Before You Borrow
Borrowing from the student loan programs to finance an AOMA education is an investment in a student’s future income potential. When borrowing against future income, it is important maintain a realistic understanding about the amount and timing of that income. As with any health professional entering private practice, individuals entering the field of acupuncture, must always be aware that earnings may be sporadic in the beginning of practice, even though they may ultimately be significant. By carefully estimating future income, and managing loan repayment accordingly, borrowers can avoid delinquency, default, and unnecessary interest accrual.
AOMA recommends that students minimize the amount of money they borrow and maintain a clear picture regarding the impact of loan payments on their economic future. Students should establish contingency employment plans, and familiarize themselves with all available financial resources while borrowing and in repayment. The information provided below is intended to help students effectively manage their student loan debt.
Consequences of Default
Becoming delinquent or defaulting on a student loan is very serious. Consequences include:
- Be a responsible borrower! A student loan is borrowed money that must be repaid.
- You must keep your loan servicer informed of any changes in your name, address, telephone number, Social Security number, or school enrollment status.
- You must repay your loan even if you did not finish the education you received or you can’t find a job after you graduate.
- There are repayment options available to assist you if you’re having trouble making payments.
- If you are unable to make payments and you apply for a deferment, forbearance, or consolidation, you must continue to make payments on your loan(s) until you have been notified that your request has been approved.
- You can prepay the whole loan or any part of it at any time without penalty. This means you are paying some of the loan before it’s due.
- You must make payments on your loan even if you don’t receive a bill or repayment notice. Billing statements are sent to you as a convenience, but you have to make payments even if you don’t receive any reminders.
- Your student loan account balance and status will be reported to national credit bureaus on a regular basis. Just as failing to repay your loan can damage your credit rating, repaying your loan responsibly can help you establish a good credit rating.
- Failing to pay according to your loan contract stated, your Master Promissory Note, on a federal student loan are severe and long lasting
- You might not be able to finance a car
- Be approved for a private loan
- Your federal income tax refund could be applied to your student loan balance instead of being sent to you
- Wages garnished
- Ineligible for financial aid
Additionally, students who default on loans also jeopardize AOMA's ability to offer financial aid to future students.
Paying or Capitalizing Interest
The federal government pays the interest on Direct Subsidized Loans during periods of in-school deferment and during the six-month grace period. Direct Unsubsidized Loans accrue interest from the date the loan is disbursed. During school, borrowers can pay the interest accrued on Direct Unsubsidized Loans and avoid the capitalization of that interest when repayment begins. For more information on Direct Loan capitalization, visit the Federal Student Aid website.
A deferment is a pre-arranged postponement of loan payments that results from either:
- a communication with the lender, or
- as part of the terms of the loan.
Payments on Direct Loans may be deferred when a borrower is enrolled in an eligible educational program at least half-time (six credits). This is called “in-school deferment”. As soon as a borrower ceases half-time enrollment (e.g. drops below six credits, takes a leave of absence, withdraws, or graduates), in-school deferment ceases, and loans enter repayment.
New AOMA students with existing loan debt should automatically receive in-school deferment of their existing loans. Once enrolled at AOMA, students should receive communication from their lender that their loans have been placed in deferred status. If this does not happen, students should complete a DL In-School Deferment Form and/or a FFELP In-School Deferment Form submit the completed form to the Financial Services Administrator.
For Direct Subsidized and Unsubsidized loans, the federal government offers a “grace period” during which a borrower is not required to make loan payments.
This grace period begins the day after a borrower ceases half time enrollment (e.g. drops below six credits, takes a leave of absence, withdraws, or graduates), and continues for six months. Although a borrower is not required to make loan payments during this grace period, he/she may receive bills from his/her servicer. The grace period is a good time to communicate with the loan servicer and establish plans for loan repayment.
If a borrower re-enrolls and returns to at least half-time status before the end of the six-month grace period, loans will again enter in-school deferment. The borrower will receive the remaining portion of the grace period the next time he/she drops below half-time status. There is no grace period for Graduate PLUS loans.
Borrowers may defer Direct loans after they are no longer enrolled for various reasons, including:
- Economic Hardship (borrower must be conscientiously seeking but unable to find full-time employment for up to three years, or have a family income below officially published poverty levels, or have monthly student loan payment obligations that exceed 20% of gross monthly income from full-time employment); and,
- Active duty service during a war or other military operation or national emergency, including qualifying National Guard duty (only available for Direct Loans first disbursed on or after July 1, 2001).
Borrowers who are unable to make their scheduled monthly payments may make a forbearance agreement with their lender (Direct Loan). During a period of forbearance, interest continues to accrue on both Direct Subsidized and Unsubsidized Loans. A borrower may request a forbearance to allow for any of the following:
- A short period during which he/she makes no payments;
- An extension of time for making payments; or
- A period during which he/she makes smaller payments than were originally scheduled.
Communications With Lender
The most important responsibility a borrower has is to maintain communication with the lender/servicer who holds/services their loan. A lender can make any number of adjustments to a loan’s payment schedule or defer payment completely when appropriate. It is up to you to keep them apprised of your circumstances. Failure to do so can result in default. Students can find contact information for their lenders by accesing the National Student Loan Data System.