Student Loan FAQs
Student Loans - General
Q. Can I transfer my loan to another school?
A. No. A student must request a new loan from the financial aid office at the new school. The new school's financial aid staff will recalculate the student's loan eligibility, which may be reduced by the amount of loan funds already received for attendance at the prior school.
Q. How is Federal Direct Loan eligibility determined?
A. Subsidized Stafford
Financial need = cost of attendance - expected family contribution - expected financial assistance
This figure cannot be more than the annual Stafford grade level maximum.
Remaining financial need = cost of attendance - expected financial assistance (including any amount of subsidized Stafford Loan)
Q. What happens to the interest that accrues on my loan while I am in school?
A. If you are a subsidized Stafford Loan borrower, the U.S. Department of Education pays the interest that accrues on your loan while you are in school on at least a half time basis and during grace or authorized deferment periods.
If you are an unsubsidized Stafford Loan borrower, interest that accrues on your loan while you are in school may be capitalized – or added to the principal balance of your loan. If you want to pay the interest as it accrues, you can make this selection when completing your federal Master Promissory Note. Otherwise, unpaid accrued interest will be capitalized.
Q. What is a student loan?
A. A student loan is money you borrow to pay for your college education. Student loans must be repaid, even if you:
- are not satisfied with the quality of your education,
- do not complete your program of study, or
- are not able to obtain employment after you graduate.
Q. What is my balance and who do I pay?
A. All loans first disbursed after June 30, 2010 will be originated by the Federal Direct Loan Program. If your loan was originated before June 30, 2010 and you do not know the holder of your student loan, visit the National Student Loan Data System, or NSLDS, or call (800)433-3243 to talk to the federal information center. The NSLDS or federal information center will also provide the loan amount(s) certified by your school. Contact your loan holder to determine your outstanding balance and how to submit payments.
Q. What is the difference between subsidized and unsubsidized Federal Direct Stafford Loan?
A. Subsidized Stafford Loans are need-based and the interest is paid by the U.S. Department of Education while the student is in school, in the grace period, and in authorized deferment periods.
Unsubsidized Stafford Loans are not need-based. The interest payment is always the borrower's responsibility. A borrower can choose to pay interest that accrues while the borrower is in school, in grace, in deferment or other times when payments are not otherwise expected can be paid, or the unpaid accrued interest will be capitalized, i.e., added to the outstanding principal amount of the loan.
Q. What is the Federal PLUS Loan?
A. The Federal PLUS loan is for graduate or professional students (to borrow on their own behalf) or for parents to borrow on behalf of their undergraduate, dependent students. The borrower may borrow up to the cost of attendance less any financial aid the student has been awarded. To be eligible for a PLUS loan, the borrower must not have negative credit.
Administrative Wage Garnishment
Q. How can I get out of administrative wage garnishment?
- Pay the account in full.
- Apply for a Federal Consolidation Loan.
- Request a hearing if you feel that the administrative wage garnishment is not warranted.
Q. This is not a court-ordered garnishment, is this legal?
A. We are collecting on these loans as an agent of the U.S. Department of Education. We are required to perform administrative wage garnishment as a part of our collection efforts. Public Law gives us the authorization.
Q. What should I do about the Notice Prior to Wage Withholding I just received?
- Contact the MDHE to establish satisfactory repayment arrangements.
- Request a hearing or exemption by the deadline.
- Nothing and the MDHE will contact your employer. If a payment is not received by the time your employer is contacted, the administrative wage garnishment may not be stopped until the account is paid in full.
Q. Why did my employer get an Order of Withholding from Earnings, I made my payments?
A. If a borrower makes a payment to suspend administrative wage garnishment, a payment must be received every thirty days to continue to suspend the process. A borrower cannot make a double payment in one month and then skip the next month
Q. What are my options now that I am in default?
- Pay the account in full to American Student Assistance or the collection agency.
- Establish monthly payment arrangements with the entity assigned to the account.
- If you want to return to school, you must make six consecutive monthly payments and write a letter to the MDHE requesting a financial aid eligibility letter to be sent to you. This is called reinstatement.
- Upon making at least 9 consecutive monthly payments within 10 months, you may be eligible for the loan rehabilitation program.
- Upon making three consecutive monthly payments, the MDHE will release accounts for consolidation. Borrowers must continue to make payments until the consolidation is complete. Also, the MDHE assesses 18.5 percent in collection costs on defaulted loans released for consolidation, FFEL Program or Direct.
- Choose not to make payments and face possible tax offset, wage garnishment, assignment to a collection agency, assignment to the U.S. Department of Education, and up to a 25 percent assessment in collection costs.
Q. Why did my loan go into default, I sent a deferment/forbearance form to my lender?
A. If you choose not to make payments and apply for a deferment or forbearance, it is your responsibility to ensure the lender receives the complete documentation in a timely manner. You should keep a copy of all forms submitted and keep checking with the lender to ensure they receive the documentation and place the deferment or forbearance on the account. When a payment is not made by the due date, the account is delinquent. When the delinquency reaches 270 days, the account is in default status and the lender may file a default claim with your guaranty agency - the MDHE. If the MDHE pays the default claim to the lender they begin collection activities.
Q. Why is there a collection agency on my account?
A. As a guaranty agency, the MDHE is required to make a diligent attempt to contact the borrower through phone calls and letters to collect on a defaulted student loan. For these functions, the MDHE assigns accounts to collection agencies to collect on the student loans held by the MDHE.
Q. Will my taxes be taken?
A. If your account meets specific selection criteria, the MDHE has legal authority to intercept borrowers' federal and Missouri tax refunds and apply those refunds to a defaulted loan held by the MDHE.
Q. How are my payments applied to my account?
A. The MDHE posts payments effective the date of receipt by whatever entity receives the payment (i.e., collection agency, attorney, American Student Assistance, Internal Revenue Service, and Missouri Department of Revenue). Account balances can consist of principal, accrued interest, and collection costs. If collection costs are assessed on the account, 20 percent of the payment is first applied to collection costs. The remainder of the payment is then applied to accrued interest and then to the principal balance. If there are multiple claims, the payments are prorated to the individual claims although the account is considered one account.
Q. How can I consolidate my loans?
A. Contact current holders of the loans to determine if they do consolidation loans and request application information.
Q. How do I get a deferment or forbearance form?
A. Contact your lender
Q. How do I get my loan discharged because I attended a school that closed while I was there?
A. If the loan is not in default, the borrower should request the closed school discharge application from the lender. If the loan is in default, the MDHE can mail the borrower the discharge application. The MDHE reviews all closed school discharge requests. In order to qualify, the student must have been in attendance within 90 days of the school's closure and must not have been able to transfer to another school or complete the program of study. Lack of job placement or subsequent training is not reason for discharge.
Q. What is the AmeriCorps program?
A. It is a federal program in which participants can get vouchers to pay existing loans or pay future educational expenses. For more information, call:
National number: (800) 942-2677
Attorney General's office: (573) 751-4727
Q. Who can answer my questions about a forbearance form?
A. Questions about forbearances should be directed to the borrower's lender. Each lender may have its own forbearance form.