The final step in applying for student loans is to accept your financial aid award package and sign your promissory note, which outlines the details of the loan, including the interest rates and terms of repayment. Be sure to save this document. You may need to reference it over the life of the loan. Once these documents are signed, your loan money should be available to you either through the school or from your lender within days.
For first-time student loan borrowers, there is one final requirement before your funds can be distributed. For most schools, you must attend a brief financial counseling session, either online or in person. These sessions not only remind you of your repayment obligations, they also offer helpful tips for managing your money while you are in school. You will probably also receive exit counseling upon graduation to make sure you understand your repayment obligations.
Keep in mind that students receiving federal loans must remain in good academic standing. The definition of this varies from school to school, but generally speaking, this means you need to maintain a certain grade point average or, at the very least, avoid being placed on academic probation. Check with your school for more information on academic progress for student loan borrowers.
Student loans are a binding legal agreement. Not repaying according to your terms and conditions could put you into default status, which has serious implications for your credit rating and could result in you being pursued by collection agencies or even taken to court.
Despite the burden of debt after graduation that comes with student loans, borrowing under these programs is a great way to pay for an education that, for many people, would be otherwise out of reach. Just be sure to make the most of the borrowing opportunity by using the loans with the most favorable terms first, managing your funds wisely while in school and handling your debt responsibly after graduation.
For more information on paying for college and other personal finance topics, visit the links on the following page.
Related HowStuffWorks Articles
- Audit to Determine if Cohort Default Rates Provide Sufficient Information on Defaults in the Title IV Loan Programs, U.S. Department of Education-Office of the Inspector General, December 2003 (accessed January 13, 2010) http://www.ed.gov/about/offices/list/oig/auditreports/a03c0017.doc
- Direct Loans, U.S. Department of Education, March 2009 (accessed January 13, 2010) http://www.ed.gov/offices/OSFAP/DirectLoan/index.html
- Free Application for Federal Student Aid, U.S. Department of Education, January 2010 (accessed January 13, 2010)http://www.fafsa.ed.gov/
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