What Do I Need to Know About Getting Loans to Pay for My Education?

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First, you decided that you wanted a new career. Then you researched your options and picked the school that's right for you. Now you have to figure out how to pay for it. Like many students, you may be considering taking out student loans.

There are two main kinds of student loans: federal/state loans and private loans. If your school has been approved by the U.S. Department of Education (a list of those schools is available athttp://nces.ed.gov/ipeds/cool/index.asp), you may be able to apply for federal and state loans. If not, you can still apply for private loans.

Federal and State Student Loans

• If your school has been approved by the United States Department of Education, you may apply for federal student loans. Get more information at http://studentaid.ed.gov. If the school has a Program Participation Agreement with the U.S. Department of Education, eligible students can receive Pell Grants and other federal aid (e.g. Direct Loans).
• Students who are applying for federal or state student aid must complete a Free Application for Federal Student Aid (FAFSA) form. Please be advised that these forms are free to all students and may be obtained via the web at Free Application for Federal Student Aid, by calling the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243), or from the school you plan to attend.
• There are a number of organizations and individuals who call themselves FAFSA "coaches" and whom you can pay to help you to complete the application, but you do not need to pay these "coaches" to complete the FAFSA forms for you! You can get free "coaching" online at Federal Student Aid Coach.
• Students seeking to attend schools that are approved for federal student aid are also eligible to apply for aid through the Commonwealth of Massachusetts. Please see the Massachusetts Office of Student Financial Assistance for more information on state aid programs, which include no-interest student loans and MASSGrant funding for students who have not previously received a bachelor's or equivalent degree.
• If a school closes unexpectedly, students with federal loans may apply with American Student Assistance for a discharge (cancellation) of their loans.

Private Loans

• Many schools have agreements with private loan companies to provide loans for their students, but you should shop around to find the best interest rate.
• Private loan companies often have designated "Career Training" loans.
• Many private loan companies send your entire tuition payment to the school shortly after you take out the loan. Therefore, as far as the loan company is concerned, you will owe the entire amount of the tuition even if your school closed before you started classes. It is in your best interest to take out a loan with a loan company that makes multiple disbursements, meaning that they send payments to the school for each session (e.g. quarter, trimester, semester) rather than paying the school in one lump sum.
• If a school closes unexpectedly, students with private loans may still have to pay off the loan, unlike students with federal loans. If you find yourself in this situation, contact your loan company immediately to discuss your options. They may be willing to discharge your loan or give you an administrative forbearance while your claim for restitution is processed. "Administrative forbearance" means that you will not be billed for a certain period of time, and any interest that accrues during this period may be written off at the end of the period. You will still have to make the payments; they are simply delayed until such time as you might receive restitution from the Commonwealth of Massachusetts (for more information about restitution, please see our Closed Schools and Claims for Restitution FAQ). However, please note that the terms of any forbearance is entirely between yourself and the lender.

General Information about Loans

• When taking out a loan, remember that the smaller your payment is each month, the more you will ultimately pay in interest charges.
• When you sign a promissory note, you're agreeing to repay the loan according to the terms of the note. The note states that except in cases of loan discharge (cancellation), you must repay the loan, even if you don't complete your education. You must repay your loan even if you can't get a job after you complete the program or you didn't like the school.
• Think about what your repayment 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 might go into default, which has severe consequences. In many cases, default can be avoided by submitting a request for a deferment, forbearance, or discharge (cancellation) and by providing the required documentation.
• If you go into default, your school, the lender or agency that holds your loan, the state, and the federal government may all take action to recover the money. Such actions might include:
  • Notifying national credit bureaus of your default, which has a serious effect on your long-term credit rating (for example, you might find it very difficult to borrow money from a bank to buy a car or a house);
  • The Internal Revenue Service withholding your U.S. individual income tax refund and applying it to the amount you owe; and
  • Your employer deducting payments from your paycheck.
  Other consequences include liability for loan collection expenses, and if you return to school, you're not entitled to receive additional federal student aid. Legal action also might be taken against you.
• You must make payments on your loan even if you don't receive a bill or repayment notice. Billing statements and/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. You must also make monthly payments in the full amount your repayment plan has established. Partial payments do not fulfill your obligation.
• If you apply for a deferment or forbearance, you must continue to make payments until you're notified that the request has been granted. If you don't, you might 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.

Please note: The Massachusetts Department of Elementary and Secondary Education regulates proprietary schools, not loan companies. We may be able to assist you if your school closes or if you have a complaint against the school, but we cannot help you if you're having trouble making payments or if the loan company is threatening to collect. Your loan is an agreement only between you and the loan company.