next Steps, supra note 43.

TO REMAIN ELIGIBLE FOR FEDERAL STUDENT AID, YOU MUST FILL OUT THE FAFSA FORM EACH YEAR YOU REMAIN IN SCHOOL.

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Federal Loans

ELIGIBILITY REQUIREMENTS BASIC REQUIREMENTS

1. You must fill out the FAFSA to be eligible for Federal Student Loans.47

2. First-time federal loan borrowers must go through entrance counseling.48 Entrance counseling is an online information session that discusses how the loan process works, how to manage your educational expenses, what other options you have besides loans, and your general rights and responsibilities as a borrower.49 Your school is responsible for telling you how to complete your entrance counseling.50

For an entrance counseling demo visit: studentloans.gov/myDirectLoan

3. You must sign a master promissory note (MPN), which is a legal agreement to repay your loans including any interest.51 Your MPN includes the terms and conditions of your loan and must be signed before you can receive any of your loan funds.52 You can sign your MPN online53 or sign a paper copy.54 This process is handled primarily through your school’s financial aid office.55

47 FED. STUDENT AID, FAFSA®: Applying for Aid, supra note 34. 48 Entrance Counseling, FED. STUDENT AID, https://studentaid.ed.gov/sa/fafsa/next-steps/entrance-counseling (last visited Mar. 6, 2018). 49 Id. 50 Your school may require in-person counseling. If your school allows for online completion, the school will provide you with the website. Your school may tell you to use StudentLoans.gov to complete your counseling. FED. STUDENT AID, Entrance Counseling, supra note 48. 51 Master Promissory Note, FED. STUDENT AID, https://studentaid.ed.gov/sa/fafsa/next-steps/accept-aid/mpn (last visited Mar. 5, 2018). 52 Id. 53 To sign your MPN, visit FED. STUDENT AID, https://studentloans.gov/myDirectLoan/index.action?_ga=2.182747045.2037968063.1518755377-367761078.1516756585 (last visited Mar. 10, 2018); see also FED. STUDENT AID, Master Promissory Note, supra note 51. 54 FED. STUDENT AID, Master Promissory Note, supra note 51. 55 Id.

YOUR SCHOOL WILL NOT MAKE THE FIRST PAYMENT, OR DISBURSEMENT, OF YOUR FEDERAL LOAN UNTIL YOU COMPLETE ENTRANCE COUNSELING.

BY SIGNING YOUR MPN, YOU AGREE TO REPAY YOUR LOANS EVEN IF YOU DO NOT COMPLETE YOUR EDUCATION, ARE NOT SATISFIED WITH YOUR

EDUCATION, OR ARE UNABLE TO GET A JOB AFTER YOU GRADUATE.

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ACADEMIC REQUIREMENTS To Be Eligible for Federal Student Loans You Must:

1. Be Enrolled At least Part-Time56

2. Be in a Degree, Certificate, or Other Approved Program at an Eligible Participating School57

3. Have a High School Diploma or a General Educational Development (GED),

with a Few Exceptions58 In order to maintain your eligibility for federal aid, you must meet the standard of Satisfactory Academic Progress (SAP).59 Each school can have a different standard, but in general you are required to:

1. Have at Least a “C” Average by the End of Your Second Year OR

2. Have an Academic Standing in Line with Your School’s Graduation Requirements60

CITIZENSHIP REQUIREMENTS To Be Eligible for Federal Student Aid You Must:

1. Be a U.S. Citizen or an Eligible Non-Citizen61

2. Have a Valid Social Security Number (SSN)62

3. Register with the Selective Service63 if Required64 While you may be required to provide parental information, your parents’ lack of citizenship or lack of a SSN does not affect your eligibility.65 For students whose parents do not have SSNs, “you should enter all zeroes for him or her on the FAFSA where it asks for that information.”66 Parents without SSNs will not be able to create an FSA ID,

56 Student Loans for Part-Time Students, SIMPLE TUITION, http://www.simpletuition.com/student-loans/part-time-student/ (last visited Mar. 5, 2018). 57 NAT’L CONSUMER LAW CTR., STUDENT LOAN LAW § 1.6.1 (5th ed. 2015), https://library.nclc.org/node/99568 (last visited Mar. 5, 2018). 58 Id. 59 Id. § 1.6.2. 60 Id. 61 Eligible non-citizens include permanent residents, refugees, asylees, victims of human trafficking, and immigrant victims of domestic violence by U.S. citizen or permanent resident spouses, and more. For up to date details, see https://studentaid.ed.gov/sa/eligibility/non-us-citizens. Individuals granted deferred action via the Deferred Action for Childhood Arrivals program are not eligible. NAT’L CONSUMER LAW CTR., supra note 57 § 1.6.3. 62 NAT’L CONSUMER LAW CTR., supra note 57 § 1.6.3. 63 Generally speaking, all males, including certain non-citizens, between the ages of 18 and 25 are required to register with the Selective Service, which is the U.S. military conscription service or ‘draft.’ For more details, please see: Must Register, SELECTIVE SERVICE SYSTEM, https://www.sss.gov/Registration-Info/Who-Registration (last visited Mar. 5, 2018). 64 NAT’L CONSUMER LAW CTR., supra note 57 § 1.6.3. 65Reporting Parent Information, FED. STUDENT AID, https://studentaid.ed.gov/sa/fafsa/filling-out/parent-info (last visited Mar. 5, 2018); NAT’L CONSUMER LAW CTR., supra note 57 § 1.6.3. 66 FED. STUDENT AID, Reporting Parent Information, supra note 65.

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which is required for an online signature of the FAFSA form.67 Thus, a copy of the FAFSA must be printed, signed by the parent, and then mailed in for processing.68 INCARCERATION STATUS You are not eligible to receive Federal Student Loans if you are an incarcerated student.69 An incarcerated student is a student “serving a criminal sentence in a federal, state, or local penitentiary, prison, jail, reformatory, work farm, or similar correctional institution.”70 However, if you are in a halfway house, under home detention, sentenced to serve only on weekends, on probation, or on parole, you are not an incarcerated student and you are eligible for Federal Student Aid.71

Once you are released from incarceration you are generally eligible to receive Federal Student Aid, but your eligibility may be limited even after release if you were:

1. Subject to an Involuntary Civil Commitment for a Sexual Offense OR

2. Convicted of a Drug-Related Offense72 DRUG CONVICTION STATUS Drug convictions may limit your ability to receive Federal Student Loans.73 In general, if you are convicted of a federal or state drug offense while receiving Federal Student Loans your eligibility for Federal Student Aid may be suspended.74 The suspension length depends on the type of offense as well as your total number of drug convictions.75 Your eligibility can be restored if you complete a drug rehabilitation program or if your conviction is reversed or removed from your record.76 PRIOR STUDENT AID STATUS If you are in default on any Federal Student Loans or owe overpayments on federal grants or loans, you generally cannot qualify for Federal Student Loans.77 Additionally, if you previously committed fraud involving Federal Student Aid and have not repaid the money you obtained through that fraud, you are ineligible for further Federal Student Aid.78

67 Id. 68 FED. STUDENT AID, Reporting Parent Information, supra note 65; NAT’L CONSUMER LAW CTR., supra note 57 § 1.6.3. 69 NAT’L CONSUMER LAW CTR., supra note 57 § 1.6.5. 70 Id. 71 NAT’L CONSUMER LAW CTR., supra note 57 § 1.6.5; Students with Criminal Convictions, FED. STUDENT AID, https://studentaid.ed.gov/sa/eligibility/criminal-convictions (last visited Mar. 5, 2018). 72 FED. STUDENT AID, Students with Criminal Convictions, supra note 71. 73 Id. 74 NAT’L CONSUMER LAW CTR., supra note 57 § 1.6.4. 75 Suspensions are less severe for the possession of drugs than for the selling of drugs; With every additional conviction, the suspension time imposed tends to become longer. NAT’L CONSUMER LAW CTR., supra note 57 § 1.6.4. 76 NAT’L CONSUMER LAW CTR., supra note 57 § 1.6.4. 77 Id.§ 1.6.6. 78 Id.

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BASIC OVERVIEW OF LOAN TYPES WILLIAM D. FORD DIRECT LOANS (DIRECT LOANS) This is the largest Federal Student Loan program and it consists of four types of loans:

1. Direct Subsidized Loans

2. Direct Unsubsidized Loans

3. Direct PLUS Loans

4. Direct Consolidation Loans79

The Department of Education (DOE) is the lender of these loans.80

1. DIRECT SUBSIDIZED LOANS Under the Direct Subsidized Loan Program, undergraduate students who attend participating schools and who demonstrate a financial need can receive loans from the DOE.81 Using the information you submit in your FAFSA form, the DOE determines your financial need by subtracting your Expected Family Contribution (EFC) from your Cost of Attendance (COA).82 The DOE calculates your EFC using a formula based on your family’s size as well as your family’s income, assets, and benefits.83 Your school’s financial aid office determines your COA by estimating the total cost of your education. The school bases this on educational expenses, such as tuition and fees, room and board, and the cost of books. 84 Your school determines the amount you are able to borrow under the Direct Subsidized Loan Program.85 However, this amount may not exceed your financial need.86 You do not need to pass a credit check to qualify for these loans.87 There is a maximum eligibility period for these loans, meaning that if you are a first-time borrower on or after July 1, 2013 you may not receive these loans for more than 150 percent of the published length of your program.88

79 FED. STUDENT AID, Loans, supra note 1. 80 Id. 81 Subsidized and Unsubsidized Loans, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized (last visited Mar. 5, 2018). 82 How Aid is Calculated, FED. STUDENT AID, https://studentaid.ed.gov/sa/fafsa/next-steps/how-calculated (last visited Mar. 5, 2018). 83 Id. 84 Id. 85 Id. 86 FED. STUDENT AID, Subsidized and Unsubsidized Loans, supra note 81. 87Federal Student Aid for Adult Students, FED. STUDENT AID 1 (Sept. 2016), https://studentaid.ed.gov/sa/sites/default/files/federal-student-aid-for-adult-students.pdf. 88 The published length of your program is typically two years for an associate’s degree program or four years for a bachelor’s degree program. FED. STUDENT AID, Subsidized and Unsubsidized Loans, supra note 81.

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For these loans, your interest does not start adding, or accruing, until your grace period—a six-month period post-graduation during which you do not need to make payments—ends.89 This is because the government subsidizes, or pays, your interest during this time.90 Additionally, when you are in a period of deferment—a temporary postponement of payment on a loan—your interest does not accrue.91 However, if you drop below the part-time student credit requirement, your interest might start accruing.92

2. DIRECT UNSUBSIDIZED LOANS Under the Direct Unsubsidized Loan Program, undergraduate and graduate students who attend participating schools can receive loans from the DOE, regardless of financial need.93 Your school determines the amount you are able to borrow based on your COA and other financial aid you receive.94 You do not need to pass a credit check to qualify for these loans.95 As a Direct Unsubsidized Loan borrower, you have a six-month grace period after graduation before you are required to start payments.96 For these loans, the government does not subsidize the loan’s interest and the student is charged that interest from the time of the loan disbursement until it is fully paid.97 This can have a significant financial impact on you as a borrower! When you take out a loan, you start with your principal balance, which is the amount of money you borrow.98 Interest is added to your principal balance over time.99 Unpaid interest capitalizes, meaning future interest payments are calculated using your new amount owed.100 In other words, if you borrow $20,000 for an undergraduate degree, you could owe over $20,000 by the time you graduate.

89 FED. STUDENT AID, Subsidized and Unsubsidized Loans, supra note 81. 90 Id. 91 Id.; FED. STUDENT AID, Glossary, supra note 2. 92 FED. STUDENT AID, Subsidized and Unsubsidized Loans, supra note 81. 93 Id. 94 FED. STUDENT AID, How Aid is Calculated, supra note 82. 95 FED. STUDENT AID, Federal Student Aid for Adult Students, supra note 87. 96 FED. STUDENT AID, Subsidized and Unsubsidized Loans, supra note 81. 97 NAT’L CONSUMER LAW CTR., supra note 57 § 1.4.1.1. 98 Federal Student Loans Basics for Students, FED. STUDENT AID (Sept. 2017), https://studentaid.ed.gov/sa/sites/default/files/direct-loan-basics-students.pdf. 99 Id. 100 FED. STUDENT AID, Glossary, supra note 2 (“Capitalization”).

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3. DIRECT PLUS LOANS For Direct PLUS Loans, your school determines the amount you are able to borrow based on your COA and any other financial aid you receive.101 To be eligible to receive Direct PLUS Loans, you must typically pass a credit check and show that you do not have an adverse credit history.102 If you have an adverse credit history but still want a Direct PLUS Loan, you can often borrow with an endorser who does not have an adverse credit history.103 Alternatively, the DOE will consider extenuating circumstances in some cases.104 There Are Two Different Types of Direct PLUS Loans:

1. Grad PLUS Loans: Graduate or professional students in school at least part-time at participating schools can receive Grad PLUS Loans from the DOE.105This program has a six-month grace period after graduation.106

2. Parent PLUS Loans: Parents107 can borrow Parent PLUS Loans if they have a dependent undergraduate student who is enrolled at least part-time in a participating school.108 There is no grace period for these loans, but deferment is an option.109

101 PLUS Loans, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/loans/plus (last visited Mar. 5, 2018); FED. STUDENT AID, How Aid is Calculated, supra note 82. 102 FED. STUDENT AID, Glossary, supra note 2 (“Adverse Credit History”); NAT’L CONSUMER LAW CTR., supra note 57 § 1.4.1.2. 103 Direct PLUS Loans and Adverse Credit, FED. STUDENT AID (Mar. 2015), https://studentaid.ed.gov/sa/sites/default/files/plus-adverse-credit.pdf. 104 Id. 105 FED. STUDENT AID, PLUS Loans, supra note 101. 106 Id. 107 ‘Parents’ includes biological and adoptive parents as well as stepparents in some cases. Id. 108 Id. 109 Id.

ADVERSE CREDIT HISTORY FACTORS

• Accounts with Large Outstanding Balances

• Delinquent Accounts• Accounts Placed in Collection• Any of The Following Within Five

Years of Your Credit Report: • Default Determinations• Bankruptcy Discharges• Repossessions• Foreclosures• Charge-offs Or Write-offs of Federal

Student Aid Debt• Wage Garnishments• Tax Liens

ADVERSE CREDIT HISTORY, Glossary, FEDERAL STUDENT AID, https://studentaid.ed.gov/sa/glossary (last visited Feb. 13, 2018).

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4. DIRECT CONSOLIDATION LOANS

A Direct Consolidation Loan allows you to consolidate, or combine, several federal loans into one main loan.110 However, note that Parent PLUS loans and private loans cannot be consolidated into a Direct Consolidation loan.111 You may consolidate all, some, or just one of your existing loans.112 There is no minimum or maximum size for this type of loan.113 There is no fee to consolidate your loans.114 Generally you can consolidate your loans after you graduate, leave school, drop below part-time enrollment, are in repayment or a grace period,115 or are in default.116

110 Loan Consolidation, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/consolidation (last visited Mar. 5, 2018). 111 Id. 112 NAT’L CONSUMER LAW CTR., supra note 57 § 1.4.1.3.1. 113 Id. 114 FED. STUDENT AID, Loan Consolidation, supra note 110. 115 Id. 116 NAT’L CONSUMER LAW CTR., supra note 57 § 1.4.1.3.1.

LOANS ELIGIBLE FOR CONSOLIDATION

• Subsidized Federal Stafford

Loans• Unsubsidized Federal Stafford

Loans• PLUS loans from the Federal

Family Education Loan (FFEL) Program

• Supplemental Loans for Students• Federal Perkins Loans• Nursing Student Loans• Nurse Faculty Loans• Health Education Assistance

Loans• Health Professions Student

Loans• Loans for Disadvantaged

Students• Direct Subsidized Loans

Loan Consolidation, FEDERAL STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/consolidation, (last visited Feb. 13, 2018).

CONSOLIDATION LOAN PROS

• Simplified process through only one loan and one monthly bill

• Potential lower monthly payments due to an increased repayment period

• Increased access to certain repayment and forgiveness plans

CONSOLIDATION LOAN CONS

• Potential increase to the total amount paid overall due to the increased repayment period

• Potential loss of certain borrower benefits and existing credit for payments made toward repayment and forgiveness programs

Loan Consolidation, FEDERAL STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/consolidation, (last visited Feb. 13, 2018).

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PERKINS LOANS Perkins Loans are low-interest student loans for students who have exceptional financial need.117 Exceptional financial need is determined based on your EFC and COA.118 These loans are originated and serviced by participating schools. The government does not directly insure the loans, but rather provides initial contributions to participating schools.119 Perkins Loans have a grace period of nine months.120 The Perkins Loan Program was not reauthorized by Congress and thus expired as of September 30, 2017.121 There is some support for re-authorizing the program in Congress, but so far these efforts have not been successful.122

FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM If you borrowed loans before July 1, 2010, you might have borrowed a FFEL loan. The Health Care and Education Reconciliation Act of 2010123 brought an end to the FFEL loan program and therefore no new loans were issued as of July 1, 2010. FFEL loans were education loans by private lenders to students who were guaranteed by the federal government.124 This meant a private company, not the DOE, was the lender. 125 117 Perkins Loans, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/loans/perkins (last visited Mar. 5, 2018). 118 Federal Perkins Loans, UNIV. OF ILL. AT CHI. OFF. OF STUDENT FIN. AID, http://financialaid.uic.edu/fedperkinsloan.shtml (last visited Mar. 5, 2018); FED. STUDENT AID, How Aid is Calculated, supra note 82. 119 NAT’L CONSUMER LAW CTR., supra note 57 § 1.4.1.4. 120 Grace Periods, STUDENT LOAN BORROWER ASSISTANCE, http://www.studentloanborrowerassistance.org/repayment/postponing-repayment/grace-periods/ (last visited Mar. 6, 2018). 121 Jack O’Brien, Congress Fails to Reauthorize Federal Perkins Loan Program – Here’s How It Could Impact Students, NH J. (Oct. 3, 2017), http://www.insidesources.com/congress-fails-reauthorize-federal-perkins-loan-program-heres-impact-students/. 122 Kat Trentina, The Perkins Loan Program Just Expired: How to Handle It, STUDENT LOAN HERO, https://studentloanhero.com/news/federal-perkins-loan-program-expired/ (last updated Oct. 2, 2017). 123 Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (Codified in scattered sections of 19 U.S.C.; 20 U.S.C; 42 U.S.C.). 124 FFEL Program Lender and Guaranty Agency Reports, FED. STUDENT AID, https://studentaid.ed.gov/sa/about/data-center/lender-guaranty (Last Visited Mar. 5, 2018). 125 Id.

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INTEREST RATES Congress sets the interest rates for Federal Student Loans on an annual basis.126 These interest rates are fixed for the life of the loan, meaning they will stay the same until the loan is fully repaid.127 The interest rate varies based on the type of loan and on the date of the first disbursement of the loan.128 Federal loan interest rates are typically lower than private loan interest rates.129 The chart below shows the interest rates of Federal Student Loans disbursed between July 1, 2017 to July 1, 2018.130 The chart excludes FFEL loans and Direct Consolidation loans.131 For comparison, a range of private loan interest rates is included.132

Loan Type Interest Rate

Direct Subsidized Loans 4.45%

Direct Unsubsidized Loans: Undergraduate Students 4.45%

Direct Unsubsidized Loans: Graduate or Professional Students 6%

Direct PLUS Loans 7%

Perkins Loans133 5%

Private Loans 2.98%-19%134 126 Interest Rates and Fees, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/loans/interest-rates (last visited Mar. 5, 2018). 127 Id. 128 Id. 129 Federal Versus Private Loans, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/loans/federal-vs-private (last visited Mar. 5, 2018). 130 FED. STUDENT AID, Interest Rates and Fees, supra note 126. 131 Direct Consolidation Loan interest rates are fixed for the life of the loan and are calculated using the weighted average of the interest rates of the loans being consolidated. FED. STUDENT AID, Loan Consolidation, supra note 110. 132 FED. STUDENT AID, Interest Rates and Fees, supra note 126. 133 Perkins Loans are all fixed at an interest rate of 5% regardless of the date of the first disbursement. Id. 134 Based on private loan variable rates from CONSUMER FIN. PROT. BUREAU, STUDENT LOAN SERVICING 12 (Sept. 2015), https://files.consumerfinance.gov/f/201509_cfpb_student-loan-servicing-report.pdf.; see also NAT’L CONSUMER LAW CTR., supra note 57 § 12.2.1.

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LOAN LIMITS Direct Subsidized and Direct Unsubsidized Federal Student Loans are subject to monetary limitations both on an annual and aggregate, or cumulative, basis.135 Simply put, there is a cap on the amount you can borrow. Ultimately, your school determines the loan amount you are eligible to receive each academic year, which could be less than the federal limit. 136 These limits depend on what year you are in at school, the type of loans you have, and if you are a dependent or independent student.137 The chart below shows the annual and aggregate limits for undergraduate and graduate students.138

Year Direct

Subsidized Loan Limit

Total Limit: Dependent Students139

Total Limit: Independent Students140

1st Year Annual Limit $3,500 $5,500 $9,500

2nd Year Annual Limit $4,500 $6,500 $10,500

3rd Year and Beyond Annual Limit $5,500 $7,500 $12,500

Graduate or Professional Annual Limit N/A141 N/A142 $20,500

Total Aggregate Limit: Undergraduate Students $23,000 $31,000 $57,500

Total Aggregate Limit: Graduate Students $65,500143 N/A144 $138,500

135 FED. STUDENT AID, Subsidized and Unsubsidized Loans, supra note 81. 136 Id.; FED. STUDENT AID, Glossary, supra note 2. 137 FED. STUDENT AID, Subsidized and Unsubsidized Loans, supra note 81. 138 FED. STUDENT AID, Subsidized and Unsubsidized Loans, supra note 81; What is a Stafford Loan?, DEBT.ORG, https://www.debt.org/students/types-of-loans/stafford/ (last visited Mar. 5, 2018). 139 Except students whose parents are unable to obtain PLUS Loans. FED. STUDENT AID, Subsidized and Unsubsidized Loans, supra note 81. 140 And dependent undergraduate students whose parents are unable to obtain PLUS Loans. Id. 141 Direct Subsidized Loans are not available to graduate students. Id. 142 All graduate students are considered independent students. Id. 143 This includes all federal loans received for undergraduate study. Id. 144 All graduate students are considered independent students. Id.

FACTORS IN FAVOR OF DETERMINING A STUDENT AN INDEPENDENT

• 24-years-old• Married• Graduate or Professional Student• Veteran• Member of the Armed Forces• Orphan• Ward of the Court• Someone with Legal Dependents Other

Than a Spouse• Emancipated Minor • Homeless or at Risk of Becoming

Homeless

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The chart below shows annual and aggregate loan limits for Perkins Loans.145

Student Type Annual Limit Aggregate Limit

Undergraduate $5,500 $27,500

Graduate $8,000 $60,000146 LOAN FEES Most federal student loans also have loan fee requirements.147 This means you will have a certain percentage deducted from your loan payment at each time of disbursement, typically at least twice a year.148 You are still responsible for repaying the entire amount borrowed even though you will actually receive a smaller amount once the loan fee is taken into account.149 The chart below shows the loan fee percentages for loans first disbursed between October 1, 2017 and October 1, 2018. Note there are no loan fees for Direct Consolidation or Perkins Loans.150

Loan Type Loan Fee Rate

Direct Subsidized Loans 1.066%

Direct Unsubsidized Loans 1.066%

Direct PLUS Loans 4.276% 145 Perkins Loan Information & Eligibility, DEBT.ORG, https://www.debt.org/students/types-of-loans/perkins/ (last visited Mar. 5, 2018). 146 Includes all federal loans received for undergraduate study. DEBT.ORG, Perkins Loan Information & Eligibility, supra note 145. 147 FED. STUDENT AID, Interest Rates and Fees, supra note 126. 148 Id. 149 Id. 150 Id.

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Private Loans

OVERVIEW It is highly recommended that you exhaust all of your Federal Student Loan options before seeking private education loans.151 While Federal Student Loans are funded by the government through the Department of Education (DOE), private loans come from private lenders such as banks or credit unions.152 In general, private loans can be more expensive and are not covered by as many protections as Federal Student Loans.153 One of the most notable differences between Federal Student Loans and private loans concerns interest rates. Private loans have variable interest rates, which means they are subject to change and are generally higher, thus making private loans more expensive.154 In contrast, Federal Student Loan interest rates are fixed.155 Private loans typically require a credit check, are generally not subsidized, may require a co-signer, and do not generally guarantee access to forbearance, deferment, repayment, or forgiveness options.156

151 CONSUMER FIN. PROT. BUREAU, What Are the Different Ways to Pay for College or Graduate School?, supra note 32. 152 FED. STUDENT AID, Federal Versus Private Loans, supra note 129. 153 Id. 154 Id. 155 Id. 156 Id.

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25

In This Section

1. Parent PLUS Loans

2. Co-Signers

Parent PLUS Loans

CAN PARENTS TAKE OUT LOANS FOR THEIR CHILDREN? Yes. The Parent PLUS Loan is a PLUS loan that is taken out by parents—biological, adoptive, or in some cases, a step-parent—on behalf of their children.157 See more in Financing Your Education. PARENT PLUS REPAYMENT Parent borrowers are generally expected to start making payments on their Direct PLUS Loan once the loan is fully paid out.158 Parents cannot transfer their Parent PLUS Loan to their children.159 Parents May Request a Deferment if:

1. Their Child Remains Enrolled At Least Part-Time 160 OR

2. For an Additional Six-Month Period After Their Child Graduates, Leaves School, or Drops Below Part-Time Enrollment161

While a loan is in deferment, payments do not have to be made. However, interest will accrue during this time.162

157 FED. STUDENT AID, PLUS Loans, supra note 101. 158 Id. 159 Id. 160 Id. 161 Id. 162 Id.

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Co-Signers

Co-signers share equal responsibility in repaying debt.163 This means that if the student borrower does not make payments, the co-signer will be responsible.164 The credit scores of both the student borrower and the co-signer can be impacted by the loan and its repayment.165 Additionally, debt collectors could pursue collection from both the borrower and the co-signer.166 Many private lenders require co-signers, particularly if the borrower does not have an established credit record.167

163 What Is a Co-signer for a Student Loan?, CONSUMER FIN. PROT. BUREAU, https://www.consumerfinance.gov/ask-cfpb/what-is-a-cosigner-student-loan-en-565/ (last updated Aug. 7, 2017). 164 CONSUMER FIN. PROT. BUREAU, What Is a Co-signer for a Student Loan?, supra note 163. 165 Id. 166 If I Co-Signed for a Student Loan and It Has Gone into Default, what Happens?, CONSUMER FIN. PROT. BUREAU, https://www.consumerfinance.gov/ask-cfpb/if-i-co-signed-for-a-student-loan-and-it-has-gone-into-default-what-happens-en-671/ (last updated Aug. 7, 2017). 167 FED. STUDENT AID, Federal Versus Private Loans, supra note 129.

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28

In This Section

When you take out student loans, you must repay them. Choosing a repayment plan that is right for you is important. This section contains general information on repayment plans. It is important to note that one of the advantages of federal student loans is flexible repayment plans, which private student loans may not offer.168

1. Repayment Plans for Direct Loans

2. Deferment and Forbearance

3. Tax Benefits

Repayment Plans for Direct Loans

STANDARD REPAYMENT PLAN

This plan will require a higher monthly payment than other plans, but will help you pay off your loan in the shortest amount of time.169 The exact length of the repayment period will depend on the type of loan and the amount of money borrowed.170 This plan usually results in the lowest total interest paid due to its shorter repayment period.171 If you do not select a different repayment plan when it is time to repay your loans, your servicer will automatically place you on this plan.172 WHO SHOULD CHOOSE THE STANDARD REPAYMENT PLAN?

● Individuals with Steady Income

● Individuals Who Can Afford Higher Monthly Payments

● Individuals Who Want a Shorter Repayment Period

168 CONSUMER FIN. PROT. BUREAU, What Are the Different Ways to Pay for College or Graduate School?, supra note 32. 169 Standard Plan, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/understand/plans/standard (last visited Mar. 6, 2018). 170 Id. 171 Id. 172 Id.

Fixed Monthly Payment (minimum of $50) x Fixed Repayment Period (Up to 10 years)

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EXTENDED REPAYMENT PLAN

This plan may be useful if you need to make lower monthly payments spread out over a longer period of time. 173 The repayment period under the Extended Repayment Plan is longer compared to the Standard Repayment Plan.174 While this plan has lower monthly payments than the Standard Repayment Plan, the loan will accrue greater interest over time and you will end up paying more than under the Standard Repayment Plan.175 WHO SHOULD CHOOSE THE EXTENDED REPAYMENT PLAN?

● Individuals with Lower Income Who Cannot Afford Payments Under the Standard Repayment Plan

● Individuals with Additional Expenses and Financial Obligations GRADUATED REPAYMENT PLAN

If you have a low income but expect that it will increase consistently over time, you might want this repayment option.176 The exact repayment period depends on the amount borrowed.177 While this plan has lower monthly payments than the Standard Repayment Plan, the loan will accrue greater interest over time and you will end up paying more than under the Standard Repayment Plan.178 WHO SHOULD CHOOSE THE GRADUATED REPAYMENT PLAN?

● Individuals in Pursuit of a Career with Promising Opportunity for Career Advancement

● Individuals Hired with High Starting Salaries to Counteract High Monthly Payment

Under the Standard Repayment Plan

173 Extended Plan, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/understand/plans/extended (last visited Mar. 6, 2018). 174 Id. 175 Repayment Plans, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/understand/plans (last visited Mar. 6, 2018). 176 Graduated Repayment Plan, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/understand/plans/graduated (last visited Mar. 6, 2018). 177 Id. 178 FED. STUDENT AID, Repayment Plans, supra note 175.

Fixed or Graduated Monthly Payment x Fixed, But Extended, Repayment Period (Up to 25 years)

Gradually Increasing Monthly Payment (Starts Low and Increases Every 2 Years) x Fixed Repayment Period (Up to 10 Years for All Loans Except Consolidation Loans)

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INCOME-DRIVEN REPAYMENT PLANS There are four Income Driven Repayment Plans available for Federal Student Loans. While using an Income Driven Repayment Plan, you need to recertify your income and family size by the specified annual deadline every year.179 Recertifying can be done online.180 Under all four plans, the outstanding loan balance is forgiven at the end of the repayment period. 181 1. INCOME-CONTINGENT REPAYMENT PLAN

Note that the required monthly payment will not exceed 20% of the borrower’s discretionary income.182

2. INCOME-BASED REPAYMENT PLAN (IBR PLAN)

The repayment period for the IBR Plan is 20 years if you are a new borrower on or after July 1, 2014. 183 Otherwise, the repayment period is 25 years. 184

179Income-Driven Plans, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven (last visited Mar. 6, 2018). 180 Income-Driven Repayment (IDR) Plan Request, FED. STUDENT AID, https://studentloans.gov/myDirectLoan/ibrInstructions.action (last visited Mar. 6, 2018). 181 FED. STUDENT AID, Income-Driven Plans, supra note 179. 182 Id. 183 Id. 184 Id.

Fixed Monthly Payment Based on Borrower’s Adjusted Gross Income (AGI) and the Total Amount of Direct Loans Borrowed x Repayment Period (25 years)

Fixed Monthly Payment Based on Borrower’s Discretionary Income (Generally 10%- 15%) x Repayment Period (20 or 25 years)

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3. PAY AS YOU EARN (PAYE)

This plan has a minimum income requirement and is only available to borrowers who received a Direct Loan or FFEL Program Loan, without any previous outstanding loans, on or after October 1, 2007.185 The calculated monthly payment never rises above what you would pay monthly under a Standard Repayment Plan.186

4. REVISED PAY AS YOU EARN (REPAYE)

REPAYE is available regardless of when you took your loans out and there is no income requirement.187 If you are married, REPAYE combines your spouse’s income with yours to calculate repayment.188 Because the monthly payment under the REPAYE plan is 10% of your monthly income, it could rise above what you would pay under the Standard Repayment Plan.189

The repayment period is 20 years if you are only paying undergraduate loans.190 The repayment period is 25 years if you are paying any graduate loans.191

185 Id. 186 FED. STUDENT AID, Income-Driven Plans, supra note 179. 187 Id. 188 HOMEROOM, Which Income-Driven Repayment Plan Is Right for You?, supra note 186; Income-Driven Repayment Plans: Questions and Answers, FED. STUDENT AID, https://studentaid.ed.gov/sa/sites/default/files/income-driven-repayment-q-and-a.pdf (last visited Mar. 6, 2018). 189 FED. STUDENT AID, Income-Driven Plans, supra note 179. 190 Id. 191 Id.

Monthly Payment Based on Income and Family Size (Generally 10% of Discretionary Income) x Repayment Period (20 years)

Monthly Payment (Generally 10% of Discretionary Income) x Repayment Period (20 or 25 Years)

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WHAT HAPPENS IF I DON’T RECERTIFY MY INCOME BY THE DEADLINE? The consequences of not recertifying vary depending on your repayment plan.

1. INCOME-CONTINGENT REPAYMENT PLAN, INCOME-BASED REPAYMENT

PLAN, PAYE PLAN Under the ICR Plan, the IBR Plan, or the PAYE Plan, you will be switched to a Standard Repayment Plan.192 Your payments will depend on how much you still owe. This can be remedied by providing your servicer with your updated income information.193 If you still qualify for an Income Driven Repayment Plan, you can return to one.194

2. REPAYE PLAN If you fail to recertify, you will be removed from the REPAYE Plan and placed on an alternative repayment plan.195 Under this alternative repayment plan, your required monthly payment will be based on the amount necessary to repay your loan in full by the earlier of:

a. 10 Years from the Date You Begin Repaying Under the Alternative Repayment Plan OR

b. The Ending Date of Your 20 or 25 Year REPAYE Plan Repayment Period196

This can be remedied by certifying your income.197

198

192 Id. 193 Id. 194 Id. 195 Id. 196 Id. 197 Id. 198 Id.

In addition to the consequences described above, if you don’t recertify your income by the annual deadline under the REPAYE plan, the PAYE plan, or the IBR plans, any unpaid interest will be added to the principal balance of your loans. This means your interest for future payments will have higher interest applied to them!

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Deferment and Forbearance

Deferment and forbearance programs allow you to temporarily stop or reduce payments on your student loans.199 Although these options are guaranteed for Federal Student Loan borrowers, deferment and forbearance may not be available for private loans.200 Since rules can vary lender to lender, you should contact your servicer to confirm whether you have deferment or forbearance options available. DEFERMENT AND FORBEARANCE OPTIONS FOR FEDERAL LOANS If you are considering putting your Federal Student Loan into either deferment or forbearance, you can make a request through your servicer’s website or you can call your servicer. In order to qualify for either, your servicer will likely require documentation that shows financial hardship or extenuating circumstances that impede ability to make your monthly payments. 201 However, if you are having difficulty affording your loan payments, you should first ask your loan servicer if you are eligible for a flexible repayment plan.202 Since certain repayment plans are based on your income, changing your plan to one of these options could lower your monthly payment to an amount as low as $0. 203

199 Deferment and Forbearance, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance (last visited Mar. 6, 2018). 200 Can I Obtain a Deferment for My Private Student Loan?, CONSUMER FIN. PROT. BUREAU, https://www.consumerfinance.gov/ask-cfpb/can-i-obtain-a-deferment-for-my-private-student-loan-en-645/ (last updated Jul. 21, 2016); Is forbearance available for private student loans?, CONSUMER FIN. PROT. BUREAU, https://www.consumerfinance.gov/ask-cfpb/is-forbearance-available-for-private-student-loans-en-647/ (last updated Aug. 4, 2016). 201 FED. STUDENT AID, Deferment and Forbearance, supra note 200. 202 What Should I Do If I Can’t Afford My Student Loan Payment?, CONSUMER FIN. PROT. BUREAU, https://www.consumerfinance.gov/ask-cfpb/what-should-i-do-cant-afford-student-loan-payment-en-639/ (last updated Aug. 8, 2017). 203 CONSUMER FIN. PROT. BUREAU, What Should I Do If I Can’t Afford My Student Loan Payment?, supra note 203.

DEFERMENT: YOU ARE NOT RESPONSIBLE FOR INTEREST THAT ACCRUES ON SUBSIDIZED FEDERAL LOANS, BUT ARE RESPONSIBLE FOR INTEREST ON

UNSUBSIDIZED LOANS

FORBEARANCE: YOU ARE RESPONSIBLE FOR INTEREST THAT ACCRUES ON BOTH SUBSIDIZED AND UNSUBSIDIZED FEDERAL LOANS

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According to the Department of Education, You May Be Eligible for Deferment if You Are:

● Enrolled at Least Part-Time at an Eligible School, in an Approved Graduate

Fellowship Program, or in an Approved Rehabilitation Program for the Disabled

● A Parent with a Direct PLUS Loan and the Student is Enrolled At Least Part-Time in an Eligible School

● Not Currently Employed or Are Unable to Find Full-Time Employment or are

Experiencing Economic Hardship

● Serving in the Peace Corps, on Active Military Service or Recently Returned from Active Duty204

If you are unable to afford payments due to financial difficulties, medical expenses, or changes in employment, you can request a general forbearance from your loan servicer.205 Your loan servicer has discretion in deciding whether to grant a request for a general forbearance and has authority to deny your request or to place a cap on the number of years you can receive a forbearance. 206 General forbearances are granted for a maximum of 12 months at a time and you may need to request another forbearance if your hardship continues. 207 There are certain circumstances where servicers are required to grant your forbearance request. You May Be Eligible for a Mandatory Forbearance If:

● You are in a Medical or Dental Internship or Residency Program

● If the Monthly Payment Owed on All Your Student Loans is More Than 20% of Your Gross Monthly Income

● You are Serving in AmeriCorps

● You are Performing a Teaching Service That Qualifies for Teacher Loan

Forgiveness

● You are an Activated Member of the National Guard and are Otherwise Not Eligible for Military Deferment208

204 FED. STUDENT AID, Deferment and Forbearance, supra note 200. 205 Id. 206 Id. 207 Id. 208 Id.

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Tax Benefits

Tax benefits can be useful for student loan borrowers looking for ways to increase their college savings or save money as they pay for their loan interests.209 The following are a few examples of tax benefits that are available. Note that you should check the specific requirements to verify your eligibility. AMERICAN OPPORTUNITY CREDIT What Is It? This option is a tax credit. A tax credit reduces the amount of income tax that you pay.210 While a deduction reduces the amount of income subject to tax, a tax credit reduces the tax itself.211 What Are Its Tax Benefits? A taxpayer can claim up to $2,500 per student per year for the first four years of school as the student pursues a program leading to a degree or other education credential.212 You can claim this credit if the eligible student is yourself, your spouse if you file jointly, or a dependent for whom you claim an exemption on your tax return.213 You can take advantage of this tax benefit only if the eligible student is still in school.214

209 Tax Benefits, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/tax-benefits (last visited Mar. 6, 2018). 210 INTERNAL REVENUE SERV., U.S. DEP’T OF THE TREASURY, PUB. NO. 970, TAX BENEFITS FOR EDUCATION: FOR USE IN PREPARING 2017 RETURNS 9 (2018), https://www.irs.gov/pub/irs-pdf/p970.pdf. 211 Id. 212 FED. STUDENT AID, Tax Benefits, supra note 210. 213 INTERNAL REVENUE SERV., supra note 211, at 11. 214 Christy Rakoczy, How to Claim Student Loan Tax Credits and Deductions, STUDENT LOAN HERO, https://studentloanhero.com/featured/student-loan-tax-credits-guide/ (last updated Feb. 28, 2018).

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LIFETIME LEARNING CREDIT What Is It? This option is also a tax credit. What Are Its Tax Benefits? A taxpayer can claim up to $2,000 per student per year for any college or career school tuition and fees, in addition to expenses for books and supplies that were purchased from the school because they were required for the course.215 You can claim this credit if the eligible student is yourself, your spouse if you file jointly, or a dependent for whom you claim an exemption on your tax return.216 You can take advantage of this tax benefit only if the eligible student is still in school.217 STUDENT LOAN INTEREST DEDUCTION What Is It? This option is a tax deduction. A tax deduction reduces the amount of income subject to tax.218 What Are Its tax benefits? You can claim this tax deduction if you paid interest on student loans taken out for yourself, your spouse, or your dependent so as to finance higher education expenses.219 You can reduce your taxable income by up to $2,500.220 215 FED. STUDENT AID, Tax Benefits, supra note 210. 216 INTERNAL REVENUE SERV., supra note 211, at 23. 217 Rakoczy, supra note 215. 218 INTERNAL REVENUE SERV., supra note 211, at 31. 219 Rakoczy, supra note 215. 220 Tax Benefits for Education: Information Center, IRS, https://www.irs.gov/newsroom/tax-benefits-for-education-information-center (last visited Mar. 6, 2018).

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MASSACHUSETTS UNDERGRADUATE STUDENT LOAN INTEREST DEDUCTION What Is It? This option is also a tax deduction. It only applies to undergraduate education loans.221 What Are Its Tax Benefits? You can claim this tax deduction for interest paid on loans borrowed to pay for tuition and other fees for school enrollment.222 In contrast to the tax benefit above, there is no maximum deduction amount allowed, regardless of the taxpayer’s income and the age of the loan.223 SECTION 108(F) (“STUDENT LOAN”) OF THE INTERNAL REVENUE CODE What Is It? This option allows eligible taxpayers to exclude student loan debt forgiveness from your gross income.224 What Are Its Tax Benefits? Excluding student loan debt forgiveness means that you do not have to pay taxes for the amount of that loan debt forgiveness.225 Borrowers who have Federal Student Loans and have qualified for Public Service Loan Forgiveness (PSLF) may be eligible for this option.226 See more in Loan Forgiveness and Discharge.

221 Learn About Education Related Deduction, MASS.GOV, https://www.mass.gov/service-details/learn-about-education-related-deduction (last visited Mar. 6, 2018). 222 Id. 223 Id. 224 26 U.S.C.A. § 108 (West 2018). 225 Id. 226 Gregory Crespi, Should We Defuse the "Tax Bomb" Facing Lawyers Who Are Enrolled in Income-Based Student Loan Repayment Plans?, 68 S.C. L. REV. 117, 133–34 (2016).

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39

In This Section

Under ordinary circumstances, you must repay your loans regardless of whether you complete your education, whether you are satisfied with your education, or whether you have the job you were hoping your education would prepare you for.227 However, there are certain circumstances under which some borrowers might not have to pay off all of their loans.228

1. Loan Forgiveness Programs

2. Discharging Student Loans

It is possible to have your student loans forgiven, canceled, or discharged, which means that you might not have to repay all or a part of your loans.229 These terms all mean the same thing, but are often used differently.230 The terms “forgiveness” and “cancellation” are generally used to refer to instances where you are not required to pay the rest of your loans because of your job.231 The term “discharge” is usually used to refer to situations where you are not required to pay the rest of your loans due to other circumstances, such as permanent disability or school closure.232 This section introduces you to the types of loan forgiveness, cancellation, or discharge programs that are available options.

227 Forgiveness, Cancellation, and Discharge, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation (last visited Mar. 5, 2018). 228 Id. 229 Id. 230 Id. 231 Id. 232 Id.

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Loan Forgiveness Programs

Loan Forgiveness is when, under certain circumstances, you are eligible to have your loans forgiven, which means you no longer have to pay them back.233 Each of the loan forgiveness programs has its own eligibility requirements. This information is subject to change, so it is important that you talk to your loan servicer to find out if you are eligible for any of these programs and about how you can apply for them. PUBLIC SERVICE LOAN FORGIVENESS (PSLF) Public Service Loan Forgiveness (PSLF) provides debt relief for borrowers in qualifying public service government or nonprofit jobs.234 Under PSLF, It Is Possible to Have the Remaining Balance on Direct Loans Forgiven:235

1. After You Have Made 120 Qualifying Monthly Payments Under a Qualifying Repayment Plan AND

2. If You Made Those 120 Payments While Working Full-Time for A Qualifying Employer

Only payments towards Direct Loans are eligible for PSLF.236 If you have FFEL Loans and Federal Perkins Loans, you can consolidate them into a Direct Consolidation Loan. Then you can begin making payments on that newly consolidated loan that would count towards PSLF.237 If you consolidate your existing Direct Loans with other loans, you may want to leave your Direct Loans out of the consolidation.238 This is because you would lose credit for qualifying payments you already made on your Direct Loan if you included it in the new Direct Consolidation Loan.239 Additionally, you must be on an Income Driven Repayment Plan in order to qualify for this program.240

233 Id. 234 FED. STUDENT AID, Forgiveness, Cancellation, and Discharge, supra note 228 235 Id. 236 Id. 237 Id. 238 Id. 239 Id. 240 Id.

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EMPLOYERS WHO QUALIFY: 241

1. Government Organizations (All Levels: Federal, State, Local, Or Tribal)

2. Non-Profit Organizations That Are Tax Exempt Under 501(C)(3) Of the Internal Revenue Code

3. Non-Profit Organizations That Are (A) Not Tax Exempt Under 501(C)(3) Of the Internal Revenue Code And (B) Whose Primary Purpose Is to Provide Certain Kinds of Public Services That Qualify

4. AmeriCorps and Peace Corps (For Full Time Volunteers) EMPLOYERS WHO DO NOT QUALIFY:242

1. Labor Unions

2. Partisan Political Organizations

3. For-Profit Organizations, Including For-Profit Government Contractors

4. Non-Profit Organizations That Are

a. Not Tax Exempt Under 501(C)(3) Of the Internal Revenue Code OR

b. Do Not Provide a Qualifying Public Service As Their Main Purpose

Contact your loan servicer to find out whether you qualify and how you can begin making payments.

241 Id. 242 Id.

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LOAN FORGIVENESS FOR TEACHERS Teachers may be eligible for loan forgiveness up to $17,500 on Direct Subsidized and Unsubsidized Loans and on Subsidized and Unsubsidized Federal Stafford Loans under the Teacher Loan Forgiveness Program.243 TEACHER QUALIFICATIONS FOR THIS PROGRAM:244

1. Have At Least a Bachelor's Degree

2. Be Certified as A Teacher by The State

3. Have Taught for Five Full Consecutive School Years in A Low-Income School or Educational Service Agency

There might be other eligibility requirements depending on factors such as whether or not you are new to the profession and whether you teach elementary, middle, or high school.245 It is also possible that teaching for less than a full academic year may count towards the five-year requirement.246 Contact your servicer to find out what other eligibility requirements might apply to you. If you consolidate your loans, any time spent teaching prior to consolidation will not count toward the Teacher Loan Forgiveness Program.247 Only time spent teaching after the loan consolidation will count.248 PLUS Loans for parents and for graduate or professional students are not eligible for this loan forgiveness program.249

Contact your loan servicer to find out whether you can benefit from this loan forgiveness program.

243 FED. STUDENT AID, Forgiveness, Cancellation, and Discharge, supra note 228. 244 Id. 245 Id. 246 Id. 247 Jim Sullivan, Make Clients Aware of Their Options for Student Loan Debt Relief, J. OF ACCT., https://www.journalofaccountancy.com/newsletters/2017/oct/client-options-student-loan-debt-relief.html (last visited Mar. 7, 2018). 248 Id. 249 FED. STUDENT AID, Forgiveness, Cancellation, and Discharge, supra note 228.

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FEDERAL PERKINS LOAN CANCELLATION Depending on the type of loan you have, and when that loan was taken out, you may be eligible to cancel part of or your entire loan if you have served as one of the following:250

1. Volunteer Service

2. Teacher

3. Member of the U.S. Armed Forces (Serving in Hostile Area)

4. Nurse or Medical Technician

5. Law Enforcement or Corrections Officer

6. Child or Family Services Worker

7. Professional Provider of Early Intervention Services

There may be additional opportunities for Federal Perkins Loan cancellation. Contact your servicer to see if you are eligible. You must apply for Perkins Loan cancellation through the school who disbursed your loan or to your school’s servicer.251 Your school or your school’s servicer will provide you with the forms and directions you must follow in order to benefit from this program.252

250 FED. STUDENT AID, Forgiveness, Cancellation, and Discharge, supra note 228. 251 Perkins Loan Cancellation and Discharge, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/perkins (last visited Mar. 5, 2018). 252 Id.

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Discharging Student Loans

WHAT IS DISCHARGE? To discharge a loan means to forgive or cancel an outstanding debt.253 There are currently seven ways to discharge federal student loans:254

1. Closed School 2. Total and Permanent Disability 3. False Certification/Unauthorized Payment 4. Unpaid Refund 5. Borrower Defense 6. Death 7. Bankruptcy

Meeting any of these seven conditions may make you, as a borrower, eligible to apply for the discharge of all or a part of your loans.255 In order to apply for any of these seven options, you must contact your servicer or browse their website to look for the applicable forms for discharge. Be sure to continue paying your student loan until you have explicit confirmation that your discharge application has been approved to avoid any risks of late charges. CLOSED SCHOOL DISCHARGE If your school shuts down permanently during your enrollment or shortly after your withdrawal, you may be able to qualify for Closed School Discharge.256 You must have been unable to complete your education because the school shut down before you completed your program.257 You will not be eligible for this form of discharge if you withdrew from the school more than 120 days before the school closed, if you are completing a comparable education 253 Debt Discharge, INVESTOPEDIA, https://www.investopedia.com/terms/d/debt-discharge.asp (last visited Mar. 7, 2018). 254 Rebecca Safier, 7 Legit Ways to Get Your Student Loans Canceled, STUDENT LOAN HERO, https://studentloanhero.com/featured/student-loan-discharge-programs/ (last updated Mar. 2, 2017). 255 Id. 256 Id. 257 Id.

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program at another school, or if you have completed all of the course work for your program (even if you do not have a diploma or certificate).258 Be sure to contact the state licensing agency of the school to obtain your academic and financial records, since your school will be closed and you will most likely need your records to prove that you are eligible for discharge.259 For Massachusetts students, contact the Office of Private Occupational School Education under the Consumer Affairs and Business Regulation Agency at: http://www.mass.gov/ocabr/government/oca-agencies/dpl-lp/schools/260 Approval of discharge under this condition will cancel 100% of your Direct Loans, Federal Family Education Loans or Perkin Loans, as well as Parent PLUS Loans.261 Contact your loan servicer about how to apply for Closed School Discharge.

TOTAL AND PERMANENT DISABILITY DISCHARGE A Total and Permanent Disability Discharge (TPD) relieves you from having to repay any Federal Direct Loans, Federal Family Educational Loans (FFEL), or Federal Perkins Loans due to a documented disability.262 There Are Three Ways to Qualify:

1. If you are a veteran with a service-related disability who can no longer work, you must submit documents from the U.S. Department of Veterans Affairs

2. If you receive Social Security Disability Insurance or Supplemental

Security Income benefits, you must submit supporting documentation and have a disability review scheduled within the next five to seven years263

3. If your physician determines that you have a total and permanent disability that has lasted for at least 60 months and will last for at least another 60 months264

To apply for TPD, contact your loan servicer and ask them to provide you with an application.265

258 Id. 259 Closed School Discharge, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/closed-school (last visited Mar. 7, 2018). 260 Office of Private Occupational School Education, MASS.GOV, http://www.mass.gov/ocabr/government/oca-agencies/dpl-lp/schools/ (last visited Mar. 5, 2018). 261 FED. STUDENT AID, Closed School Discharge, supra note 260. 262 About Total and Permanent Disability Discharge, FED. STUDENT AID, https://www.disabilitydischarge.com/faqs (last visited Mar. 7, 2018). 263 Safier, supra note 255. 264 Id. 265 FED. STUDENT AID, About Total and Permanent Disability Discharge, supra note 263.

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FALSE CERTIFICATION OR UNAUTHORIZED PAYMENT DISCHARGE False Certification or Unauthorized Payment Discharge is offered to victims of identity theft or false certification.266 This option only applies to Direct Loan or FFEL loans.267 To Qualify, You Must Show At Least One of The Following:268

1. Your School Falsely Certified You as Eligible to Receive Loans by Falsely Signing Your Name on A Loan Application Even Though You Didn’t Meet the Requirements

2. Your School Signed Your Name on An Application or Promissory Note Without

You Knowing About It 3. Someone Took Out a Loan in Your Name (Identity Theft) 4. You Trained for An Occupation at School That You Can’t Pursue Due to A

Physical or Mental Condition, Your Age, A Criminal Record, Or Another Qualifying Reason

You should regularly check your credit report to ensure that your servicers have not been making false certifications and that you have not been a victim of identity theft. Contact your loan servicer to review your loan certification to determine if unauthorized payments made in your name or identity theft has happened to you. UNPAID REFUND DISCHARGE If you withdrew from school, you may be eligible for loan discharge if your school did not pay a refund that it owed to the U.S. Department of Education or to a lender.269

If you withdrew from school early and your school is required to refund part of your tuition, they are required to disperse the refund to your student loan.270 This option only applies to Direct Loans and FFEL Program loans.271 266 Safier, supra note 255. 267 Id. 268 Id. 269 FED. STUDENT AID, Forgiveness, Cancellation, and Discharge, supra note 228. 270 Safier, supra note 255. 271 Id.

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If you withdraw from school, be sure to request confirmation from your servicer that they received the tuition refund from your school. If it is proven that your school did not pay your refund, the government should give a partial discharge in the amount your school failed to pay.272 Contact your school to learn about its Federal Student Aid refund policies.273 BORROWER DEFENSE DISCHARGE This option is available if you took out Federal Student Loans for a school that violated state laws.274 If your school used illegal or deceptive tactics to convince you to take out loans to attend, then you may be eligible for this discharge option.275 Common Illegal or Deceptive Tactics Include:

● Misleading Students into Believing That Their Degrees Are More Valuable Than They Actually Are

● Exaggerated Job Placement Rates276

If you can prove that your school defrauded you, you can discharge a certain percentage of your loans.277 To determine the amount you can discharge, see: https://www.ed.gov/news/press-releases/improved-borrower-defense-discharge-process-will-aid-defrauded-borrowers-protect-taxpayers You must produce evidence of your school’s misleading conduct that directly relates to your loan or education.278 Proof can include documents such as transcripts, enrollment agreements, or emails with school officials, promotional materials, and course catalogs.279 Apply Online for Borrower Defense to Loan Repayment: https://borrowerdischarge.ed.gov/FormWizard/BDU/BDULanding.aspx When you apply for Borrower Defense Discharge, the government will put your loans into forbearance and stop collections while they render a decision on your case.280 If 272 Id. 273 Id. 274 Id. 275 Id. 276 Yan Cao and Tariq Habash, College Complaints Unmasked, THE CENTURY FOUND. (Nov. 8, 2017), https://tcf.org/content/report/college-complaints-unmasked/. 277 Anna Helhoski, Loan Forgiveness Scaled Back for Defrauded Students, NERDWALLET (Dec. 21. 2017), https://www.nerdwallet.com/blog/loans/student-loans/borrower-defense-repayment/. 278 Safier, supra note 255. 279 Id. 280 Information About Debt Relief for Corinthian Colleges’ Students, FED. STUDENT AID, https://studentaid.ed.gov/sa/about/announcements/corinthian (last visited Mar. 8, 2017).

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your application is denied, you will have to pay back the loans plus the interest accrued while the loan was in forbearance.281 DEATH DISCHARGE Federal Student Loans are discharged when the borrower dies.282 Your family member or representative must send your death certificate or other documentation to the loan servicer.283 Parent PLUS loans will also be cancelled if the borrower or student passes away.284 Until parents with Parent PLUS loans have explicit confirmation that the loan is in forbearance during the application process, parents MUST keep paying their loan until their death discharge application is approved.285 Failure to get confirmation risks late fees or default.286 Not all private student loan lenders offer the option to discharge a loan upon death. Private student loans are treated as if they are personal loans which gives the lender the ability to come after your estate after you die.287

281 Id. 282 Melanie Lockert, What Happens to Student Loans When You Die?, STUDENT LOAN HERO, https://studentloanhero.com/featured/what-happens-to-student-loans-when-you-die/ (last updated Dec. 18, 2017). 283 Safier, supra note 255. 284 Lockert, supra note 283. 285 Id. 286 Safier, supra note 255. 287 Lockert, supra note 283.

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BANKRUPTCY DISCHARGE Servicers may tell borrowers that they cannot discharge their loans under bankruptcy. This is not always true. Though it is very difficult and should only be considered as a last resort, you may be able to discharge your student loan if repaying it will cause you to experience “undue hardship.”288 The U.S. Bankruptcy Code does not define undue hardship, but Massachusetts courts have weighed a variety of factors, listed below, to determine whether or not you meet this requirement.289

1. Poverty: You may qualify under this standard if your student loans are making it difficult for you to maintain a minimal standard of living for yourself and your dependents. Courts generally determine this standard based on your current income and expenses, although they may also consider factors such as your potential for employment and income, your education, your marketable skills, your health, and your family support obligations.

2. Persistence: You also have to show that the condition of poverty will continue for

the duration of your loan. 3. Good Faith: You have to show that you made a good faith effort to repay your

loans, but illness, injury, or a long-term lack of employment options have made repayment impossible.

4. Policy: Some courts might look to see if you only filed for bankruptcy to get rid of your student loans, or if you had other reasons for filing for bankruptcy. Other courts might look to see that you have not made financial gains because of the education you took out loans for. 290

288 Can I Discharge My Student Loans in Bankruptcy?, LEGAL CONSUMER, https://www.legalconsumer.com/studentloans/topic.php?TopicID=3&ST=MA (last visited Mar. 5, 2018). 289 Id. 290 Kim Porter, What Happens to Your Credit When You File For Bankruptcy?, CREDIT KARMA (Jan. 8, 2018), https://www.creditkarma.com/advice/i/what-happens-when-you-file-for-bankruptcy/.

IT IS IMPORTANT TO NOTE THAT WHILE BANKRUPTCY MAY HELP RELIEVE YOUR DEBT OBLIGATIONS, IT WILL IMPACT YOUR CREDIT FOR UP TO TEN

YEARS AND SHOULD ONLY BE CONSIDERED AS A LAST RESORT MEASURE

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It will be difficult for you to obtain any type of credit while you have bankruptcy on your credit report.291 If you are considering discharging your student loan through bankruptcy, first talk to your servicer about your circumstances and consider requesting deferment or forbearance to ease your burden while applying for relief through bankruptcy. See Repayment Plans or Unfair Servicer Practices for potential consequences of going into deferment or forbearance. There Are Two Types of Bankruptcy You Can Use to Discharge Your Loan:292

1. Chapter 7 Bankruptcy (Liquidation) 2. Chapter 13 Bankruptcy (Reorganization)

Either of these options halts any collection attempt via phone call and letters while your case is open.293 Chapter 7 Bankruptcy cases take four to six months to complete and will stay on your credit report for ten years.294 If you have steady income, you may not qualify for this route.295 If you do not qualify for Chapter 7 Bankruptcy or cannot demonstrate undue hardship, you may be able to use Chapter 13 bankruptcy to set up a more manageable payment plan for your debt.296 Chapter 13 bankruptcy will remain on your credit report for seven years and you will have to make regular payments again on the remaining balances.297 Student loans are not typically included in bankruptcy cases, but you may ask a court to discharge them by filing a separate document called a “Complaint to Determine Dischargeability.”298 Although it is possible to file the undue hardship proceeding on your own, it is recommended that you consult a qualified student loan attorney to assist you in your case.299 Information on Finding a Student Loan Attorney in Massachusetts: https://www.legalconsumer.com/studentloans/topic.php?TopicID=11&ST=MA It is important to keep in mind that bankruptcy is a last resort option to get rid of your student loan debt.

291 Id. 292 Safier, supra note 255. 293 Devon Delfino, How to Get Your Student Loans Discharged in Bankruptcy., NERDWALLET (June 30, 2016), https://www.nerdwallet.com/blog/loans/student-loans/student-loans-bankruptcy/. 294 Id. 295 Id. 296 Id. 297 Id. 298 LEGAL CONSUMER, Can I Discharge My Student Loans In Bankruptcy?, supra note 289. 299 Id.

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52

In This Section

1. Defaulting on Student Loans

2. Debt Collection

Defaulting on Student Loans

Defaulting on student loans happens if you fail to pay your student loan debt after a certain amount of time.300

The default process and its consequences are different depending on whether you default on a Federal Student Loan or a private loan. For example, before you can default on a Federal Student Loan, your loan goes into delinquency301—something that does not usually exist for private student loans.302 FEDERAL STUDENT LOANS If you miss a payment on your Federal Student Loans, they will go into delinquency.303 While in delinquency, you are given a grace period in which to make up your missed payments.304 Delinquencies of over three months can have a negative impact on your credit score.305 If you continue to miss payments for 270 days, your loan goes into default and you are unable to receive any more Federal Student Aid.306 300 Understanding Delinquency and Default, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/default (last visited Mar. 6, 2018). 301 Default and Delinquency, STUDENT LOAN BORROWER ASSISTANCE, http://www.studentloanborrowerassistance.org/collections/federal-loans/default-and-delinquency/ (last visited Mar. 6, 2018). 302 Id. 303 FED. STUDENT AID, Glossary, supra note 2 (“Delinquent”). 304 Id. 305 FED. STUDENT AID, Understanding Delinquency and Default, supra note 301. 306 Id.

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PRIVATE LOANS What happens when you default on a private loan depends on your personal loan contract, but usually, a private loan goes into default as soon as you miss one payment. Events That Trigger Default on Private Loans:

1. Missing Monthly Payments307

2. Death308

3. Breaking Other Promises Outlined in the Loan Agreement309

4. Beginning a Bankruptcy Proceeding or Assigning Assets to Benefit the Loan310

5. Providing Falsely Written Statements Regarding Your Loans311

6. Inability to Pay Your Loan or Bankruptcy312

7. Defaulting on Existing Loans313

CONSEQUENCES OF DEFAULTING ON A FEDERAL STUDENT LOAN

1. The remaining balance on your loan, and any interest you have accrued, will be immediately due. This is called acceleration.314

2. You will be unable to enter deferment or forbearance, and you will lose eligibility for other benefits, such as the ability to choose a repayment plan315

3. You will be unable to receive additional Federal Student Aid316

4. The default will be reported to credit bureaus, damaging your credit score and therefore impacting your future financial decisions317

307 STUDENT LOAN BORROWER ASSISTANCE, Fed. Student Loan Default and Delinquency, supra note 302. 308 Id. 309 Id. 310 Id. 311 Id. 312 Id. 313 Id. 314 FED. STUDENT AID, Understanding Delinquency and Default, supra note 301. 315 Id. 316 Id. 317 Id.

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The Following May Also Happen When Your Federal Student Loan Goes into Default:

1. Your tax refunds and federal benefit payments may be withheld and applied toward paying off your defaulted loan. This is called treasury offset.318

2. Your loan holder may bring lawsuit against you319

3. Your wages may be garnished. This would require your employer to withhold a portion of your pay and send it to your loan holder to repay your defaulted loan.320

4. You may be charged court costs, collection fees, attorney’s fees, and other costs associated with the collection process321

5. “Your school may withhold your academic transcript until your defaulted student loan is satisfied. The academic transcript is the property of the school, and it is the school's decision—not the U.S. Department of Education’s or your loan holder’s—whether to release the transcript to you.”322 Withholding a transcript from the student can affect career choices and graduate school applications.323

CONSEQUENCES OF DEFAULTING ON A PRIVATE STUDENT LOAN

1. Private student loan lenders will demand that the borrower pay the total remaining balance of the loan immediately324

2. If there is a co-signer on the borrower’s loan, the loan lender will seek repayment from the co-signer325

3. If the loan lender so chooses, they can notify a debt collector of the borrower’s defaulted student loan account. Afterwards, the debt collector can begin to make phone calls, send letters, and other forms of notification to pressure you to pay your loans.326

318 Id. 319 Id. 320 Id. 321 Id. 322 Id. 323 Id. 324 Consequences of Defaulting on Private Student Loans, EDVISORS, https://www.edvisors.com/college-loans/terms/default-private/ (last visited Mar. 7, 2018). 325 Id. 326 Id.

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The Following May Also Happen When Your Private Student Loan Goes into Default:

1. The lender may choose to report the borrower’s defaulted loan to credit bureaus, which can damage the credit history and credit score of both the borrower and if they have one, the co-signer327

2. There may be collections charges added to the remaining loan balance328

3. The loan lender may sue the borrower or the co-signer329

a. The lender may obtain a wage garnishment order against the borrower or co-signer if a court rules against you.330 This would require your employer to withhold a portion of your pay and send it to your loan holder to repay your defaulted loan.331 Wage garnishment orders for private student loans can be up to 25% of your disposable pay depending on the state.332

b. A private lender can also get a court judgment against the borrower or co-signer in order to seize assets and place liens against property owned by the borrower or co-signer.333 A lien allows the loan lender to take possession of property owned by either the borrower or co-signer until the loan is paid off.334

GETTING OUT OF DEFAULT Ways to Get Out of Default:

1. Repayment in Full

2. Loan Consolidation

3. Signing A Loan Rehabilitation Agreement with Your Loan Servicer335 You will need to contact your defaulted loan holder for help with this process for both federal and private student loans.336 327 Id. 328 Id. 329 Id. 330 Id. 331 Wage: Garnishment: What It Is and How to Resolve It, STUDENT DEBT RELIEF, https://www.studentdebtrelief.us/knowledge-base/wage-garnishment/ (last visited Mar. 7, 2018). 332 EDVISORS, Consequences of Defaulting on Priv. Student Loans, supra note 325. 333 Id. 334 FED. STUDENT AID, Glossary, supra note 2. 335 Getting Out of Default, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/default/get-out#loan-rehab (last visited Mar. 6, 2018). 336 Id.

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Debt Collection

Once you default on either your federal337 or private338 student loans, the lender can initiate a debt collection process.339 Lenders can hire a third-party to initiate the debt collection process or the lender can do it themselves.340 Third-party debt collectors usually earn commissions on the amount of debt they can recover.341 In other words, the person or the company who may contact you regarding the debt could be a different from the person or company who provided you with your loans. DEBT COLLECTION PRACTICES AND YOUR RIGHTS Initially, a debt collector will send you a notice with information on the amount of money you owe, how to pay, and who to pay.342 In that notice, the debt collector is also required to inform you about your rights during the collection process.343 They can reach you with the contact information you provided to your lender.344 The methods of communication that debt collectors use range from letters to text messages.345 Debt collectors might engage in unfair practices such as harassing a borrower, abusing the process, or misrepresenting their power. EXAMPLES OF HARASSMENT FROM DEBT COLLECTORS:

1. Continuous Attempts to Contact You at Your Residence or Place of Employment346

2. Calls Intended to Annoy or Abuse347

3. Using Obscene Language348

337 FED. STUDENT AID, Understanding Delinquency and Default, supra note 301. 338 EDVISORS, Consequences of Defaulting on Priv. Student Loans, supra note 325. 339 Bill Fay, Debt Collection Laws: Collections Process, Practices & Methods, DEBT.ORG, https://www.debt.org/credit/collection-agencies/debt-collectors/ (last visited Mar. 6, 2018). 340 Id. 341 Id. 342 Amy Fontinelle, How the Debt Collection Agency Business Works, INVESTOPEDIA, https://www.investopedia.com/articles/personal-finance/121514/how-debt-collection-agency-business-works.asp (last updated November 20, 2017). 343 Id. 344 Id. 345 Id. 346 What Is Harassment by a Debt Collector?, CONSUMER FIN. PROT. BUREAU, https://www.consumerfinance.gov/ask-cfpb/what-is-harassment-by-a-debt-collector-en-336/ (last updated Jan. 12, 2017). 347 Id. 348 Id.

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4. Making Threats of Violence349

5. Making Anonymous Phone Calls350

6. Calling and Saying Nothing

7. Calling Your Family Members or Neighbors351

8. Misrepresenting Themselves as Law Enforcement Officers352

9. Threatening a Borrower with Wage Garnishment353

10. Selling or Seizing Property Without a Court’s Permission354

11. Filing a Lawsuit355

12. Garnishing Money from Your Wages Without Permission from A Court356

Please note this list is not exhaustive. The Consumer Financial Protection Bureau (CFPB) reports numerous complaints by borrowers every year regarding unfair debt collection practices throughout the United States, including those against collectors of student loan debt.357 Massachusetts has the Attorney General’s Consumer Advocacy and Response Division (AGORD) where you can file complaints regarding unfair practices by debt collectors.358 There are laws and regulations at both the federal and state level that restrict the manner in which debt collectors can contact you.359 The restrictions include when, where, and the manner in which debt collectors can contact you.360 These laws and regulations are meant to protect your right to information and documentation.

349 Id. 350 Id. 351 Connie Prater, Know Your Rights: Fair Debt Collection Practices Act, CREDITCARDS.COM, https://www.creditcards.com/credit-card-news/help/fair-debt-collection-practices-act-6000.php (last visited Mar. 6, 2018). 352 CONSUMER FIN. PROTECTION BUREAU, What Is Harassment by a Debt Collector?, supra note 347. 353 Id. 354 Id. 355 Prater, supra note 352. 356 CONSUMER FIN. PROT. BUREAU, What Is Harassment by a Debt Collector?, supra note 347. 357 See CONSUMER FIN. PROT. BUREAU, CONSUMER RESPONSE ANN. REPORT (Mar. 2015), https://files.consumerfinance.gov/f/201503_cfpb_consumer-response-annual-report-2014.pdf; CONSUMER FIN. PROT. BUREAU, CONSUMER RESPONSE ANN. REPORT (Mar. 2016), https://files.consumerfinance.gov/f/201604_cfpb_consumer-response-annual-report-2015.pdf; CONSUMER FIN. PROT. BUREAUS, CONSUMER RESPONSE ANN. REPORT (Mar. 2017), https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201703_cfpb_Consumer-Response-Annual-Report-2016.PDF. 358 File a Consumer Complaint, MASS.GOV, https://www.mass.gov/how-to/file-a-consumer-complaint (last visited Mar. 6, 2018). 359 Fay, supra note 340. 360 Id.

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RESTRICTION ON COMMUNICATION BY DEBT COLLECTORS WHERE DEBT COLLECTORS CAN CONTACT YOU

1. Residence: Debt collectors can contact you via telephone at your residence or via personal cell phone.361 They can contact you no more than two times every seven days.362 Debt collectors can visit your place of residence once every thirty days.363 They cannot enter the house without your permission.364 If debt collectors contact you more than once in a thirty-day period, it is considered to be harassment or abuse.365

2. Place of Employment: Debt collectors cannot contact you at your place of employment if your employer prohibits such communication or without your consent.366 You can make an oral or written request that debt collectors do not contact you there.367 If you make an oral request, it is valid for 10 days.368A written request will prevent debt collectors from contacting you at your workplace permanently.369 A debt collector can only contact you twice every thirty days at your place of employment via telephone or text messaging.370 The debt collector is obligated to provide you a notice—explaining your right to request to cease communication—within thirty days after the first communication to you at the place of your employment.371

3. Other: Debt collectors cannot contact you more than twice every thirty days at places other than your residence.372 Debt collectors can meet you at public places with your consent as long as the conversation cannot be overheard by anyone else.373 Public places include courthouses, the debt collector’s place of business, and other places agreed upon by you and your attorney.374

361 209 MASS. CODE REGS. 18.14(1)(a) (LEXISNEXIS 2018). 362 Id. 363 209 MASS. CODE REGS. 18.15(6) (LEXISNEXIS 2018). 364 Id. 365 Id. 366 209 MASS. CODE REGS. 18.14(1)(c) (LEXISNEXIS 2018). 367 Id. 368 Id. 369 Id. 370 209 MASS. CODE REGS. 18.14(1)(d) (LEXISNEXIS 2018). 371 209 MASS. CODE REGS. 18.21(e) (LEXISNEXIS 2018). 372 209 MASS. CODE REGS. 18.14(1)(d) (LEXISNEXIS 2018). 373 209 MASS. CODE REGS. 18.15(7) (LEXISNEXIS 2018). 374 Id.

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WHO DEBT COLLECTORS CAN CONTACT

1. Third Parties: Debt collectors cannot contact third parties about your debt.375 They can only contact third parties to obtain your location information.376 They can only contact a third party once unless the third party agrees to further communication.377 Debt collectors must identify themselves when contacting third parties in this way.378 They cannot disclose any information regarding your debt to third parties.379 Debt collectors can contact your attorney, a consumer reporting agency, the lender, or the attorney of the lender.380

WHEN DEBT COLLECTORS CAN CONTACT YOU

1. A DEBT COLLECTOR CAN ONLY CONTACT YOU BETWEEN 8:00 AM AND 9:00 PM, YOUR LOCAL TIME, REGARDLESS OF WHERE HE OR SHE TRIES TO REACH YOU.381

2. Communication After Refusal to Pay: If you decide to stop making payments toward your debts, you can let the debt collector know in writing.382 Once you let the debt collector know in writing, the debt collector may not contact you further in relation to your debts except to acknowledge the termination and further remedies the debt collector may pursue.383

375 209 MASS. CODE REGS. 18.14(2) (LEXISNEXIS 2018). 376 209 MASS. CODE REGS. 18.13 (LEXISNEXIS 2018). 377 209 MASS. CODE REGS. 18.13(3) (LEXISNEXIS 2018). 378 209 MASS. CODE REGS. 18.13(1) (LEXISNEXIS 2018). 379 209 MASS. CODE REGS. 18.13(2) (LEXISNEXIS 2018). 380 209 MASS. CODE REGS. 18.14(2) (LEXISNEXIS 2018). 381 209 MASS. CODE REGS. 18.14(1)(a) (LEXISNEXIS 2018). 382 209 MASS. CODE REGS. 18.14(3) (LEXISNEXIS 2018). 383 Id.

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YOUR RIGHTS

1. You can request your records from your debt collector for up to two years after the final payment384

2. You are entitled to receive complete and accurate information regarding the debt collector’s trust. This is where the debt collector deposits your payments.385

3. Debt collectors cannot share information about your debt with anyone else other than you.386 They can only contact a third party if you expressly give permission for such communication.387 If you have an attorney representing you, and the debt collector knows or has reason to know, they can only contact your attorney.388 The debt collector can contact a co-signer.389

COMPLAINTS AND LEGAL ACTION You can file complaints and even lawsuits against debt collectors who engage in unfair practices. If you believe your loan servicer or debt collector did something that violates the restrictions outlined above, you can file a complaint with the Attorney General’s Consumer Advocacy and Response Division.390 To file a complaint, go to Massachusetts Attorney General’s website (see Additional Resources) and file a consumer complaint.391 You can also file a complaint by phone, mail, or in person.392 If the complaint does not fix the issue, you can contact an attorney to take legal action. If you want to file a lawsuit, you or your attorney must send a demand letter to the debt collector thirty days before filing a lawsuit.393

384 209 MASS. CODE REGS. 18.10(1)(a) (LEXISNEXIS 2018). 385 209 MASS. CODE REGS. 18.12(4) (LEXISNEXIS 2018). 386 209 MASS. CODE REGS. 18.14(2) (LEXISNEXIS 2018). 387 Id. 388 209 MASS. CODE REGS. 18.14(1)(b) (LEXISNEXIS 2018). 389 209 MASS. CODE REGS. 18.14(2) (LEXISNEXIS 2018). 390 MASS.GOV, File a Consumer Complaint, supra note 359. 391 Id. 392 Id. 393 Consumer Protection Act Demand Letter, MASS.GOV, http://www.mass.gov/ago/consumer-resources/consumer-assistance/93a-demand-letter.html (last visited Mar. 6, 2018).

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In This Section

1. Loan Servicers and Unfair Practices

Loan Servicers and Unfair Practices

A loan servicer is an entity who is hired by a lender to manage loans by billing, contacting, and issuing notices to borrowers.394 Loan servicers are different from debt collectors. See Default Consequences. Once your grace period or your deferment period is over, you will usually start making monthly payments.395 During your grace period or deferment, you are not required to make any payments towards the interest or principal amount of your loan.396

When you start making payments, your primary contact is your loan servicer.397 Your loan servicer is responsible for assisting you through your repayment process.398 This includes providing information on how and where to make payments, reminding you of deadlines, maintaining loan records, applying payments to your loans, advising you on types of repayment plans, and helping you with loan forbearance and deferment.399

There have been many reports about loan servicers putting borrowers in unfavorable situations while performing their duties.400 Although these practices are not explicitly regulated by law, they may cause you to accumulate more interest and higher monthly payments. However, there are laws that govern certain practices by third party loan servicers that are considered to be unfair.401 394 FED. STUDENT AID, Loan Servicers, supra note 9. 395 STUDENT LOAN BORROWER ASSISTANCE, Grace Periods, supra note 120. 396 Id. 397 FED. STUDENT AID, Loan Servicers, supra note 9. 398 Id. 399 CONSUMER FIN. PROT. BUREAU, What Is a Student Loan Servicer?, supra note 9. 400 CFPB Sues Nation’s Largest Student Loan Company Navient for Failing Borrowers at Every Stage of Repayment, CONSUMER FIN. PROT. BUREAU (Jan. 18, 2017), https://www.consumerfinance.gov/about-us/newsroom/cfpb-sues-nations-largest-student-loan-company-navient-failing-borrowers-every-stage-repayment/. 401 209 MASS. CODE REGS. 18.01 (LexisNexis 2018).

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THE MOST COMMON STRATEGIES AND WARNING SIGNS OF SERVICERS COMMITTING UNFAIR PRACTICES The following acts by your servicer are red flags that your servicer may be engaging in unfair practices. Please note that this is not an exhaustive list.

1. Is Your Servicer Pushing You Towards Forbearance? If your servicer is actively pushing you to put your loans into forbearance, then it may be a sign that your servicer is engaging in an unfair practice. When your loans enter into forbearance, they continue to accrue interest that will eventually need to be repaid.402 Servicers profit from the accrued interest because it results in a longer repayment schedule.403

2. Is Your Servicer Making Recertification of Your Income Drive Repayment Plan Unnecessarily Tedious? Borrowers are required by the government to recertify their disposable income and family size each year.404405 It is the servicer’s responsibility to notify you when it’s time to recertify, typically by e-mail.406 If the servicer fails to notify you and you therefore fail to recertify, you could be removed from the IDR plan.407 If you are on track for loan forgiveness, failure to recertify can shift your timeline.408

3. Is Your Servicer Discouraging You from Paying Early? Servicers have been found to discourage early payment.409 It is often in your best interest to pay down your loan as soon as possible to lower your interest accrued. Lenders may also allow you to release your co-signer after building sufficient credit and after making 12-48 months of consecutive monthly payments.410 Servicers may tell you that you have the option to skip upcoming payments. However, doing so risks resetting the timeline of your loan payment and impedes your ability to release your co-signer.411

402 Matt Carter, 9 Things Your Student Loan Servicer Isn’t Supposed to Be Doing to You, CREDIBLE, https://www.credible.com/blog/student-loans/5-things-your-student-loan-servicer-isnt-supposed/ (last updated Feb. 9, 2018). 403 Id. 404 FED. STUDENT AID, Income-Driven Repayment (IDR) Plan Request, supra note 180. 405 FED. STUDENT AID, Income-Driven Plans, supra note 179. 406 Carter, supra note 403. 407 FED. STUDENT AID, Income-Driven Plans, supra note 179. 408 Id. 409 Seth Frotman, You Have the Right to Pay Off Your Student Loan as Fast as You Can, Without a Penalty, CONSUMER FIN. PROT. BUREAU (Sep. 26, 2016), https://www.consumerfinance.gov/about-us/blog/you-have-right-pay-your-student-loan-fast-you-can-without-penalty/. 410 Carter, supra note 403. 411 Id.

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4. Is Your Servicer Allocating Partial Payments Correctly? If you have multiple student loans under one servicer, the servicer may allocate payments for each loan. Servicers should be informing you on how they direct partial payments, and the potential ramifications of the servicer’s chosen method.412 Your loan servicer should also let you know that you have the right to direct payments to individual loans as you see fit.413 Contact your servicer immediately if you believe your payments are being allocated incorrectly.

5. Is Your Servicer Applying Your Automatic Payments Correctly? Automatic payments may risk withdrawal on a day when the bank is closed, on a weekend, or on a holiday. This means that it may not be processed until the next business day.414 Your servicer may charge you the extra interest that accrues for a day or two after the payment is processed. You should follow up on all automatic payments that may be delayed. Contact your servicer to inquire about how they are applying your automatic payments.

6. Did Your Servicer Confirm You Paid Your Entire Balance? Servicers may cease communications completely with borrowers who attempt to repay the entire loan amount.415 When the payment does not cover the entire balance, a small balance will remain on the account and accrue interest.416 These leftover balances will remain on your credit reports and may cause the loan to enter into delinquency or default.417 Monthly payments may be due again months or years later without your knowledge. You should get a written confirmation from the lender that the repayment is complete to avoid future dispute.418 If you want information concerning your loan repayment, your servicer is required to send you the information within five business days from the date they receive your written request.419 Some loan servicers may charge you a fee for loan payment information. However, they cannot charge you excessive or unreasonable fees.

412 Id. 413 Id. 414 Id. 415 Id. 416 Id. 417 Id. 418 What Is a Payoff Statement?, CREDIBLE, https://www.credible.com/blog/refinance-student-loans/what-is-a-payoff-statement/ (last updated Feb. 6, 2017). 419 209 MASS. CODE REGS. 18.21(4) (LexisNexis 2018).

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7. Has Your Servicer Told You That You Cannot Discharge Your Student Loans in Bankruptcy? Servicers sometimes falsely tell borrowers that student loan debt is not dischargeable in bankruptcy. However, it is possible to discharge a student loan debt if a borrower can show “undue hardship.” See Loan Forgiveness and Discharge. If you have closed bankruptcy cases before discharging your student loans, you may be able to reopen those cases.420

8. Have You Been Threatened with Late Fees? The Department of Education has instructed its servicers not to charge late fees for federal loans.421 If you have been charged a late fee on a Department of Education loan, you should notify your servicer immediately.

ADDITIONAL UNFAIR PRACTICES BY YOUR LOAN SERVICERS GOVERNED BY LAW

1. Your loan servicer is required to report your payment history to a nationally recognized consumer credit bureau at least once a year.422 They are required to report credit regardless of whether it is favorable or unfavorable to you.423

2. Your loan servicer is required to report correct information to a credit bureau.424 If they provide incorrect information to a credit bureau, it can potentially harm your credit.

3. Your loan servicer cannot misrepresent any important information to you in

connection with your student loan.425 The important information may include the amount of the loan, the nature or terms of any fee or payment due on a loan, the terms and conditions of the servicing contract, or the borrower’s obligations under the loan.426

4. Your loan servicer is required to maintain procedures to ensure accurate and

timely updating of your account information, including posting of payments and imposition of fees427

420 Carter, supra note 403. 421 CONSUMER FINANCIAL PROT. BUREAU, Supervisory Highlights: Fall 2015, supra note 422. 422 209 MASS. CODE REGS. 18.21(7) (LexisNexis 2018). 423 Id. 424 Id. 425 209 MASS. CODE REGS. 18.21(9) (LexisNexis 2018). 426 Id. 427 209 MASS. CODE REGS. 18.21(10) (LexisNexis 2018).

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5. Your loan servicer cannot require you to deposit money in a way that is costlier

than it would be to deposit in a bank, with a certified check, or with an attorney’s check428

6. Your loan servicer cannot refuse to communicate with your representative, such as your attorney, after you have authorized such representation in writing429

7. If your loan servicer hired someone else to manage your loans such as a law firm or sub-servicer, then your loan servicer is required to monitor and oversee that they are complying with laws and regulations.430If you believe that your loan servicer has hired a sub-servicer, you can contact them to confirm.

8. A loan servicer is required to preserve records related to your payments and

communication.431 You can request your records.432 If you suspect your servicer is engaging in any of these tactics, contact your servicer immediately with your issue. If the issue persists, consider launching a complaint with the Consumer Financial Protection Bureau at: https://www.consumerfinance.gov/complaint/

428 209 MASS. CODE REGS. 18.21(11) (LexisNexis 2018). 429 209 MASS. CODE REGS. 18.21(12) (LexisNexis 2018). 430 209 MASS. CODE REGS. 18.21(13) (LexisNexis 2018). 431 209 MASS. CODE REGS. 18.10(1)(a) (LexisNexis 2018). 432 Id.

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Before Taking Out Loans

1. What Is a Loan?

A loan is money borrowed that must be paid back, often with interest.433

2. What Is Interest?

Interest is a percentage of your loan amount, or your principal balance.434 It is the time value of money. Interest is paid to the lender in exchange for borrowing money.435 Each loan you take out may have a different interest rate. To learn more about different interest rates, visit: studentaid.ed.gov

3. What Is the Difference Between a Subsidized and an Unsubsidized Loan?

If your federal loan is subsidized, the interest does not start accruing until your grace period after graduation is over.436 Direct subsidized loans are only available to undergraduate students.437 If your Federal Student Loan is unsubsidized, interest starts accruing on your loan as soon as it is taken out.438 Direct unsubsidized loans are available to both undergraduate and graduate students.439 Both of these loans are based upon financial need.440

4. How Do I Apply for Federal Student Loans?

To apply for any federal student aid, including loans, you will need to fill out the FAFSA at fafsa.ed.gov.441 This form is available every year from October until June. This form needs to be filled out every year you are in school to continue receiving aid.442

433 FED. STUDENT AID, Glossary, supra note 2. 434 FED. STUDENT AID, Interest Rates and Fees, supra note 126. 435 Id. 436 FED. STUDENT AID, Subsidized and Unsubsidized Loans, supra note 81. 437 Id. 438 Id. 439 Id. 440 Id. 441 FED. STUDENT AID, FAFSA®: Applying for Aid, supra note 34. 442 Id.

EXAMPLEYou take out a $5,000 loan that has an interest rate of 4.2%. The $5,000 is called your principal balance. Your loan starts adding or accruing interest at different times, depending on the type of loan you borrow. When you repay this loan, you will owe more than your principal balance because of the accrued interest.

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5. Is My Federal Grant or Scholarship the Same as My Federal Loan?

No! Grants and scholarships are not loans.443 A grant is often need-based and a scholarship is often merit-based.444 Neither needs to be repaid, whereas a loan does need to be repaid.445

6. Do I Need a Co-Signer on My Loans? FEDERAL LOANS You do not need a co-signer for most federal loans. 446 PRIVATE LOANS Some private loan servicers do require a co-signer.447 To understand the process of getting a co-signer on your loans and the qualifications and responsibilities of a co-signer, reach out to your lender.

7. How Can I Budget for My Student Loans?

Federal Student Aid offers tips for why you need a budget and how you can stick to it when it comes to student loans.448

For more information, visit: studentaid.ed.gov/sa/prepare-for-college/budgeting

8. I’m Just Taking Out Loans Now. Do I Need to Think About Repayment Yet?

It’s a good idea to consider what your repayment will look like when you are taking out your loans. You should consider interest rates, repayment plans, and forgiveness programs available for the specific types of loans you’re planning to take out to ensure you are making the best choice for your personal budget.449

443 FED. STUDENT AID, Grants and Scholarships, supra note 16. 444 Id. 445 Id. 446 FED. STUDENT AID, Loans, supra note 1. 447 Private Student Loans, FINAID.ORG, http://www.finaid.org/loans/privatestudentloans.phtml (last visited Mar. 5, 2018). 448 Budgeting, FED. STUDENT AID, https://studentaid.ed.gov/sa/prepare-for-college/budgeting (last visited Feb. 15, 2018). 449 Get Repayment Options, FED. STUDENT AID, https://studentloans.gov/myDirectLoan/repayOptions.action#/0/0/consolidationIDRPSLF (last visited Mar. 5, 2018).

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During School

1. Do I Need to Apply for Loans Every Year While in School?

FEDERAL LOANS Yes! You need to apply for loans for each year you are in school.450 The amount a student can borrow can only be determined one academic year at a time, so borrowing a student loan for multiple semesters or years is not possible.451

FAFSA must be filled out every year while you are enrolled in school in order to stay eligible for federal student aid.452 PRIVATE LOANS Typically, most private lenders will insist the borrower reapply for loans each new year or semester.453 Each lender has its own specific guidelines and rules for borrowing, so it is best to contact your provider for the most accurate answer.454 If you are planning on taking out private loans, FAFSA can inform you of potential federal eligibility or other grants that may be available to you, so it is highly recommended that you fill out FAFSA regardless of the type of loans you choose to take out.455

2. What Is the Interest Rate on My Loans and Does It Change Every Year?

FEDERAL LOANS The interest rate for a new Federal Student Loan might be different from a past Federal Student Loan.456 The specific interest rates on your loans can be found by contacting your servicer.457 The loans you have already taken out often have fixed interest rates. This means they will not change every year. 458

PRIVATE LOANS For private loans, when you take out the loan you can choose to either have a variable or invariable interest rate.459 If you choose an invariable interest rate, your interest will not change, but a variable rate can substantially increase the amount that is repaid during the repayment period.460

450 Do I Borrow Student Loans for One Year or for All Years, ESTUDENTLOAN, https://www.estudentloan.com/blog/do-i-borrow-student-loans-for-one-year-or-all-years (last visited Mar. 7, 2018). 451 Id. 452 Id. 453 Id. 454 Id. 455 FED. STUDENT AID, FAFSA®: Applying for Aid, supra note 34. 456 FED. STUDENT AID, Interest Rates and Fees, supra note 126. 457 Id. 458 Id. 459 FINAID.ORG, Private Student Loans, supra note 448. 460 Id.

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3. Can I Still Borrow Loans If I Am Not Enrolled Full-Time?

FEDERAL LOANS Yes. For direct subsidized loans, a student is required to only be in school part-time.461 For direct unsubsidized loans, it is only a requirement that the student is enrolled in a program that leads to a degree.462

PRIVATE LOANS Yes. For private student loans, each private lender has its own rules and regulations regarding what is acceptable for part-time students in terms of the eligibility requirements, loan rates, and loan terms.463 Some private student loan servicers also work with loan minimums and loan maximums.464 If you are borrowing for a part-time course load or are considered less than a part-time student, the loan minimum may not be met. Please note that you will not have to go into repayment on your loans unless you leave college or drop below part-time.465

4. How Much Will My Monthly Payment Be for My Loans When I Graduate?

FEDERAL LOANS Visit the Federal Student Aid Repayment Calculator.466 After entering your loan information, the website will tell you which repayment plans you are eligible for and what your monthly payments would be under those plans.467 Note that the repayment calculator makes assumptions that might not apply to you and to find out your actual monthly payment, you should contact your loan servicer.468

Federal Student Aid Repayment Calculator: studentloans.gov/myDirectLoan/repaymentEstimator.action PRIVATE LOANS Many private loan servicers provide repayment calculators so check on your loan servicer site first.

Example: salliemae.com/college-planning/tools/student-loan-repayment-calculator

461 FED. STUDENT AID, Subsidized and Unsubsidized Loans, supra note 81. 462 ID. 463 FINAID.ORG, Private Student Loans, supra note 448. 464 Id. 465 SIMPLE TUITION, Student Loans for Part-Time Students, supra note 56. 466 Repayment Estimator, FED. STUDENT AID, https://studentloans.gov/myDirectLoan/repaymentEstimator.action (last visited Feb. 15, 2018). 467 Id. 468 Id.

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BOTH/UNSURE If your loan servicer does not provide a repayment calculator or you’re not sure who your servicer is, try the Federal Student Aid Repayment Estimator.469

5. What Is My Total Borrowing?

FEDERAL LOANS Go to studentloans.gov/myDirectLoan/index.action.

You will need an FSA (Federal Student Aid) ID, and if you do not have one, you can create a new one on the site.470 Once created, you will be able to view your loans.471 This will look like a chart, called an “Aid Summary” which will list your loan types, amounts, and dates they were disbursed.472 PRIVATE LOANS Each private lender is different, so when in doubt, contact your private loan provider to ask what your total borrowing is.

469 Id. 470 Student Loans, FED. STUDENT AID, https://studentloans.gov/myDirectLoan/index.action (last visited Mar. 7, 2018). 471 Id. 472 Id.

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After Graduating/Leaving School

1. When Do I Go into Repayment for My Loans If I Withdraw?

The process of withdrawal and its impact on you financially can vary depending on where you are attending school. In addition to speaking with your loan provider, speak with your school’s financial aid office to understand the impact that withdrawal can have on your student loans.

FEDERAL LOANS Federal Student Loan regulations require that the school returns all or a portion of the student’s federal aid if the student withdraws before completing at least 60% of the loan period (typically one academic year).473 The school is not required to have the same tuition return policy, so many students who withdraw have both student loan debt and owe the school directly. 474

PRIVATE LOANS Private lenders have varying flexibilities for the repayment of loans in the event of a withdrawal.475 Contact your provider for the most accurate answers.

2. Where Do I Get Information About How to Set Up a Payment Plan for My Loans?

FEDERAL LOANS Contact your loan servicer for the most accurate information regarding your specific loans. For a general overview of federal repayment plans, visit studentaid.ed.gov/sa/repay-loans/understand/plans PRIVATE LOANS Repayment plans for private loans will depend on your private lender.476 Contact your lender for more information.

473 How Withdrawing from School Affects Your Financial Aid, PENNSTATE STUDENT AID, https://studentaid.psu.edu/eligibility/withdrawing-from-school (last visited Mar. 5, 2018). 474 Betsy Mayotte, Consider Your Student Loans Before Dropping Out of College, U.S. NEWS. (Oct. 21, 2015, 10:00 AM), https://www.usnews.com/education/blogs/student-loan-ranger/2015/10/21/consider-your-student-loans-before-dropping-out-of-college. 475 Amy Blatterfein, What Happens to Your Student Loans When You Drop Out?, U.S. STUDENT LOAN CTR. (Feb. 19, 2017), https://usstudentloancenter.org/what-happens-to-your-student-loans-when-you-drop-out/. 476 FINAID.ORG, Private Student Loans, supra note 448.

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3. What Do I Do If I Cannot Afford My Monthly Payment?

FEDERAL LOANS There are multiple options for you if you’re having a difficult time affording your monthly payment. One option is to apply for an Income Driven Repayment Plan, which will take into account your current income and adjust your monthly payments.477 To sign up for an Income Driven Repayment Plan, you will need to submit validation of your income and every year you will have to recertify.478 Contact your loan servicer for more details. PRIVATE LOANS Repayment plans for private lenders vary based on lender.479 Contact your lender for more information regarding your loans.

4. Is There a Way to Have My Loans Forgiven?

FEDERAL LOANS There are multiple options for federal loan forgiveness, but be advised that loan forgiveness programs are subject to federal change, meaning the federal government can cut or add programs.480 Some current options include:

1. Public Service Loan Forgiveness481 2. Forgiveness with Income-Based Repayment Plans482 3.Federal Perkins Loan Cancellation483 4. Teacher Loan Forgiveness484

For more information on forgiveness programs and to find out if you are eligible, contact your servicer. **As a last option, you can file for bankruptcy. However, it is recommended you consult a bankruptcy lawyer before resorting to this option to go over your specific situation.

PRIVATE LOANS Many private lenders offer the option of refinancing your student loans.485 This will consolidate your loans and could reduce your interest rate.486 However, every lender provides different options so contact your loan provider to get the most accurate answer for your situation.

477 FED. STUDENT AID, Income-Driven Plans, supra note 179. 478 How to Repay Your Loans, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans#cant-afford-payments (last visited Feb. 15, 2018). 479 FINAID.ORG, Private Student Loans, supra note 448. 480 FED. STUDENT AID, Forgiveness, Cancellation, and Discharge, supra note 228. 481 Id. 482 FED. STUDENT AID, Income-Driven Plans, supra note 179. 483 FED. STUDENT AID, Forgiveness, Cancellation, and Discharge, supra note 228. 484 Id. 485 Private Student Loans Consolidation, FINAID.ORG, http://www.finaid.org/loans/privateconsolidation.phtml (last visited Mar. 5, 2018). 486 Id.

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5. When Should I Consider Contacting a Student Loan Attorney?

Student loan attorneys can help you resolve delinquencies or defaults, assist in negotiations you have with your student loan servicer, handle credit disputes, and litigate student loan matters such as defending a collections lawsuit against you or assist in suing loan-related agencies for legal violations.487 If you’re facing any of these issues, consider contacting a student loan attorney or The National Consumer Law Center (NCLC). 488

Additional Questions?

Check out Additional Resources to find more resources applicable to you.

487 Melanie Lockert, When Is It Time to Hire a Student Loan Lawyer?, STUDENT LOAN HERO, https://studentloanhero.com/featured/hire-student-loan-lawyer/ (last updated July 5, 2016). 488 Id.

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Before Taking Out Loans

Free Application for Federal Student Aid (FAFSA) Fafsa.ed.gov Fill out your FAFSA form to be eligible for Federal Student Aid such as grants and loans. Consumer Financial Protection Bureau (CFPB) consumerfinance.gov/paying-for-college/compare-financial-aid-and-college-cost/ The CFPB website offers tools to help you compare schools and determine how to pay for each choice. U.S. Department of Education studentaid.ed.gov/sa The U.S. Department of Education website offers budgeting tools, information on student loan types, and other student loan assistance tools. Student Loan Calculator finaid.org/calculators/loanpayments.phtml This student loan calculator is another option to use as a budgeting tool. The Boston Public Schools Financial Readiness bostonpublicschools.org/Page/6095 The Boston Public Schools (BPS) offers options to its students to help make college more affordable. Specifically, BPS offers a tuition-free community college plan. The plan covers the costs of tuition and mandatory fees that are not covered by the Pell Grant for a limited number of community colleges. The program has eligibility requirements and a limited choice in schools, so be sure to check BPS’s website for more details.

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University of Massachusetts Offerings umass.edu/umfa The University of Massachusetts (UMass) system offers various tools for students to better understand their financial aid. These offerings include:

● Face-to-face walk-in counseling, telephone conversations, and email exchanges with students

● Outreach events like open houses, new student orientation, financial aid

presentations in the UMass schools and colleges, and events in conjunction with the Bursar’s Office (the office responsible for billing student accounts) and Student Success Centers

● Parent Information

○ umass.edu/umfa/parents/understanding-financial-aid

● Financial Aid FAQs

○ umass.edu/umfa/undergraduates/faq

● Financial Aid TV Videos

○ Umass.financialaidtv.com

● Student Debt Center in the UMass Amherst Student System

Step-by-Step Guide credible.com/blog/how-to-take-out-a-student-loan/ This blog provides a step-by-step guide on how to take out student loans. This blog was last updated February 9, 2018. College Board bigfuture.collegeboard.org/pay-for-college/loans/8-tips-for-taking-out-student-loans College Board offers tips and tools for student borrowers. The site also helps you map out your application and borrowing experience. Student Loan Hero Studentloanhero.com Student Loan Hero offers calculators to help you stay on track with your borrowing. The site also offers interactive quizzes to guide you through questions you might have.

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Assistance for Low-Income and/or First-Generation-To-College Students

Bottom Line Bottomline.org “Bottom Line helps low-income and first-generation-to-college students get to and through college. We are committed to building strong connections with our students, providing them with individual support, and ensuring they have the guidance they need to persist and earn a college degree.” -Bottom Line’s “What We Do” Bottom Line pairs each student with a counselor through either a high school support program or a college support program. These counselors help the students apply to college, apply for financial aid, and manage their debt upon graduation. Bottom Line counselors keep in contact with students throughout their college career and for up to six years after graduation to guide them through the process. To get involved with Bottom Line, a student can check the eligibility requirements. If a student qualifies, an application can be completed and submitted on the website. Let’s Get Ready Letsgetready.org Email: info@letsgetready.org “Let’s Get Ready provides high school students from historically under-served communities and first-generation-to-college students with free SAT preparation, admission counseling and other support services needed to gain admission to and graduate from college. Services are provided by volunteer college students who also serve as role models and mentors. Let’s Get Ready envisions a future in which students from all socioeconomic backgrounds have the support they need to attain a college education.” -Let’s Get Ready Mission and Vision Statement To get involved with Let’s Get Ready, a student can enroll as a high school student or volunteer as a college student. For high school students, Let’s Get Ready begins with a College Access Program which consists of a nine-week curriculum to prepare students for college. As a college student, a volunteer could work as a coach in many different capacities to prepare students entering college. To enroll as a high school student or to work as a coach, a student can visit the Let’s Get Ready website.

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Repayment

FEDERAL STUDENT LOAN REPAYMENT OPTIONS/TIPS Consumer Financial Protection Bureau (CFPB) Repayment Center consumerfinance.gov/paying-for-college/repay-student-debt The CFPB Repayment Center provides advice on repayment plans. The site does not assist you with your exact situation but does provide an overview of plans. U.S. Department of Education Repayment Calculator studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action The U.S. Department of Education offers a repayment calculator to determine what your approximate monthly payment will be depending on the type of repayment plan you qualify for and choose. To use this calculator, you can either sign in with your FSA ID to use your actual loan information or you can proceed without signing in and manually input your loan information. Federal Student Aid (FSA) studentaid.ed.gov/sa/repay-loans FSA offers a repayment guide for Federal Student Loans on its website. Your Federal Loan Servicer

● MOHELA: mohela.com

● Great Lakes: mygreatlakes.org

● HESC/Edfinancial: edfinancial.com

● Cornerstone: mycornerstoneloan.org

● Nelnet: nelnet.com

● Granite State: gsmr.org

● Navient: navient.com

● OSLA: public.osla.org

● PHEAA: myfedloan.org Your loan servicer can provide you with specific information regarding your loans.

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Private Loan Repayment Options/Tips Student Loan Hero studentloanhero.com Student Loan Hero offers various calculators and tips to help you budget your repayment and make repayment choices. U.S. News usnews.com/education/blogs/student-loan-ranger/2014/07/30/get-to-know-private-student-loan-repayment-options-restrictions This blog discusses private borrower options. The article was last updated July 30, 2014.

File A Complaint Against Loan Servicer or Debt Collector

Attorney General’s Consumer Advocacy and Response Division

One Ashburton Place, 18th Floor Boston, MA 02130 Hotline: 617-727-8400

You can file a complaint on the website, by mail, in-person, or by calling the hotline. For additional information, visit: https://www.mass.gov/how-to/file-a-consumer-complaint

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Student Borrower Advocacy Groups

Public Higher Education Network of Massachusetts (PHENOM) Phenomonline.org “The Public Higher Education Network of Massachusetts (PHENOM) unites students, families, alumni, professors, staff, and community members from our state universities, community colleges and the UMass system to advocate for high-quality, debt-free public college.” -PHENOM’s “Who We Are” Student Loan Advocacy Group Studentloanag.com The Student Loan Advocacy Group offers assistance to student borrowers. The site offers a chat option to talk through your student borrower questions. National Consumer Law Center/Student Loan Borrower Assistance studentloanborrowerassistance.org/advocacy The Student Loan Borrower Assistance Project (SLBA) is a program of the National Consumer Law Center (NCLC). The group works on advocacy for low-income consumers.

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General Assistance

Consumer Financial Protection Bureau (CFPB) Ombudsman’s Office Phone: (855) 830-7880 Email: CFPBOmbudsman@cfpb.gov consumerfinance.gov/cfpb-ombudsman/ When to Contact the CFPB Ombudsman:

“You may want to contact the CFPB Ombudsman if you are a consumer, financial entity, consumer or trade group, or anyone else who has a process issue from interacting with the CFPB and you:

1. have not resolved that issue after contacting the CFPB itself or 2. want to share it with the CFPB Ombudsman in confidence”

Federal Student Aid (FSA) Ombudsman studentaid.ed.gov/sa/repay-loans/disputes/prepare/contact-ombudsman Fill out the form on this page with your student loan questions or issues and the FSA Ombudsman Group will try to help. Massachusetts Attorney General Office Phone: 1-888-830-6277 mass.gov/ago/consumer-resources/consumer-information/schools-and-education/student-loans The Attorney General’s Insurance & Financial Services Division offers a hotline with free mediation service to borrowers who are having difficulties with their student loans. National Consumer Law Center (NCLC) Nclc.org The National Consumer Law Center (NCLC) provides guides, tips, and legal assistance to student borrowers. Their program, The Student Loan Borrower Assistance Project (SLBA), provides resources including a list of legal options for borrowers.

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ACADEMIC YEAR: The period of time in which your school is in session. Students may be a required to complete a minimum amount of credits within this time period. Typically, the time period is September through June.489 ADVERSE CREDIT HISTORY: Generally, this refers to a record of poor repayment history on credit cards or loans. An adverse credit history will result in a low credit score. This makes it difficult to get a loan or a credit card with good terms, or to get one at all.490 Adverse credit history can have a more specific meaning in regard to student loans. In this context, adverse credit history means that a person’s credit report shows that they have experienced any of the following within the last five years491:

1. Default determination 2. Bankruptcy discharge 3. Repossession 4. Foreclosure 5. Charge-off/ write-off of federal student aid debt 6. Wage garnishment 7. Tax lien

A borrower may also have adverse credit history if she or he has “accounts with a total outstanding balance greater than $2,085 that are 90 or more days delinquent as of the date of the credit report, or that have been placed in collection or charged off during the two years preceding the date of the credit report.”492 ASSOCIATE’S DEGREE: An undergraduate academic degree awarded upon completion of a course of study. This degree lasts two years and is generally awarded by a community college or career college.493 BACHELOR’S DEGREE: An undergraduate academic degree awarded upon completion of a course of study. This degree generally lasts four years and is awarded by a college or university.494 489 Glossary, FED. STUDENT AID, https://studentaid.ed.gov/sa/glossary (last visited Mar. 9, 2018). 490 Adverse Credit Hist., INVESTOPEDIA, https://www.investopedia.com/terms/a/adverse-credit-history.asp (last visited Mar. 9, 2018). 491 FED. STUDENT AID, Glossary, supra note i. 492 Id. 493 Id. 494 Id.

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BORROWER: A person who is responsible for repaying a debt or a loan.495 CO-SIGNER: A joint signer of a loan or promissory note. Co-signers are equally responsible for repayment of the loan.496 COST OF ATTENDANCE (COA): The price for a full academic year. This may include tuition and fees, room and board, books and supplies, transportation fees, loan fees, buying or renting a personal computer, and stipends for eligible study-abroad programs. COA may also include costs related to a disability and dependent care.497 CREDIT BUREAU: A company that gathers individual credit information and sells it to lenders, creditors, and consumers in the form of a credit report. The three big credit bureaus in the U.S. are Equifax, Experian, and TransUnion.498 Credit bureaus will note if you default on a student loan. This can decrease the likelihood that a future lender will extend credit to you.499 CREDIT CHECK: A check on your current credit score. This score is based on your experience with borrowing and repaying money.500 DEBT: A duty to pay money, perform a service, or deliver goods to another.501 DEBT COLLECTOR:

“Someone whose business or job is to seek payment of past-due bills and other outstanding debts.” 502

495 Student Loan Definition and Other Loan Terms, ESTUDENTLOAN, https://www.estudentloan.com/resources/student-loan-glossary#Borrower (last visited Mar. 9, 2018). 496 Cosigner, MERRIAM-WEBSTER, https://www.merriam-webster.com/dictionary/cosigner (last visited Mar. 9, 2018). 497 FED. STUDENT AID, Glossary, supra note i. 498 Latoya Irby, Things You Should Know About Credit Bureaus, THE BALANCE, https://www.thebalance.com/credit-bureau-facts-960693 (last updated Oct. 1, 2017). 499 FED. STUDENT AID, Glossary, supra note i. 500 See How to Understand Credit Scores, CREDIT KARMA, https://www.creditkarma.com/credit-scores (last visited Mar. 9, 2018). 501 Debt, BUSINESS DICTIONARY, http://www.businessdictionary.com/definition/debt.html (last visited Mar. 9, 2018). 502 Debt Collector, BLACK'S LAW DICTIONARY (10 ed. 2014).

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DEFAULT: “Failure to repay a loan according to the terms agreed to in the promissory note.”503 DEFERMENT: Temporary pause to a borrower’s student loan payments for specific situations, including active duty military service and re-enrollment in school. For unsubsidized loans, interest accrues during deferment. Private loans do not necessarily have deferment options.504 DELINQUENT: A loan becomes delinquent when payments are not received on time. Loans become delinquent on the first day after a borrower misses a payment.505 DEPENDENT: A student who does not meet any of the criteria for an independent student, as listed below:

1. At Least 24 Years Old 2. Married 3. A Graduate or Professional Student 4. A Veteran 5. A Member of the Armed Forces 6. An Orphan 7. A Ward of the Court 8. Someone with Legal Dependents Other Than a Spouse 9. An Emancipated Minor 10. Someone Who is Homeless or at Risk of Becoming Homeless506

DISBURSEMENT: When a school pays a borrower their federal student aid funds. This generally occurs in two or more disbursements.507 DISCHARGE: Cancellation of a borrower’s duty to pay all or part of the remaining balance and interest owed on a loan.508 503 FED. STUDENT AID, Glossary, supra note i. 504 What is Deferment?, CONSUMER FIN. PROT. BUREAU, https://www.consumerfinance.gov/ask-cfpb/what-is-deferment-en-629/ (last updated Aug. 4, 2016). 505 FED. STUDENT AID, Glossary, supra note i. 506 Id. 507 Id. 508 Id.

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ELIGIBLE NON-CITIZEN: Someone who is either a U.S. national, a U.S. permanent resident, or an individual whose Arrival-Departure Record (I-94) has one of the following designations:

1. Refugee 2. Asylum Granted 3. Cuban-Haitian Entrant (Status Pending) 4. Conditional Entrant (valid only if issued before April 1, 1980) 5. Victims of human trafficking, T-visa (T-2, T-3, or T-4, etc.) holder 6. Parolee (must be paroled into the U.S. for at least one year; able to prove that

he/she is in the U.S. for other than a temporary reason; and able to prove intent to become a citizen or permanent resident of the U.S.)509

ENTRANCE COUNSELING: A required information session for first-time student loan borrowers that is typically offered online.510 EXPECTED FAMILY CONTRIBUTION (EFC):

An estimate used to determine the amount of federal aid a student is eligible to receive. The formula used to calculate EFC is set by law. It takes into account the family’s taxable and nontaxable income, assets, benefits, size, and the number of family members in college.511 FINANCIAL AID: Total combined amount of federal and nonfederal financial aid offered by a college or school that is intended to fill the gap between a student’s ability to pay, the expected family contribution (EFC), and total cost of attendance (COA). 512 FINANCIAL NEED:

“The difference between the cost of attendance (COA) and the expected family contribution (EFC).” 513 FIRST-TIME BORROWER: One who has not taken out loans before. 509 Id. 510 Id. 511 Expected Fam. Contribution (EFC), FED. STUDENT AID, https://fafsa.ed.gov/help/fftoc01g.htm (last visited Mar. 9, 2018). 512 FED. STUDENT AID, Glossary, supra note i. 513 How Aid Is Calculated, FED. STUDENT AID, https://studentaid.ed.gov/sa/fafsa/next-steps/how-calculated (last visited Mar. 9, 2018).

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FIXED RATE: An interest rate that stays the same for the life of a loan.514 FORBEARANCE: Temporary postponement or reduction of loan payments due to financial difficulty. Borrower is responsible for making interest payments during periods of repayment. 515 FRAUD: The use of deceit or deception to induce another to part with something of value. For example, in the student loan context, fraud may include taking out a student loan to pay for non-educational expenses.516 FREE APPLICATION FOR FEDERAL STUDENT AID (FAFSA): Free application for federal student aid, including federal grants, loans, and work study. 517 GENERAL EDUCATION DEVELOPMENT (GED) CERTIFICATE: Received when students pass a high school equivalency test. These students are eligible for federal student aid.518 GRACE PERIOD: Period of time after student graduates, leaves school, or drops below part-time enrollment during which borrower does not need to make payments on qualified student loans.519 GRADUATE/PROFESSIONAL STUDENT: Student pursuing a higher degree beyond a bachelor’s degree520 514 Miranda Marquit, Fixed v. Variable Int. Rate: How to Make the Right Choice for Your Student Loans, STUDENT LOAN HERO, https://studentloanhero.com/featured/fixed-vs-variable-rate-student-loans-which-choose/ (last updated Jan. 18, 2018). 515 What is Forbearance?, CONSUMER FIN. PROT. BUREAU, https://www.consumerfinance.gov/ask-cfpb/what-is-forbearance-en-631/ (last updated Aug. 8, 2017). 516 Fraud, MERRIAM-WEBSTER, https://www.merriam-webster.com/dictionary/fraud (last visited Mar. 9, 2018); Student Loan Fraud, LEXISNEXIS: IDENTITY CHALLENGES, http://blogs.lexisnexis.com/identitygov/identity-challenges/student-loan-fraud/ (last visited Mar. 9, 2018). 518 FED. STUDENT AID, Glossary, supra note i. 519 Id. 520 What Is A Graduate Student?, U.S. DEP’T OF STATE, https://educationusa.state.gov/your-5-steps-us-study/research-your-options/graduate/what-graduate-student (last visited Mar. 9, 2018).

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GRANT: Financial aid that does not have to be repaid (unless you withdraw from the school and owe a refund).521 INCARCERATED STUDENT: For purposes of student loan eligibility, a student is considered incarcerated if he or she:

1. Is serving a criminal sentence in a penitentiary, prison, jail, reformatory, work farm, or a similar correctional facility OR

2. Has been delinquent and is committed to a juvenile justice facility. A student is not considered incarcerated if he or she:

1. Is in a halfway house

2. Is in home detention or is only sentenced to serve on weekends

3. Is confined in a correctional or juvenile facility before receiving a criminal sentence.522

INDEPENDENT: You are considered an independent student if you are:

1. At least 24 years old 2. Married 3. A graduate or professional student 4. A veteran 5. A member of the armed forces 6. An orphan 7. A ward of the court 8. Someone with legal dependents other than a spouse 9. An emancipated minor 10. Homeless or at risk of becoming homeless523

521 Grants and Scholarships, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/grants-scholarships (last visited Mar. 9, 2018). 522 Fed. Student Aid Eligibility for Students Confined in Adult Corr. or Juv. Just. Facilities, FED. STUDENT AID, 1 (Dec. 2014), https://studentaid.ed.gov/sa/sites/default/files/aid-info-for-incarcerated-individuals.pdf. 523 FED. STUDENT AID, Glossary, supra note i.

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INTEREST: An expense calculated as a percentage of the remaining principal balance of a loan.524 INTEREST RATE: The percentage at which interest is calculated on a loan.525 LENDER: Person or entity who originates a loan and provides the borrowed funds. 526 LOAN: Money that is borrowed and paid back later along with interest.527 LOAN FEE: A certain percentage of the amount of a loan that is deducted from each loan disbursement a borrower receives. Borrowers are still responsible for repaying the entire amount borrowed even though they will actually receive a smaller amount once the loan fee is taken into account.528 LOAN FORGIVENESS: Cancellation of borrower’s duty to repay some or all of the remaining outstanding balance of the loan.529

LOAN SERVICER: Company that collects payments on a student loan, provides customer servicer and information regarding a borrower’s loan and repayment options, and performs various administrative tasks associated with loan maintenance. When borrowers receive a monthly billing statement and remit payment, they are interacting with their loan servicers. 530

524 Id. 525 Id. 526 Id. 527 See Loan, INVESTOPEDIA, https://www.investopedia.com/terms/l/loan.asp (Mar. 9, 2018). 528 Int. Rate and Fees, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/loans/interest-rates (Mar. 9, 2018). 529 Forgiveness, Cancellation, and Discharge, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation (last visited Mar. 9, 2018); FED. STUDENT AID, Glossary, supra note i.. 530 What is a Student Loan Servicer, CONSUMER FIN. PROT. BUREAU, https://www.consumerfinance.gov/ask-cfpb/what-is-student-loan-servicer-en-583/ (last updated Aug. 8, 2017).

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MASTER PROMISSORY NOTE: Binding legal document which a borrower signs when he or she takes out a federal student loan. The promissory note contains terms and conditions for loan repayment, including an explanation of the borrower’s rights and responsibilities.531 MAXIMUM ELIGIBILITY PERIOD: The maximum time during which a borrower is eligible to receive Direct Subsidized Loans. This is generally equal to 150 percent of the borrower’s school’s published length of program.532 OVERPAYMENT: When a borrower receives more federal student aid funds than he or she is eligible to receive.533 PART-TIME: When a student does not take the full amount of credits that they could be taking at a given time. In regards to financial aid eligibility, a student generally must take at least six credits at a time to be considered part-time.534 REPAYMENT: To pay back a loan that has been borrowed.535 REPAYMENT PERIOD: The length of time that a borrower has to repay his or her loans.536 SATISFACTORY ACADEMIC PROGRESS (SAP): A student’s status if they have good enough grades and are taking enough credits to keep moving towards graduation.537 SELECTIVE SERVICE: The draft registration system.538

531 FED. STUDENT AID, Glossary, supra note i. 532 Subsidized and Unsubsidized Loans, FED. STUDENT AID, https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized (last visited Mar. 9, 2018). 533 FED. STUDENT AID, Glossary, supra note i. 534 Student Loans for Part-Time Students, FED. STUDENT AID, http://www.simpletuition.com/student-loans/part-time-student/ (last visited Mar. 9, 2018). 535 See Understanding Repayment, FED. STUDENT AID, https://studentaid.ed.gov/sa/repay-loans/understand (last visited Mar. 9, 2018). 536 Andrew Pentis, 21 Student Loan Definitions Everyone Should Know, STUDENT LOAN HERO https://studentloanhero.com/featured/student-loan-definitions-terms-to-know/#repaymentterm (last updated Sept. 13, 2017). 537 Staying Eligible, FED. STUDENT AID, https://studentaid.ed.gov/sa/eligibility/staying-eligible (last visited Mar. 9, 2018). 538 Registration, SELECTIVE SERV. SYS., https://www.sss.gov/Registration/Why-Register (last visited Mar. 9, 2018).

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SUBSIDIZED LOAN: A loan in which the federal government pays for interest that accrues while the borrower is in school, in a grace period, in deferment status, or during certain periods of repayment under some income-driven repayment plans.539 TAX CREDIT: A reduction in the amount of taxes that one owes to the government.540

TAX DEDUCTION: A reduction in the amount of one’s income that is subject to tax.541 UNDERGRADUATE STUDENT: A student attending a college or university that has not received his or her degree yet.542 VARIABLE INTEREST RATE: Variable interest rates at based on an index and change periodically if the index changes.543

539 FED. STUDENT AID, Glossary, supra note i. 540 Tax Credit, INVESTOPEDIA, https://www.investopedia.com/terms/t/taxcredit.asp (last visited Mar. 9, 2018). 541 Tax Deduction, INVESTOPEDIA, https://www.investopedia.com/terms/t/tax-deduction.asp (last visited Mar. 9, 2018). 542 Undergraduate, MERRIAM-WEBSTER, https://www.merriam-webster.com/dictionary/undergraduate (last visited Mar. 9, 2018). 543 Understanding Student Loan Int. Rates, DISCOVER (June 23, 2015), https://www.discover.com/student-loans/college-planning/understanding-interest-rates.html.

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