Student Loans

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.  

Department of Education Logo and Link to Their Website              University of Montana Logo and Link to Their Site

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 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.

Here is a calculator that compares your estimated hourly salary to the amount of loans you can afford to borrow.

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 principle of the loans you will be offered and once you reach those limits, you will not receive any more. This link has a chart from the Federal Student Aid Office detailing these loan 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 Federal Student Aid 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 "Financial Aid Review" and follow the steps to your account.  

Screenshot of NSLDS homepage and Link to their Site

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.  

Screenshot of NSCH Homepage and Link to Their Site

UM students can get an Enrolment Verification Certificate thru National Student Clearinghouse by going to their Cyberbear account:

Log into Cyberbear and click "Student 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, Unsubsidized 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
  • Nelnet
    • Phone: 1-888-486-4722
    • Fax: 1-866-545-9196 (for documents related to deferment, forbearance, repayment plans, or enrollment status changes)
  • Navient (previously Sallie Mae)
    • Phone: 1-800-722-1300
    • Fax: 1-866-266-0178 (for Direct Loan documents)
    • Fax: 1-800-848-1949 (for FFELP and HEAL Loan documents) 

For individuals with loans issued before 2013 you may have the following Federal servicer

For individuals with loans issued before 2010 in Montana you may have the following Sate servicer

  • Student Assistance Foundation (SAF)

For individuals with loans issued by the University of Montana (such as Perkins Loans or other UM loans) you have the following institutional servicer

The good news is you have a lot of repayment options for your student 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 and the loan is paid off in 10 years.

Graduated Repayment Plan --  Payments are smaller at first and then increase gradually, usually every two years, and the loan is paid off in 10 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 (ICR)  --  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.

Loan Forgiveness

Federal Loan Forgiveness

Public Service Loan Forgiveness

You may qualify for forgiveness of the remaining balance of your loans after you have made 120 qualifying payments on your loans while being employed by a public service organization.  There are several other qualifiers that have to be meet in order to be eligible for this type of loan forgiveness such as having Direct Loans, having FedLoan Servicing as a servicer and having a certain type of repayment plan.  Here is a Q&A by the Department of Education about PSLF.  There's a surprising amount of employment that counts towards PSLF so it's worthwhile to look into the program!  

Here is the Employment Certification for PSLF.  This form (which is submitted to FedLoan Servicing) will certify that your employer does in fact qualify your loans for PSLF.  FedLoan Servicing will tell you how many qualifying months you have and how many months you have left to complete.  Note that this is NOT an application for loan forgiveness it just certifies that you will qualify for PSLF when you have reached your 120th payment.  The application form has not yet been released by the Department of Education; once it has we will include the link to that form.  

If you would like assistance with PSLF or have questions about the process, please contact the Financial Education Program at (406)243-6016 to schedule an appointment.  

Teacher Loan Forgiveness 

The federal government has loan forgiveness for up to a total of $17,500 on Subsidized and Unsubsidized loans for individuals who teach full-time for 5 consecutive years at a school that serves low-income families and meets other qualifications.  Here is the site with details on this type of loan forgiveness as well as the application for it.  Check the site to see if you a eligible for this forgiveness.

VA Student Loan Repayment Program

The Department of Veterans Affairs has loan forgiveness of up to $10,000 per year, with a lifetime maximum of $60,000, to help employees repay their student loans. Any VA employee is eligible, except those occupying a position excepted from the competitive civil service. An employee receiving this benefit must sign a service agreement to remain in the service of the VA for a period of at least 3 years.  Here is the summary of the Student Loan Repayment Program that the VA uses.  Here is the list of other educational benefits employees of the VA can receive.  

State Loan Forgiveness

Quality Educator Loan Assistance Program

For full-time qualifying educators there is state loan forgiveness of up to $3,000 per year for up to four years.  Here is the site that has more information on how to qualify and the application for this program.  The application is due by the end of March and typically becomes available in February.  

Perkins Loans

Perkins Loans are eligible for cancellation depending on they type of employment you have.  A certain percentage of your Perkins Loans can be canceled for each year of service you complete in a variety of employment areas including but not limited to:

  • Volunteer in the Peace Corps or ACTION program (including VISTA)
  • Teacher
  • Member of the U.S. armed forces (serving in area of hostilities)
  • Nurse or medical technician
  • Law enforcement or corrections officer
  • Head Start worker
  • Child or family services worker
  • Professional provider of early intervention services

Here is a complete chart of the cancellation conditions for Perkins Loans.  Since Perkins loans are issued by the University you attend, you must contact your campus to request Perkins Loan cancellation.  For Perkins Loans issued by the University of Montana, contact Alice Tully in Business Services by email or call (406) 243-5535.

Repayment Plans that Contain Loan Forgiveness

Many of the Income-Driven Repayment Plans contain loan forgiveness however in these cases you may be taxed on the forgiven portion as income.  Be aware that you could see a significant increase in that years Income Tax if you have a large amount of loans forgiven from one of these plans!  

Income-Based Repayment Plan (for those who are not new borrowers* on or after July 1, 2014)

If you have not repaid your loan in full after making the equivalent of 25 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven and you may have to pay income tax on that amount.

Income-Based Repayment Plan( for those who are new borrowers* on or after July 1, 2014)

If you have not repaid your loan in full after making the equivalent of 20 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven and you may have to pay income tax on that amount.

Pay As You Earn Plan

If you have not repaid your loan in full after making the equivalent of 20 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven and you may have to pay income tax on that amount.

Income-Contingent Repayment Plan

If you have not repaid your loan in full after making the equivalent of 25 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven and you may have to pay income tax on that amount.

*For the IBR Plan, you are a new borrower on or after July 1, 2014, if you had no outstanding balance on a William D. Ford Federal Direct Loan (Direct Loan) Program loan or Federal Family Education Loan (FFEL) Program loan when you received a Direct Loan on or after July 1, 2014. (Because no new FFEL Program loans have been made since June 30, 2010, only Direct Loan borrowers may qualify as new borrowers on or after July 1, 2014.) 

When You Can't Make Your Payment

If you cannot make your current payment consider 

  • Switching to another repayment plan with a lower minimum payment (contact your servicer)
  • Requesting a Deferment
  • Requesting a Forbearance

What is a Deferment?

A deferment is a period during which repayment of your loan is temporarily delayed.  During a deferment, the Federal government will pay the interest on your Perkins and Subsidized loans; you will be responsible for any interest accrued from Unsubsidized or PLUS loans.  Go to this site to see if you are eligible for a deferment.  Contact your servicer if you need a deferment for your student loans. 

What is a Forbearance?  

A forbearance is a period during which repayment of your loan is temporarily reduced or delayed.  But unlike deferment, you are responsible for all the interest that accrues on your loans.  So deferment is a better option than forbearance!  If you have to take a forbearance, contact your servicer.  This site has information on the types of forbearance available.  

If you do not make any payments on your loans they can go into Default

A Federal student loan enter default when your last payment is over 270 days (that's 9 months) late.  

Decorative Image of Past Due Notice

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 FFEL 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!

Loan Rehabilitation

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.  

  • For Federal Direct Loans: The Debt Management and Collection Service Office of the Department of Education can tell you which collections agency has your loans.  They can be contacted at 
  • For Loans Serviced by SAF: These loans were guaranteed by the state of Montana (instead of the Federal government as they now are).  SAF can be contacted at 
    • Student Assistance Foundation (SAF)
      • 1-800-322-3086

Working with your agency can rehabilitate your loans and get back into repayment a process which can take 6-9 months.  After rehabilitation, the collections fee drops from 24% to 16% and the information is dropped from your credit report.