Borrower Responsibilities

When you sign a promissory note, you're agreeing to repay the loan according to the terms of the note. The note is a binding legal document and states that, except in cases of discharge, you must repay the loan‹even if you don't complete your education (unless you were unable to complete your program of study because the school closed); aren't able to get a job after you complete the program; or are dissatisfied with, or don't receive, the education you paid for.

Think about what this obligation means before you take out a loan. If you don't repay your loan on time or according to the terms in your promissory note, you may go into default, which has very serious consequences. You must make payments on your loan even if you don't receive a bill or repayment notice. Billing statements (or coupon books) are sent to you as a convenience, but you're obligated to make payments even if you don't receive any reminders.

If you apply for a deferment or forbearance, you must continue to make payments until you are notified that the request has been granted. If you don't, you may end up in default. You should keep a copy of any request form you submit, and you should document all contacts with the organization that holds your loan. You must notify the appropriate representative (school, agency, lender, or the Direct Loan Servicing Center) that manages your loan when you graduate, withdraw from school, or drop below half-time status; change your name, address, or Social Security Number; or transfer to another school.

If you have borrowed a Perkins Loan, your loan will be managed by the school that lends you the money or by an agency that the school assigns to service the loan. If you borrow a Direct Loan, it will be managed by the Direct Loan Servicing Center. If you borrow a FFEL Program loan, your lender or its servicing agent will manage it. During your loan counseling session, you'll be given the name of the representative that manages your loan.

Regardless of the type of loan you borrow, you must receive entrance counseling before you're given your first loan disbursement, and you must receive exit counseling before you leave school. These counseling sessions will be administered by your school and will provide you with important information about your loan. Your lender or the Direct Loan Servicing Center will provide you with additional information about your loan. If you default on your loan, your school, the lender or agency that holds your loan, the state, and the federal government may all take action to recover the money, including notifying national credit bureaus of your default. This may affect your credit rating for a long time. For example, you may find it very difficult to borrow from a bank to buy a car or a house.

In addition, if you default, the agency holding your loan may ask your employer to deduct payments from your paycheck. Also, you may be liable for expenses incurred in collecting the loan. If you decide to return to school, you're not entitled to receive any more federal student aid. The U.S. Department of Education may ask the Internal Revenue Service to withhold your income tax refund and apply it toward the amount you owe.