Are you planning to attend college or career school but want to know how to pay for it?
Federal student loans provided by the federal government can help you achieve your educational goals without breaking the bank. These loans offer lower interest rates than private loans, making them a more affordable option for students. There are two types of federal student loans: Direct Subsidized Loans and Direct Unsubsidized Loans. Loan consolidation is also available for students who want to simplify their loan accounts and lower their interest rates.
So how do federal student loans work? Where does the federal government get the money for these loans? And what is loan consolidation exactly? Let’s dive in!
Eligibility for Federal Student Loans
Who can get federal student loans?
Federal student loans are available to students enrolled at least half-time in an eligible program and meet specific financial need criteria. To qualify for federal student loans, you must also be a U.S. citizen or eligible noncitizen, have a valid Social Security number, and maintain satisfactory academic progress.
What federal student loans are available?
Eligible loans include Direct Subsidized Loans, Direct Unsubsidized Loans, and Loans. Direct Subsidized Loans are available to undergraduate students who demonstrate financial need. The government pays the interest on these loans while you’re in school and during deferment periods. Direct Unsubsidized Loans are available to undergraduate and graduate students regardless of financial need. You’re responsible for paying the interest on these loans while in school and during deferment periods.
PLUS, Loans are available to parents of dependent undergraduate students and graduate or professional students. These loans require a credit check and may require a cosigner if your credit history needs to be improved.
When are federal student loans due?
Repayment typically begins six months after graduation or dropping below half-time enrollment status. However, there are options for postponing repayment through deferment or forbearance if you experience financial hardship or other circumstances that prevent you from making payments.
What information will I need about my student loan(s) to file my federal tax return?
You’ll receive a Form 1098-E from your loan servicer that shows how much interest you paid on your student loan(s) during the tax year. This information can be used when filing your income tax return to claim the student loan interest deduction.
How is student loan interest calculated?
The amount of interest charged on your student loan depends on several factors, including the type of loan, the current interest rate, and whether the loan is subsidized or unsubsidized. Interest is calculated based on the outstanding principal balance of the loan.
Direct Stafford Loans and Direct PLUS Loans for Parents
Federal student loans are a popular option for students who need financial assistance to pay for their education. One type of federal student loan is the Direct Loan Program, which offers two types: Direct Stafford Loans and Direct PLUS Loans for Parents.
Types of Federal Student Loans
Direct Stafford Loans are available to undergraduate and graduate students, while PLUS Loans are only available to parents of dependent undergraduate students. Stafford Loans have lower interest rates than PLUS Loans, making them a more affordable option for students. However, PLUS Loans can cover up to the total cost of attendance, including tuition, room and board, and other expenses.
Consolidating Federal Student Loans
You may be eligible for a Direct Consolidation Loan if you have multiple federal student loans. This type of loan allows you to combine all your federal student loans into one loan with a single monthly payment. Consolidation can simplify repayment by reducing the monthly costs you make.
Income-Driven Repayment Plans
Borrowers struggling with monthly payments may be eligible for an Income-Driven Repayment (IDR) plan. These plans adjust your monthly payment based on your income and family size. The goal is to make your prices more affordable by capping them at a percentage of your discretionary income.
You must complete the Free Application for Federal Student Aid (FAFSA). The FAFSA determines your eligibility for federal aid programs based on your financial need.
GradPLUS and Direct PLUS Loans for Graduate Students and Parents
If you’re looking for a way to finance your graduate education or help your child pay for college, GradPLUS and Direct PLUS loans are two options to consider. These loans are part of the federal student loan program, which Nelnet manages, among other services.
Types of PLUS Loans
GradPLUS loans are available to graduate students who have completed their FAFSA and exhausted their other federal student loan options. On the other hand, direct PLUS loans are known to parents of dependent undergraduate and graduate students.
Both types of loans require a credit check but offer higher borrowing limits than other federal student loan options. For example, graduate students can borrow up to the total cost of attendance minus any other financial aid received, including grants and scholarships. Parent borrowers can also borrow up to the total cost of attendance minus any further financial assistance received by their children.
Principal Balance and Additional Fees
It’s important to note that in addition to the principal balance, PLUS loans may also include fees and interest that increase the overall amount owed over the loan term. This means that while these loans can be a helpful option for financing education, it’s essential to carefully consider how much you need to borrow and how it will impact your long-term financial goals.
Repayment Options
Fortunately, several repayment options are available for GradPLUS and Direct PLUS loans. Both types of loans are eligible for income-driven repayment plans that base monthly payments on your income level. Several forgiveness programs are available if you work in specific public service fields or meet other eligibility requirements.
Suppose you’re struggling with making payments on your federal student loans serviced by Nelnet or another provider like Great Lakes or Navient due to COVID-19 pandemic-related issues such as job loss or reduced income levels. In that case, you may be eligible for temporary relief through forbearance or deferment.
Benefits of Private Undergraduate and Graduate Student Loans
What are Private Student Loans?
Private student loans are financial aids that can help cover the cost of higher education, including tuition, room and board, and other expenses, unlike federal student loans, banks, credit unions, and other financial institutions.
Advantages of Private Student Loans
Private student loans offer several benefits to students seeking funding for their education:
- Lower Interest Rates: Private student loans often offer lower interest rates than federal loans. This can save students thousands of dollars over the life of the loan.
- Flexible Repayment Options: Private student loan lenders often offer more flexible repayment options than federal loan programs. For example, some lenders may allow students to make interest-only payments while in school or defer payments until after graduation.
- No Financial Need Requirement: Federal student loans require students to demonstrate financial need before qualifying for aid. Private student loans do not have this requirement, making them accessible to a broader range of students.
- Available for Undergraduate and Graduate Programs: Private student loans can finance undergraduate and graduate programs. This gives students an advantage in pursuing advanced degrees.
- Additional Funding Beyond Federal Loans: Students who have exhausted their federal loan options or need additional funding beyond what federal loans provide can turn to private lenders for assistance.
COVID-19 Emergency Relief Measures for Federal Student Loans
What Are the Available Relief Measures?
Federal student loan borrowers struggling financially due to the COVID-19 pandemic can take advantage of several relief measures. These measures include temporarily suspending payments and interest accrual until September 30, 2021. Borrowers can request a forbearance or deferment if they need more time to make payments.
Who Can Help You Access Relief Measures?
Nelnet is one of the services that can assist borrowers with accessing these relief measures. Nelnet has been helping students manage their loans for over 40 years and has extensive experience assisting during hardship. They have a dedicated team that can help you understand your options and guide you through the process.
How Will Payments Be Applied After the Payment Pause Ends?
Once the payment pause ends on September 30, 2021, any unpaid interest accrued during this period will be added to your principal balance. Your monthly payments may increase slightly after the payment pause ends since you will now owe more than before.
However, you struggle to make payments after the payment pause ends. In that case, you may be eligible for additional relief measures such as income-driven repayment plans or loan forgiveness programs.
How Does the Payment Pause Affect My Cancer Treatment Deferment?
If you were granted a cancer treatment deferment before March 13, 2020 (when the payment pause began), your suspension will continue as usual during this period. However, if you enter a cancer treatment deferment after March 13, 2020, your payments will be automatically suspended until September 30, 2021.
After this date, any unpaid interest that accrued during this period will be added to your principal balance, as mentioned earlier.
Public Service Loan Forgiveness for Federal Student Loans
What is Public Service Loan Forgiveness (PSLF)?
The Public Service Loan Forgiveness (PSLF) program is a federal program that forgives the remaining balance on eligible federal student loans for borrowers who work full-time in public service. This means that after making 120 qualifying monthly payments, the remaining balance of your federal student loan will be forgiven.
How can I qualify for PSLF?
To qualify for PSLF, you must meet several requirements:
- You must have Direct Loans or consolidate other federal student loans into a Direct Consolidation Loan.
- It would be best if you were employed full-time by a qualifying employer, such as a government or non-profit organization.
- You must make 120 qualifying monthly payments while working full-time for a qualifying employer.
- Your loans must be in repayment status when you make each payment.
- You cannot be in default on your loans.
What federal student loans are eligible for forgiveness under PSLF?
Only Direct Loans are eligible for forgiveness under PSLF. However, suppose you have other federal student loans, such as the FFEL Program or Perkins Loans. In that case, you can consolidate them into a Direct Consolidation Loan to become eligible.
What is the limited PSLF waiver?
Suppose you were previously enrolled in an ineligible repayment plan and made some payments that would have been considered qualifying under an eligible repayment plan. In that case, you may still qualify for loan forgiveness through the limited PSLF waiver. This waiver allows specific borrowers to receive credit for up to 12 months of otherwise training payments before enrolling in an eligible repayment plan.
What happens during the grace period?
During the grace period, typically six months after graduation or leaving school, borrowers are not required to make student loan payments. Interest rate reduction may apply during this time.
Nelnet as a Student Loan Servicing Company
What is Nelnet?
Nelnet is a student loan servicer that manages federal student loans on behalf of the Department of Education. As a loan servicer, Nelnet collects payments, processes paperwork, and provides customer service to borrowers.
What Loans Does Nelnet Service?
Nelnet services loans for several loan groups, including Direct Loans and Federal Family Education Loans (FFEL). Direct Loans are federal loans issued directly by the Department of Education. Private lenders issued FFEL loans but are now owned by the Department of Education.
How Can Borrowers Access Their Loan Information?
Borrowers can access their loan information through Nelnet’s website or customer service phone number. The website allows borrowers to make payments, view their payment history, update their contact information, and apply for deferment or forbearance.
How Does Nelnet Work with Government Agencies and Lenders?
Nelnet works closely with government agencies and lenders to ensure borrowers receive the support they need to manage their loans. For example, borrowers with trouble paying for their federal student loans may be eligible for income-driven repayment plans or loan forgiveness programs. Nelnet can help borrowers understand these options and assist them in applying.
Why Choose Nelnet as Your Loan Servicer?
If you have federal student loans serviced by Nelnet, you can rest assured knowing that your loans are managed by an experienced company with a proven track record of success. If you have questions or concerns about your loans, you can easily access customer service through Nelnet’s website or over the phone.
Updating Contact Information on Nelnet
Why Keeping Your Contact Information Up-to-Date is Important
The federal student loan servicer, Nelnet, requires borrowers to keep their contact information up-to-date. Failure to do so can result in missed payment notifications and other important updates. You must provide accurate and current contact information to ensure you receive all the necessary communication regarding your student loans.
How to Update Your Contact Information on Nelnet
Updating your contact information on Nelnet is quick and easy. You can make changes through the Nelnet website or mobile app. Follow these simple steps:
- Log in to your Nelnet account.
- Click on “Profile” in the top right corner of the screen.
- Select “Contact Information.”
- Make any necessary changes to your email address, phone number, or mailing address.
- Click “Save Changes.”
It’s important to note that if you change your email address, you’ll need to verify it before it can be used for communication from Nelnet.
Authorizing Third-Party Access
If you want a third party, such as a parent or spouse, to access your account information or make payments on your behalf, you’ll need to authorize them through Nelnet’s website or mobile app.
To authorize third-party access:
- Log in to your Nelnet account.
- Click on “Profile” in the top right corner of the screen.
- Select “Manage Account Access.”
- Enter the name and email address of the person you’d like to grant access.
- Choose which permissions they should have (viewing account details only or making payments).
- Click “Send Invitation.”
The person will receive an email with instructions on setting up their login credentials.
What Is My Nelnet Account?
Your Nelnet account is where you can manage all aspects of your federal student loans serviced by Nelnet.
Automatic Monthly Payments: Signing Up and Debiting from Bank Account
How to Sign Up for Automatic Monthly Payments?
Signing up for automatic monthly payments, or auto debit, is straightforward. To enrol in auto debit, borrowers can follow these simple steps:
- Log in to their federal student loan account on the Nelnet website.
- Select “Auto Debit” under the “Payments” tab.
- Enter their bank account information.
- Choose a preferred debit date and payment amount.
- Confirm enrollment.
Once enrolled, borrowers will receive a confirmation email with details about their first automatic payment.
Advantages of Making Automatic Monthly Payments through Auto Debit
Auto debit offers several benefits for borrowers with federal student loans:
- Convenience: Auto debit eliminates the need to remember to make monthly payments manually, saving time and effort.
- Avoid Late Fees: By enrolling in auto debit, borrowers can avoid missed or late charges that may result in late fees or penalties.
- Flexible Payment Options: Borrowers can choose their preferred payment amount and debit date when enrolling in auto debit.
- Payment Pause: In case of financial hardship or other circumstances, borrowers can pause their automatic payments temporarily.
When Will My First Automatic Payment Be Debited?
After enrolling in auto debit, borrowers’ first automatic payment will be debited on the next billing cycle’s due date. It’s essential to ensure sufficient funds are available in the bank account at least two days before the scheduled payment date.
How Long Will It Take for My Auto Debit Payment to Be Debited from My Bank Account?
Auto debit payments typically take two business days to process after being debited from a borrower’s bank account.
When Am I Eligible to Enroll in Auto Debit?
Borrowers become eligible for auto-debit once they have received their first monthly billing statement for their federal student loans.
Deferment or Forbearance Application Processing Time on Nelnet
Nelnet Processes Deferment or Forbearance Applications promptly
One of the biggest concerns for borrowers who need to pause their student loan payments is the processing time for deferment or forbearance applications. Fortunately, Nelnet is known for its efficient processing times. Once you submit your application, it typically takes about two weeks for Nelnet to review and process your request.
The Forbearance Period is Temporary and Can be Extended if Needed
If you’re experiencing financial hardship and can’t make your monthly payments, forbearance may be an option. With forbearance, you can temporarily stop making payments or reduce your monthly payment amount for up to 12 months. However, it’s important to note that interest will continue to accrue during this period.
You can apply for an extension if you need more time after the initial forbearance period ends. Remember that extensions are not guaranteed and are subject to approval by Nelnet.
Deferment is Available for Those Undergoing Cancer Treatment
Postponement is another option for borrowers who need to pause their student loan payments. One unique type of deferment offered by Nelnet is cancer treatment deferment. If you’re undergoing treatment for cancer or have recently completed treatment, you may be eligible for this type of deferment.
During the deferment period, you won’t be required to make any payments on your federal student loans. Interest will not accrue on subsidized loans during this time but will continue on unsubsidized loans.
Nelnet Offers Various Options for Borrowers Who Need to Pause Their Student Loan Payments
In addition to forbearance and deferment options, there are other ways that Nelnet can help borrowers who are struggling with their student loan payments.
Getting Ready to Repay – Additional Steps to Take
In conclusion, repaying federal student loans from Nelnet can be daunting. However, you can make the process smoother by taking additional steps, such as staying updated on COVID-19 emergency relief measures and signing up for automatic monthly payments. It is also essential to update your contact information with Nelnet and explore options such as deferment or forbearance.
At the same time, it is crucial to understand eligibility requirements for federal student loans and the different types of loans available, including Direct Stafford Loans and Direct PLUS Loans. Private undergraduate and graduate student loans may also offer benefits worth considering.
As a loan servicing company, Nelnet offers support for borrowers throughout the repayment process. By taking advantage of their services, you can ensure that your repayments are processed efficiently.
Overall, staying informed about your options and taking proactive steps towards repayment can make the process less stressful.
FAQs
How long does it take for Nelnet to process a deferment or forbearance application?
Nelnet typically processes deferment or forbearance applications within 30 days of receipt. However, processing times may vary depending on individual circumstances.
Can I change my payment plan with Nelnet?
Yes, you can change your payment plan with Nelnet anytime by logging into your account online. Remember that changing your payment plan may affect your monthly payments and overall repayment timeline.
What happens if I miss my federal student loan payment from Nelnet?
If you miss a payment on your federal student loan from Nelnet, you may face consequences such as late fees or damage to your credit score. It is essential to contact Nelnet immediately if you anticipate missing a payment or experiencing financial hardship.
Does Nelnet offer loan forgiveness programs?
While Nelyking loan forgiveness through programs such as Public Service Loan Forgiveness.
