Repayment of student loans is your responsibility--even if the lender is unable to locate you. Prevent loan default, a bad credit history, and other negative actions by being proactive about loan repayment. Depending on the loan program, repayment begins either after graduation from dental school, when you leave school, or when you drop below full-time or half-time enrollment. This section will review the borrower’s and lender’s responsibilities in this process.
The Borrower’s Responsibilities
There are some steps you can take to help reduce the amount and kinds of debt you take on. Often it isn’t until students begin repaying student loans or seek additional funds to set up a dental practice that they review their records and discover how much they have borrowed (or charged on credit cards). You should begin taking steps early on in your borrowing to monitor your spending habits and student loan portfolio. If you keep track of your borrowing from the start you will be in a better position to manage repayment successfully.
Remember that repaying your loans is a legal and professional obligation. Individuals who default on their loans face financial and legal consequences that can have negative effects both personally and professionally. You are the key to making your borrowing experience a positive one. If you keep good records, open your mail, make sure your lenders and their billing servicers have your current address, and contact your lenders immediately if you have trouble paying, you should be successful.
After you sign a promissory note and once funds have been disbursed, you are legally obligated to repay the loan according to the terms of the note.
"...The promissory note is a binding legal document and states that you must repay the loan—even if you do not complete your dental education, are not able to get a job after you complete the program, fail to succeed in practice, are dissatisfied with or feel you did not receive the education you paid for, dislike the dental school you attend, or receive notification that the loan has been sold to another party by your lender."
Keep your lender informed
If you do not repay your loan on time or according to the terms in the note, you may go into default. You must make payments on your loan(s) even if you do not receive a bill or repayment notice. If you apply for a deferment or forbearance, you must continue to make payments until you are notified that the request has been granted.
It is your responsibility as a borrower to keep lenders informed about your enrollment status and your current address. You must notify the school, agency, lender, or billing servicer that manages your loan when you graduate, withdraw from school, or drop below full-time or half-time status; change your name, address, or Social Security number; or transfer to another school. If you borrow Perkins Loans, HPSL, LDS or institutional loans, these loans will be managed by the school that lent you the money or by an agency that the school assigns to service (billing servicer) the loan.
Defaulting on your loan
Repaying your student loans affects your credit rating. Bad credit can adversely affect your ability to borrow money to set up a dental practice in the future and to buy an existing practice, a home, or a car. If you cannot meet your monthly repayment obligations, you have options to defer or postpone payment for postgraduate training. Also, you may request forbearance on your loan, as discussed below.
If your lender does not have your current contact information, you run the risk of becoming delinquent and defaulting on your loan. The consequences of default are serious. If you default on a student loan, there are programs that will allow you to regain your financial aid eligibility or get out of default. You will want to contact the guaranty agency that holds your defaulted loan to inquire about reinstatement and rehabilitation programs. Remember, it takes time and commitment to fix the problem.
Counseling
Regardless of the type of loan, you must receive entrance counseling before you are given the first loan disbursement, and you must receive exit counseling before you leave school. These counseling sessions will either be administered by your school’s financial aid office, or you may be asked to complete an online program that will provide you with important information about your loan(s).
Deferring Student Loan Payment During Residency Training
Dental students who enroll in residency training programs at accredited U.S. dental schools will continue to be eligible for in-school deferment for the duration of their residency training if the program is affiliated with a dental school that registers its residents as students. However, dental residents training in hospital-based programs that are not formally affiliated with a U.S. dental school will have to see if they qualify for an “Economic Hardship Deferment” for Title IV Loans or apply to forbear in order to postpone repayment.
A new law took effect on October 1, 2007, the College Cost Reduction and Access Act (HR 2669), which contained a provision that could affect loan repayments for dental residents training in hospital-based programs. The new law eliminated the “20/220” rule regulation that had enabled residents to qualify for economic hardship deferment, and defer payment for three years without accruing interest on subsidized loans. Residents qualified if their debt burden was greater than 20% of their income and if their income minus their debt burden was not greater than 220% of the federal poverty level. Effective July 1, 2009, under this new rule, loan repayments will be capped at 15% of the borrower’s income that is above 150% of the federal poverty level.
Borrowers with HPSL and LDS loans can defer without interest during all full-time post-graduate training. You would have to check with your lender about postponement options for other institutional loans and for private/alternative loans.
The Lender’s Responsibilities
Lenders owe you more than the money they have agreed to lend to you when you sign on the dotted line. They must provide you with a copy of the promissory note. As discussed above, this document explains the conditions of your loan in detail and is the legal document requiring you to repay the loan with interest. KEEP THIS DOCUMENT. The lender should also provide a disclosure statement before or at the time your loan is disbursed. This document states the amount of your loan (principal), fees that may be added at the time of repayment, the interest rate, and an estimate of the total amount you will have to repay, if you follow the standard repayment terms.
Prior to beginning repayment of your student loan, the lender or servicer will send you a detailed repayment schedule. This document will state the principal balance you owe along with the total amount of estimated interest over the period of repayment. In addition, it will tell you the amount and number of your monthly payments and the date your first payment is due. KEEP THIS DOCUMENT.
Because taking out loans means you will have many important papers and documents that you will need after you graduate, it may be helpful to use a loose leaf binder or accordion file to house all of your student loan documents. You should also keep a log of student loans you borrow, how much you borrow each year, the interest rate on each loan, and the lender’s and servicer’s name, telephone number, and address.
If you need help finding information about your Title IV borrowing (Stafford, Perkins, GradPLUS, and consolidation loans) the National Student Loan Data System stores information on student aid recipients and these loans. The database is maintained by the USDE. Other educational loans such as Title VII aid, administered by HHS, and private educational loans are not included in this database, but may be found on your credit reports. Once a year you are entitled to free credit reports from each of the three major credit bureaus, Experian, Equifax, and TransUnion.
(Back to Financing a Dental Education)