Perkins Loan Rights and Responsibilities
When you take out a student loan, you have certain responsibilities. Here are a few of them.
- Before you receive a Perkins Loan, you must complete an electronic promissory note that includes your Entrance Interview. We will ask for address information for your parents, siblings if they are not still living at home, your spouse, and two references. This is regardless of your dependency status for financial aid purposes. So, even if you are a non-traditional student and have been on your own for several years, you must still provide us with this information. This information is used solely by this office for people we can contact during the repayment of your loan if we should lose contact with you.
- When you sign a promissory note, you are agreeing to repay the loan according to the terms of the note. The note is a binding legal document. This means that before you sign your promissory note, you need to read it carefully so that you understand the terms and conditions that are a part of that note. If you don’t repay your loan on time or according to the terms in your promissory note, you may go into default, which has very serious consequences.
- You must make payments on your loan even if you don’t receive a bill or repayment notice. Billing statements or sets of coupons are sent to you as a convenience to you, but you are obligated to make payments even if you don’t receive any notice.
- If you apply for a deferment, cancellation, or forbearance, you need to do so in plenty of time that your payments do not go past due. If you continue to receive bills or past due notices after you have filed your form, it is your responsibility to contact this office to find out why your deferment or forbearance has not been processed. The most likely problem is simply that we have not received the form, or it was missing documentation.
- You must notify this office when you graduate, withdraw from school, drop below half-time status, or transfer to another school.
- You must notify this office when you have a change of name, address, telephone number, or social security number.
- When you leave UNI, you must complete an Exit Interview. We hold group exit meetings every December and April for the fall and spring graduates. These are done in a large group along with the Direct Loan exit meeting. At this meeting we go over the benefits of this program, explain all the paperwork included in your exit packet, remind you of what we expect from you, and let you know what you can expect from us. For those students who leave UNI for reasons other than graduation and for summer grads, a letter is sent to you giving you instructions on how to do your Exit online. A hold is put on your records until you complete the Exit Interview. This means you will not be able to register for classes or to receive a transcript.
- If you fail to make your payment on time, the late payments will be reported to national credit bureaus. This may effect your credit rating for a long time. For example, you may find it difficult to borrow from a bank for a car or house.
- If you default on your loan, UNI has the right to use whatever actions are necessary to collect that debt. This includes using a collection agency, litigating, withholding state tax payments or refunds to you, or assignment back to the Department of Education. We are required to charge the cost of any of these actions to you, the borrower, which means the amount you owe could be considerably larger than the principal and interest due.
RIGHTS of a Perkins Loan Borrower
You also have certain rights as a borrower. Listed below are some of them.
Before we make your first disbursement, you will receive the following information about your loan:
- The full amount of the loan.
- The interest rate.
- When you must start repaying your loan.
- A complete list of any charges you must pay and information on how those charges are collected.
- The yearly and total amounts you can borrow.
- The maximum repayment periods and the minimum repayment amount.
- An explanation of default and its consequences.
- An explanation of available options for consolidating your loan.
- A statement that you can prepay your loan at any time without penalty.
You must be notified in writing whenever your loan is credited to your university bill. This is done through the university billing system. You will see the description Perkins Loan on your bill with the amount of your loan and a CR beside it to show it is a credit.
UNI does its own billing of Perkins Loans here in this office. We do not use an outside service agency for any of the Perkins Loan due diligence. You will be contacted twice during your grace period to keep you informed of your first payment due date, to give you the opportunity to request deferment or cancellation on your loan, or to request automatic withdrawal for your payments instead of using coupons. We automatically set your loan up with repayment by coupon. We will issue you a set of twelve coupons two weeks before your first payment is due, then at the end of twelve months you will receive a statement showing your current balances and a new set of twelve coupons.
If you prefer to use the automatic withdrawal (ACH) for you payments, you may apply for that at any time.
All loans are set up on a monthly repayment schedule. The minimum monthly payment amount is $40. If you borrow enough to make it impossible to repay the loan at $40 per month, within the ten-year limit, your monthly amount will be raised accordingly. The dollar amount where this minimum amount changes is at $3700.
For example, If you borrow up to $3700, you pay $40 per month. If you borrow $3800, you pay $41 per month. If you borrow $6000, you will pay $64 per month.
Lender: The University of Northern Iowa is the lender on your Perkins Loan. We provide our own billings. All payments, forms, questions, and concerns need to be directed to this office at UNI. We can be contacted year round, even when school is not in session, between 8:00 and 4:00 central time, or by fax any time of the day or night. You can reach us at:
Grace Period: You have a nine-month grace period following your date of leaving UNI. During this time, no interest accrues and no payments are due. You will be sent notices during your grace period to keep you informed of the date your grace ends and your repayment begins. It also gives you a chance to apply for deferment or cancellation benefits. A postponement/cancellation form is on the back of all bills and grace notices.
Interest Rate: The interest rate on all Perkins Loans borrowed after 10/81 is 5%. This is fixed rate, simple interest figured on the remaining principal balance of your loan at the time of billing.
Repayment: Your repayment will begin the first of the month following the end of your grace period. We will set your account up for coupons that will be sent in time for your first payment due unless you choose to have your loan paid by automatic withdrawal (ACH) from your checking or savings account.
Credit Bureau Reporting: All Perkins Loans are reported to national credit bureaus every month. This started when you received your first disbursement, and will continue monthly until seven years after your loan is paid in full. If you pay your loan on time, and file any deferment, postponement, or cancellation forms on time, you will have an excellent credit rating on this loan. However, any payment made thirty days late or more will also be reported on your credit history. It is very important that you contact this office before your due date if you are unable to make the payment or feel you are eligible for deferment, postponement, or cancellation. We do not change credit bureau history unless it is reporting incorrectly. Your credit history is a history that reflects how you handled your loan.
Holds: UNI places a hold on accounts if the exit interview information has not been completed, or on accounts, that are thirty (30) days past due. This hold will deny transcripts and will not allow you to register for classes until either the information is received or your account is brought current. CONTACT THIS OFFICE BEFORE A PAYMENT IS DUE IF YOU ARE UNABLE TO MAKE THE PAYMENT.
Default: Technically a loan is in default when you have missed a payment or shown an unwillingness to repay the loan. For credit bureau reporting, default is when your loan is 240 days past due. Defaulted loans are not eligible for financial aid at UNI or elsewhere, are not eligible for transcripts until the default is cleared, cannot register for classes at UNI until the default is cleared, and will have the default reported to the credit bureau and become a part of your credit history. Legal action may be taken against you to collect the amount owed on a defaulted loan. If efforts by the school fail to collect the amount owed, your defaulted loan may be assigned to the Department of Education. This means UNI would no longer own your loan; the DOE would be the loan holders and would use every available resource to collect this debt.
Late Fees: UNI charges a late fee of 10% of the payment due when the payment is 15 days late. To assure that no late fees are incurred, you should have payment or forms in our office by the 10th every month. Late fees are added to the amount due the month following the late payment.
Collection Costs: We are required to pass on any collection costs or fees to a borrower who allows their account to go far enough past due to be placed for collection with an outside agency. Our agencies charge us on a percentage based on the amount of principal, interest, late fees, and miscellaneous fees placed. We add these charges, multiply by the 25% to 50% for the collection costs, and add that to the amount you owe. This may also mean a charge for a letter sent to you after your account is 90 days late or the cost of searching for a good address for you with the credit bureau or some other address searching service.
Consolidation: Perkins Loans are eligible for consolidation along with your Direct Loans and other federally funded loans. This means one of your Stafford lenders will buy all your other loans making a new consolidation loan. One advantage in doing this is that the repayment period can be extended to a longer period of time than Perkins, making your monthly payments lower. There are several different repayment plans to choose from making it easier to be sure you are able to make your payments. Also, you will have only one check to write or one form to file if you are eligible for some kind of deferment. The disadvantage of including your Perkins Loan with this is that you lose the 5% interest rate -- it will go up to about what your Stafford interest rate is -- and you will lose all deferment/cancellation benefits associated with the Perkins Loan. You will still have some deferment and cancellation options, but they will not be as varied as the Perkins Loan cancellations.
Deferments: All loans are eligible for student deferment (our most common type of deferment) as long as you are at least a half-time student at UNI or another institution. All loans are eligible for financial hardship deferments. If you find yourself unable to make a payment because of your financial situation, call our office for information on your options under this deferment. We can look at an economic hardship deferment, an unemployment deferment, and forbearance. There is also military deferment and rehabilitation deferment.
Cancellations: There are many types of employment that qualifies for cancellation, so if you think you may fall into one of the categories, download the form from the www.ecsi.net or www.vpaf.uni.edu/obo/studentaccounts/ website. More detailed information is at the OBO website for each cancellation type. The types are kept general here so if you think your job may fit into one or more areas, complete the form and return it to our office with a job description.
Types of cancellation:
Teachers, Child and Family Service, Nurses, Medical Technicians, Law Enforcement, Corrections, Head Start, some Child Care providers, Firefighters, Public Defenders, Librarians, and Early Intervention.
Prepayment: There is no penalty for prepayment (paying your loan off more quickly than scheduled) on this loan. Any extra money paid will automatically be applied to reduce your principal balance. If you choose to do this, you will pay less interest over the life of the loan. You can choose to pay your loan in full during your grace period and pay no interest at all. The only time you need to include a note with your extra payment is if you are sending enough to cover more than one payment. Then you need to tell us this is payment in advance so it can be applied taking the correct amount of interest and principal out and the correct billings suppressed. For instance if you are going on vacation and won't be back in time to send your payment when it is due, you could send a double payment the month prior and indicate it is for the upcoming month as well.
Military Repayment: The Perkins Loan program is an eligible loan for military repayment. This is a military benefit, not a benefit of the loan program. We will work with you if we know you are eligible; however, you are responsible for starting the paperwork with your unit.
Rehabilitation: All defaulted Perkins Loan borrowers are eligible to rehabilitate their Perkins Loan. To do this you must contact our office so we can agree on a monthly payment amount. You must send a payment every month for 9 months. When the last payment is received, we will bring your loan current and erase all the late payments showing at the credit bureaus. You start off with a clean slate, eligible for any remaining deferment and cancellation options for which you qualify.
Ombudsman: If you disagree with a decision we have made concerning your loan, you have the right to seek assistance from the Ombudsman’s Office. They can be contacted at www.ombudsman.ed.gov or:
US Dept of Education
830 1st St NE 4th Floor
Washington, DC 20202-5144