Welcome to the
University of Missouri – Columbia’s
Online Loan Tutorial!

YOU ARE ABOUT TO BORROW A LOAN.

THIS LOAN MUST BE REPAID.

As a first time Federal Stafford Loan borrower at MU, you are required by federal regulation to complete an entrance counseling session. MU refers to this counseling as our Online Loan Tutorial. During this tutorial, MU is required to provide you with certain information pertaining to the terms of your subsidized and unsubsidized loans, as well as your rights and responsibilities as a borrower. Carefully read the information and make sure that you understand the obligation you are assuming. If you have any questions, Financial Aid Advisors are available to you via email or by phone Monday through Friday, 8:00am to 5:00pm. Our office number is (800) 225-6075 (Missouri, Illinois and Kansas) or (573) 882-7506.

Steps to complete online entrance counseling.

1. Carefully read through all material.
2. Fill in student information
3. Complete the Quiz.
4. Print confirmation and information page.

We recommend that you start a student loan file and keep all documents you receive regarding your loans in one place. This will help you answer future questions.

Understanding Your Student Loan

Student loans are one type of financial aid available to assist you with funding your college education. The Federal Stafford Loan Program, offers both subsidized loans and unsubsidized loans. Under the Federal Family Education Loan Program (FFELP), the lender you selected handles the repayment.

Understanding the details of your loans before you borrow is important. Use the following information as a guide to the terms of your loan. To keep your debt at a manageable level, borrow only what you need. This information is subject to change according to federal law.

Subsidized Direct Loan

Interest rate:
-As of 07/01/09, the interest rate is fixed (does not vary) at 5.6% for undergraduates and 6.8% for graduate, law, veterinary medical and medical students.
-Interest is paid by the government until the loan goes into repayment.

Fees for Direct Loans:

-A 1.5% origination fee is calculated by the government but only a 0.5% fee is deducted from your loan disbursement.
-The other 1.0% fee is added to your loan balance if you do not make your first 12 consecutive loan payments on time.

Fees for FFELP Loans:

-A .50% origination fee is calculated and deducted from your loan disbursement.
-A 1.0% default fee is calculated and deducted from your loan disbursement. A lender or guarantor may pay all or a portion of this fee on behalf of the borrower.

Amounts available:  Below are the maximum annual amounts a student can borrow per academic year.
-Freshman, $3,500
-Sophomore, $4,500
-Juniors and Seniors, $5,500
-Teacher Certification, $7000
-Graduate or Professional, $8,500

Grace Period:
-A six month period during which no payments are required, and all subsidized loans remain interest free.
-Only one grace period is allowed for a loan.
-Will begin as soon as you graduate, drop below half time, or leave school for any reason.

-If you return to school at least half time before the 6 month period has lapsed, you will get another grace period when you leave school again.

Repayment:
- Will begin within 60 days after your grace period expires.
- If you have already used your grace period, will being within 60 days after you graduate, drop below half time, or leave school for any reason.   
-Will automatically be set for each loan on a ten year repayment schedule, with a minimum monthly payment for each loan of $50.  You will have the option to pick another schedule.  Read further for additional details.
-Actual monthly repayment amount is based on the total amount borrowed - see chart below.

Unsubsidized Direct Loan

Interest rate:
-The interest rate is fixed at 6.8%. 
-It begins to accrue immediately on the amount disbursed.
-You may choose to pay the interest while you are in school.
-If you do not make payments on the interest it will be capitalized when your loan goes into repayment (added to your principal balance so interest will accrue upon interest).

Fees:
-Same as a subsidized loan.

Amounts available:

Below are the maximum annual amounts a student can borrow per academic year.

Dependent Students:
-Freshman, $5,500 minus any amount received from subsidized loan
-Sophomore, $6,500 minus any amount received from subsidized loan
-Juniors and Seniors, $7,500 minus any amount received from subsidized loan
-Teacher Certification, $7,000 minus any amount received from subsidized loan

Independent Students:
-Freshman, $9,500 minus any amount received from subsidized loan
-Sophomore, $10,500 minus any amount received from subsidized loan
-Juniors and Seniors, $12,500 minus any amount received from subsidized loan
-Teacher Certification $12,000 minus any amount received from subsidized loan
-Graduate or Professional $20,500 minus any amount received from subsidized loan

Repayment:
-Same as a subsidized loan.

Your Rights and Responsibilities as a Borrower

You have the right to the following:

• Written information on your loan obligations and your rights and responsibilities as a borrower.
• A grace period and an explanation of what this means.
• A disclosure statement from your lender, received before you begin to repay your loan, that includes information about interest rates, fees, the balance you owe, and the number of payments.
• Deferment of repayment for certain defined periods.  For details, go to www.direct.ed.gov for Direct Loans and http://studentaid.ed.gov/PORTALSWebApp/students/english/difficulty.jsp?tab=repaying for FFEL loans.
• Forbearance of repayment, if you qualify and request it. Go to the above links for more details.
• Prepayment of your loan in whole or in part any time without an early prepayment penalty.
• A copy of your Master Promissory Note (MPN) from your lender either before or at the time your loan is disbursed.
• Documentation from your lender that your loan is paid in full.

You have a responsibility to:

• Attend exit counseling before you leave school or drop below half-time enrollment.
• Repay your loan even if you do not complete your academic program, are dissatisfied with the education you received, or you are unable to find employment after you graduate.
• Notify your school and lender if you:
• Move/change your address
• Change your name
• Withdraw from school or drop below half-time enrollment
• Transfer to another school
• Fail to enroll or re-enroll in school for the period for which the loan was intended
• Change your expected graduation date
• Graduate
• Make monthly payments on your loan after you leave school, unless you have a deferment or forbearance.
• Notify the Direct Loan Servicing Center of anything that might alter your eligibility for an existing deferment.

Master Promissory Note (MPN)

As a student borrowing a loan, you must sign a promissory note, obligating you to repay the loan under the terms and conditions specified by the lender in that note.  The U. S. Department of Education has created a Master Promissory Note, which allows you to just sign one note, one time, and it will cover all of the subsidized and unsubsidized loans you will borrow while you are here at MU.  It eliminates the need for you to have to sign a promissory note for each new loan, thus simplifying the loan process.  As a borrower, you need to realize that by signing the MPN, you are agreeing to repay your lender all loans made to you under the terms of this MPN, and that you are confirming that you understand that multiple loans may be made to you under this note. Make sure you have read completely all of the information on the MPN before signing it.

Repayment Plans

There are four repayment plans offered for Direct Stafford and FFEL Stafford Loans.  They are described below.  You select the one that is right for your financial circumstances.  You can switch plans at any time without penalty by contacting your lender.  If you do not pick a plan at the time your loans go into repayment, you will be set up with in the Standard Repayment Plan.  Note that regardless of the payment plan you choose, you may prepay your loan - that is, pay your entire loan or make a payment larger than agreed upon - at any time without penalty.

Standard Repayment Plan: Requires fixed monthly payments (at least $50 for each loan) for up to ten years.  The length of repayment depends on the amount you owe when your loans enter repayment.

Extended Repayment Plan: Allows loan repayment to be extended over a period of 12 to 25 years, depending on the total amount you owe when your loans enter repayment.  You’ll still pay a fixed amount each month (at least $50 for each loan), but your monthly payments will be less than they would be under the Standard Repayment Plan because you take more than 10 years to repay.  However, by extending your years of repayment, more interest will accrue and you will repay more in the long run than if you chose the Standard Repayment Plan.

Graduated Repayment Plan: Your payments to start at one level and increase every two years.  You must repay your loan in full within 10 years (not including periods of deferment and forbearance).  This plan may be helpful if your income starts out low but will increase steadily.

Income Contingent/Income Sensitive Repayment Plans: A plan that bases the monthly payment amount on how much money you make, how much you owe and family size. Direct Loans offers an income contingent plan and the FFEL program offers an income sensitive repayment plan.

Income Contingent Repayment Plan: Bases your monthly payments on your yearly income (including your spouse’s income if you are married), family size, and your total amount of Direct subsidized and unsubsidized loans outstanding .  As your income rises or falls each year, so do your payments.  After 25 years, any remaining balance on the loan will be forgiven, but you may have to pay taxes on the amount forgiven.  However, by extending your years of repayment, more interest will accrue, and you may repay more in the long run than if you chose the Standard Repayment Plan.

Income Sensitive Repayment Plan: Bases your monthly payments on your yearly income. Payments may increase or decrease each year as your income rises or falls. Maximum 10 year repayment period that can be extended annually up to five years if your payments are less than the standard principal and interest.

Your Guide to Monthly Payments

Even though you do not start paying back this loan until after you graduate, withdraw, or drop below half-time status, now is the time to consider how much you should borrow while you are in college. Good financial planning starts with sound budgeting even before you borrow. Use the 10 year repayment schedule below to estimate your monthly payment.

Note: The estimated payments were calculated using the maximum interest rate of 8.25%.

Borrowers are typically advised to keep their monthly student loan payments within 8% to 10% of their monthly gross income. This guideline helps ensure that borrowers have enough discretionary income to cover their other monthly expenses including food, shelter, and transportation, and avoid financial problems. The table below indicates how much income borrowers need to repay various levels of debt.

Postponing or Canceling Repayment

Deferment

A deferment is a postponement of repayment under various, specific circumstances.  During a deferment, subsidized loans remain interest free, but unsubsidized loans continue to accrue interest.  The most typical loan deferment that borrowers receive is for being enrolled in school at least half time.  Deferments might also be available based on a borrower’s inability to find full-time employment (for up to 3 years), or for economic hardship (for up to 3 years) where based on a federal formula your income is not sufficient to make the monthly payments.

In most cases, you aren’t just granted a deferment automatically; you must formally request one from your lender. Often, you need to complete a deferment form. You’ll need to provide documentation showing you’re qualified for the deferment you’re applying for. Make sure all your paperwork is in order and make sure the loan holder receives it.  NOTE: You must continue to make payments on the loan until you’ve been notified the deferment has been approved.

Forbearance

If you temporarily can’t meet your repayment schedule but you don’t meet the requirements for a deferment, your lender might grant you forbearance.  During forbearance, your loan payments are either reduced or postponed.  However, interest will accrue on all loans, subsidized and unsubsidized, increasing the amount you will have to repay in the long run.  Generally, you can receive forbearance for periods of up to 12 months at a time for a maximum of three years.  You’ll have to formally request the forbearance, and provide documentation to your lender to show why forbearance should be granted.  NOTE: You must continue to make payments on the loan until you’ve been notified the deferment has been approved.

Loan Discharge (cancellation)

Under very specific circumstances, your federal student loan could be discharged (canceled), releasing you from the obligation to repay the loan.  Two examples are your death, or your total and permanent disability.  Also, your loan might be discharged because of the type of work you do: for example, if you are a full-time teacher for five consecutive years in a designated low-income school.  Contact your lender for more details.

Loan Consolidation

A consolidated loan allows you to combine one or more of your federal student loans into one new loan.  Then, you just make one monthly repayment.  With a consolidation loan, your payments might be significantly lower, and you can take a longer time to repay (up to 30 years).  You might also pay a lower interest rate than you would on one or more of your existing loans.  You can apply for a consolidation loan during your grace period or once you are in repayment.

Currently, the interest rate for a consolidated loan is a fixed rate for the life of the loan.  It is based on the weighted average of the interest rates of the loans you consolidate, rounded up to the nearest one-eighth of one percent.

Note that consolidation can significantly increase the total cost of repaying your loans.  Because you can have a longer period of time to repay, more interest will accrue.  In some cases, extending your repayment in consolidation can double the total interest expense.

Contact your lender for additional details.

The Consequences of Default

If you do not make the scheduled monthly payments on your loan for 270 days, your loan goes into default. Failure to repay your loan on time will result in severe financial trouble. Any or all of the following could happen to you:

• Your default will be reported to the national credit bureaus and it will damage your credit rating for a minimum of 7 years.
• Your loan can be referred to a collection agency, who can add up to 18% in fees to the balance of your loan.
• You may be sued by the federal government and be required to pay collection fees in addition to the outstanding loan debt plus accrued interest.
• You may lose your federal and/or state income tax refund.
• Your wages may be garnished.
• You will not receive any more federal financial aid.
• You will be required to repay the loan immediately.
• You will lose all options to postpone repayment (deferment, forbearance, etc.)

Student Credit Card Debt Issues

The results of a nationwide survey conducted by the Institute for Higher Education Policy indicate that while the majority of students use credit cards responsibly there are clearly some whose credit card use is putting them at risk. The survey identified the following characteristics as indicators for high-risk use:

• having average credit card balances over $1,000
• owning four or more credit cards
• carrying a balance each month
• using the cards to charge tuition or fees

The survey found that close to one in five students report average balances of $1,000 or more. Of these students 49 percent have four or more credit cards and only 18 percent pay off their balances each month. What this suggests is that somewhere between 10 and 20 percent of students are risking unacceptably high levels of debt.

What to do if you think you have a credit card problem? The Consumer Credit Counseling Services (CCCS) is a nonprofit organization that operates under the auspices of the National Foundation for Consumer Credit. There are 1,300 offices throughout the United States, Canada and Puerto Rico. The primary service they offer is a debt repayment program for people who have gotten over their heads in debt. To contact the CCCS call 800-388-2227 and you will automatically be connected to the office nearest you.

Take the Quiz

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