Financial Aid Is Not Endless
Applying for Student Loans
You apply for student loans the same way you apply for all other federal financial aid: thru your FAFSA (for questions on the FAFSA see our FAFSA page). Once you fill out and submit your FAFSA, you wait until the Department of Education and the University of Montana decide what aid you should have.
Once that is determined, you will receive your Financial Aid Package in your Cyberbear account! This will contain any federal or state scholarships, grants, work-study, tuition wavers or loans they are offering.
Before you take out a student loan: have you been offered any grants, scholarships, work-study or tuition waivers? These are free money that you do not have to repay. Always accept them first.
If you have been offered work study, we also recommend accepting this before student loans. Work study is earned by students by working a part-time job on campus or for certain approved off-campus employers. The electronic job board for the University can help you find both work study and non-work study employment opportunities.
If you still have school related expenses (tuition, fees, room & board, textbooks, essential personal expenses, school-related transportation expense, etc.) that are not covered, you may want to consider taking out a loan to cover these costs. But take the time to think about what you will be able to repay after graduation (see Accepting Student Loans).
Accepting Student Loans
Know Your Limits:
You should estimate your payment amounts by visiting GetMoneySmarts.org and compare your estimated payment to your projected income after earning your degree. Can you support a payment of that amount? Should you take out less so your payments will be smaller? These are all things to consider before accepting the loan.
Here is a more detailed loan repayment calculator that takes into account the types of loans (Subsidized, Unsubsidized, Perkins, etc.) you can take out for each year you attend college.
You always have the option to decline or reduce the amount of loan money you are offered. If you are offered a loan you don't want to accept or if they are offering more than you need, you are not obligated to take on that debt.
Know The Limits of What The Government Will Offer You:
The government will not offer you an endless amount of money! There are limits to the loans you will be offered and once you reach those limits, you will not receive any more. The following chart from the Federal Student Aid Office details these limits
Be aware that dependent undergraduates cannot borrow more than $31,000 in federal loans, independent undergraduates cannot exceed $57,500 and graduate/professional students cannot go over $138,500.
Once you decide that you want to accept all or part of a student loan, you will sign a Master Promissory Note (MPN) in which you promise to repay your loan(s), and any accrued interest and fees. More information about the MPN can be found at the FSA Website.
While You're In College
Once your loans are disbursed (i.e. you receive the loan money), you can use that money to pay for your school related expenses. As long as you are enrolled as a student, at least half time (UM students: that means you have to be taking at least 6 credits per semester), your loan will be in "in school deferment". This means that you will not have to make payments on your loans unless you are attending college less than half time and the grace period for your loans has expired.
Even while you are in "in school deferment", interest will still be accumulating on your loan. If you have a Subsidized Loan, the Department of Education will pay for the interest while you are in school at least half time. If you have any other type of loan, you are responsible for the interest while you are in school. You can choose to pay your interest or let it accumulate.
The National Student Loan Data System website contains all the information about all of your student loans all in one place. If you want to see the total amount you have already borrowed, want to know the interest rates on your loans or want to see how much interest has accumulated this site is where you should go! Click on "Financail Aid Review" and follow the steps to your account.
There is no penalty for paying towards your loans while you are a student!
We encourage students to start paying towards their loans while they are still in school. Even $5 a month can make a difference!
A $2000, Unsubsidized loan earns about $6 in interest a month. By cutting out just two coffee purchases a month and putting that money towards your loans, you can pay off your monthly loan interest!
Occasionally students will need to obtain an Enrollment Verification Certificate in order to prove their enrolment status to their employer, landlord, loan servicer, etc.. This information is housed in the National Student Clearing House which is a verification and reporting organization that holds enrollment and degree information on more than 144 million students nationwide.
UM students can get an Enrolment Verification Certificate thru National Student Clearinghouse by going to their Cyberbear account:
Log into Cyberbear and click "Studnet Services" then click on "Student Records". At the bottom of the menu choose the link that says "NEW! Order an Enrollment Verification (Free) or Official Academic Transcript (credit card req. - add'l fee applies)". From here clicking "Go to Clearinghouse site" sends you to the secure site where you can order a UM Enrolment Certificate and (starting in Fall 2014) order an official transcript.
Paying Off Student Loans
If your credit load drops below half time (below 6 credits a semester for UM students) or you graduate, the grace period on your loans will start. For Perkins Loans, the grace period is 9 months. For Subsidized, Unbisdized and PLUS loans the grace period is 6 months.
and once your grace period is over, you will be in repayment for your loans.
At this point, you will be contacted by your servicer as they initiate your repayment process. There are currently 4 national servicers
- FedLoan Servicing (also called PHEAA)
- Great Lakes
- Navient (used to be Sallie Mae)
For individuals with older loans you have the following servicer
The good news is you have a lot of repayment options for your federal loans and you can switch your repayment plan at any time. Below you will find a basic outline of each plan; conditions and qualifications for these repayment options apply for each plan which can be found on the Federal Student Aid website.
Standard Repayment Plan -- Payments are a fixed amount of at least $50 per month.
Graduated Repayment Plan -- Payments are smaller at first and then increase gradually, usually every two years.
Extended Repayment Plan -- Requires a principal balance totaling at least $30,000. A borrower's repayment period can be extended up to 25 years and may be set up as either standard or graduated repayment.
Income-Based Repayment Plan (IBR) -- Your maximum monthly payments will be 15 percent of your discretionary income, the difference between your adjusted gross income and 150 percent of the poverty guideline for your family size and state of residence (other conditions apply).
Pay As You Earn Repayment Plan -- Your maximum monthly payments will be 10 percent of discretionary income, the difference between your adjusted gross income and 150 percent of the poverty guideline for your family size and state of residence (other conditions apply).
Income-Contingent Repayment Plan -- Payments are calculated each year and are based on your adjusted gross income, family size, and the total amount of your Direct Loans.
Income-Sensitive Repayment Plan -- Your monthly payment is based on annual income, but will never drop below monthly interest accrual.
Here is a site that compares estimated monthly payments for the Standard, Graduated, Pay As You Earn, Income-Based Repayment and Income-Contingent Repayment plans. Here is more information on all repayment options.
If you are in repayment on your loans and wish to change your repayment plan, contact your loan servicer and they will be able to take you thru this process.
What if you don't make your Student Loan payments?
A Federal student loan enter default when your last payment is over 270 days (that's 9 months) late.
The penalties that come along with default are pretty sever:
- Collections costs are added at 24% on the principle and interest of your loan
- The Federal Government will take 15% of your paycheck as a wage garnishment
- Even if you receive Social Security, those will be garnished at 15% as well.
- You will not receive a Federal and State tax refund while your loans are in default
- All of this information goes on your Credit Report
- Loans from the FFELP program (a program that was ended in 2010) that go into default can result in lose of driver's, hunting and fishing licenses.
So clearly default is a place we want none of you to be!
If you do happen to be in default, there are certainly ways to get out. You can rehabilitate your loans through the collections agency that holds your loans. The Debt Managment and Collection Service Office of the Departmetn of Edcuation can tell you which collections agency has your loans. They can be contacted at
- Debt Managment and Collection Service
Working with your agency can rehabilitate your loans and get back into repayment. After rehabilitation, the collections fee drops from 24% to 16% and the information is dropped from your credit report.