At the Initial or Entrance Counseling, the borrower applies and signs the Master
Promissory Note for the Direct Loan on line and completes the Student Loan form.
The Financial Aid (FA) Officer must:
- 2.1 FA officer informs the borrower of how much he/she can borrow and how
Much he/she should borrow.
- 2.2 When filling up the FAFSA, the FA officer discusses the other options of aid including grants. This reduces the loan that the borrower can borrow.
- 2.3 Borrowers should be counseled on developing and sticking to a budget while in school to help minimize the amount one needs to borrow.
- 2.4 FA Officer should inform the student that credit cards one tool for borrowing money however credit cards charge very high interest rates.
- 2.5 Explain the difference between subsidized and unsubsidized loan. The interest rate it carries. Payments of loan should start 6 months after graduation or grace period.
- 2.6 Borrowers should be informed that if he/she choose not to pay the interest on Direct Unsubsidized Loan while in school, the unpaid principal amount of the loan. However, if borrower pays any interest while in school, the principal amount if lowered.
- 2.7 It should also be explained to the borrower that by law, a loan fee will subtracted from each loan that he/she receives. This fee is subtracted proportionally from each disbursement of your loan. The loan fee is shown on a disclosure statement issued by the Department of Education.
- 2.8 FA officer should explain how loan money is paid to borrower.
- 2.9 It should be explained to the borrower that if he/she falls behind making payments for his/her loans, he/she will be considered delinquent in his/her loan
and may create a great negative impact on your credit rating and your future.
- 2.10 Discuss the options to help resolve delinquency:
To have an approved deferment, student must apply with either one of
the most common reasons:
- • Enrolled in school for at least half-time attendance
- • Loss of a job or inability to find a job
- • Economic hardship
- • Being on active (including National Guard duty) during war,
national emergency or military operation
- 2.10.2 Forbearance
This option may apply if a borrower is having difficulty repaying his/
her loan but does not qualify for deferment. Forbearance is a tem-
porary postponement or reduction in your monthly payment.
Forbearance results in extending the amount of time to repay a loan
and at the same time, interest continues to accrue during forbearance
period causing total amount of loan to increase. Possible reasons for
- • Poor health
- • A rigorous residency program
- • Loan payment that exceeds twenty (20) % of your total
monthly gross income
- 2.10.3 Loan Forgiveness/Discharge
Federally mandated requirement should be present to avail of loan
forgiveness/discharge. With loan forgiveness/discharge, borrower’s
Loan is forgiven and not repayment of loan is due. The following may
be reasons for loan forgiveness/discharge:
- • Total and permanent disability
- • Death
- • School closure
- • Bankruptcy
- • False certification
- • Identity theft – identity stolen to acquire student loan
- 2.11 After 270 days delinquent, the loan would be on technical default. If the borrower is
- • the entire unpaid amount of loan becomes due and payable
- • U.S. Dept of Education will report your default to national credit bureau
- • U.S. Dept of Education may sue the borrower and take all or part of
the borrower’s federal tax refund or other federal payments and/or
Garnish your wages so that his/her employer is required to send us a
part of your salary to pay off your loan.
- • Borrower will have to pay collection fees and costs, plus court costs
and attorney fees
- • Borrower will lose eligibility for other federal student aid.
- • Borrower will no longer be eligible for loan deferments
- 2. Communications within the School Campus
School Officials should ensure that certain relevant information should be
disseminated across campus and departments to ensure success in the prevention
and management of default. Information to the right parties include but not limited
- • Borrower’s enrollment status
- • Administrative capabilities such as attendance, LOA and on probation
- • Satisfactory Academic Progress(SAP)
It has been identified that most borrowers who go on default are those who
withdraw from the program. Thus, an early identification and timely intervention can
improve student retention and reduce the number of students on default. Borrowers
should be encouraged to complete their programs to study and help them resolve
the issue/s that prompt their withdrawal.
- 3. Exit Counseling
Exit Counseling is done by the Financial Aid Officer with the borrower. The exit
counseling is an effective way to prevent defaults and the last opportunity to
communicate with borrower on their loan repayments.
The FA officer should again go through the borrower’s right and responsibilities, the
different options of repayments and thoroughly discuss the consequence if one
goes on default.
Remind students to always update the school of any change in address or
The borrower/student should accomplish the Exit Interview Form with their
Information and information of their references.
- 4. Timely and accurate reporting of enrollment status
Please refer to FA Manual of Procedures - Other Additional Procedures B