Student Loans And Financial Aid

Authored By: Lagniappe Law Lab

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About Student Loans And Financial Aid

Understanding the nuances of student loan default and delinquency, discharge or cancellation, forgiveness, and fraud can empower borrowers to navigate the complexities of student loans and financial aid effectively. Being aware of the terms and their repercussions can help in managing loans responsibly and taking advantage of relief programs where applicable while steering clear of fraudulent schemes.

Visit the Federal Student Aid website here

Issues Related To Student Loans And Financial Aid

Student loan default occurs when a borrower fails to make required student loan payments for a considerable period, typically 270 days for federal student loans in the U.S. This results in negative consequences such as increased loan balance, damaged credit score, and potential legal action. 

Student loan delinquency is the status that precedes default, commencing from the first missed payment. Delinquency will negatively affect a borrower's credit score and could lead to additional fees and penalties. 

Learn more about Student Loan Default and Delinquency by visiting this resource

Repayment plans can give you more time to repay your loans or can be based on your income. 

Learn more about Repayment Plans by visiting this resource

Both deferment and forbearance are temporary pauses on your student loan repayments.

During a deferment, you temporarily do not need to make payments on your student loans. In some cases, the federal government might pay the interest on your loans during the deferment period. This option is available for federal loans and is granted under certain circumstances such as economic hardship, unemployment, or military deployment.

Under forbearance, your loan payments are paused or reduced temporarily. Unlike deferment, interest will continue to accrue on all types of loans during the forbearance period, and you are responsible for paying it. Forbearance is granted in one-year increments, and you might use it if you face financial difficulties, medical expenses, or other personal problems that affect your ability to make loan payments.

Learn more about deferment and forbearance by visiting this resource

Student loan discharge or cancellation refers to the process where a borrower is no longer required to repay all or part of their student loan debt. This can occur under various circumstances such as the closure of the school the borrower attended, the borrower becoming permanently disabled, or through programs that forgive loans for individuals in certain professions or situations. It is essential for borrowers to meet specific criteria for loan discharge or cancellation, and such relief from loan debt can sometimes be taxable depending on the individual circumstances. 

Learn more about student loan discharge or cancellation by visiting these resources: 

Student loan forgiveness is a process where a borrower is relieved from the obligation to repay part or all of their student loan debt due to their work in certain professions or fulfillment of specific requirements set by a loan forgiveness program. 

Examples include the Public Service Loan Forgiveness (PSLF) program in the U.S., which forgives remaining debt after 120 qualifying payments for individuals working in public service jobs. It is a way to encourage professionals to work in lower-paying but essential jobs by offering financial relief from student loans. 

It's vital for borrowers to adhere to the specific criteria and timelines established by such programs to be eligible for loan forgiveness. 

Learn more about Student Loan Forgiveness by visiting these resources: 

Student loan fraud refers to various deceptive and unlawful activities aimed at manipulating the student loan system for financial gain. This can include false reporting of income, identity theft, false certification of student eligibility, or schemes by schools to increase enrollment for greater federal aid. Engaging in student loan fraud can lead to severe penalties, including fines and imprisonment, as well as other civil and criminal consequences. It's important for individuals and institutions to act honestly and transparently in all actions pertaining to student loans to avoid participating in fraud.

Learn more about Student Loan Fraud by visiting these resources: 

Last Review and Update: Sep 12, 2023
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