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Student Loan Lender

The lender is the source of the money you borrow—a bank, savings and loan or credit union. Creditor/Lender is a person who owed money under the terms of an agreement, promise, or law. The issuer of any loans or credit cards you have is your creditor/lender. Company hired by a lender or secondary market to manage the day-to-day details of loan tracking and collection. The lender can choose to keep the loan until it is paid in full, contract with a servicer to handle the paperwork or sell it to a secondary market. It is important to notify your lender/servicer in a timely manner of changes to your address, phone number or any other pertinent information.

A key to your financial success is keeping your lender or loan servicer updated on any changes in your contact information if you move, transfer to a new school or change your phone number, contact your lender immediately. If you receive federal student aid from any program mentioned in this publication (except for Federal Work-Study), and you withdraw from school, some of that money might have to be given back to the source by you or by your school.

Even if you don’t finish your course work, you’ll have to repay the loan funds you received, minus any student loan funds your school has returned to your lender. Defaulters are ineligible for additional federal student aid until the defaulted loan is in good standing and satisfactory arrangements have been made with the lender to repay the loan. Failure to repay a loan according to the terms agreed to when you signed a promissory note. For the FFEL and Direct Loan programs, default is more specific - it occurs if you fail to make a payment for 270 days if you repay monthly (or 330 days if your payments are due less frequently).

The consequences of default are severe. 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 as long as seven years. Moreover Forbearance must be approved by your lender. The basic difference between the Direct Loan and FFEL programs is who originates and holds the loans.

In the FFEL program, a private lender (usually a bank or credit union) receives a subsidy from the federal government to make the loan. The college or university certifies the borrower’s eligibility and helps disburse the loan. The student repays the holder of the loan and, if the student becomes delinquent, the holder of the loan initiates collection efforts. In the Direct Loan program, by contrast, the federal government makes the loans directly to the students.

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