Western Michigan University participates in federal, private and university-funded loan programs. Loans are an excellent way to finance your education. Undergraduate and graduate students and parents of dependent students may borrow money to pay for educational expenses. The money that is borrowed needs to be repaid with a variety of repayment options available. Loan amounts are based on cost of attendance, class level, enrollment status, dependency status and other resources.
To determine eligibility for most loan programs, you must file a FAFSA every year.
We encourage students and parents to borrow only what they need and are comfortable with repaying. Determine your estimated expenses and subtract any grants, scholarships or other resources such as savings or earnings from work. The difference is the amount you may need to borrow in a student or parent loan. As you are borrowing funds each year, be conscious of your total loan debt in relation to your future payment obligation and reevaluate every time you borrow.
The best loan to borrow
When making the decision to borrow a particular type of loan, consider the following questions:
- What is the maximum and minimum I can borrow in this program?
- Who is responsible for paying the interest while enrolled in school?
- What is the interest rate?
- If the interest is the responsibility of the borrower, does the interest need to be paid quarterly, yearly or at graduation?
- How much is the interest payment?
- When does the borrower need to begin repaying the principal balance of the loan?
- What is the minimum monthly payment?
- How long can I repay the loan?
- Can I make payments on the loan before it is due and pay the amount off earlier without penalty?
- What are the choices if my income changes when I'm repaying the loan?
Interest is the amount charged to the borrower for the privilege of using the lender's money. Interest is calculated as a percentage of the principal balance of the loan. The percentage rate may be fixed for the life of the loan, or it may be variable, depending on the terms of the loan.
Consolidation is a good way to manage your loan debt repayment. By bringing all your federal loans together into one payment amount, you will more easily manage your monthly loan repayment and may reduce your monthly payments. Consolidation loans are based on fixed interest rates whereas individual loans may have variable interest rates that may or may not be capped at a maximum interest rate. There are some drawbacks so students must carefully review all information from the lender.
Repayment after finishing school
For Federal Subsidized, Unsubsidized and Federal Perkins loan borrowers, you must complete an exit counseling session so you are aware of all the information you will need to know about repaying your loan. Make your monthly payments on time, even if you are not billed. Stay in contact with the servicer of your loan at all times. Notify them immediately of your address, name change, enrollment change and if you are having difficulty making payments. Open correspondence and return phone calls immediately.
Having trouble repaying loans
If you have extenuating circumstances or know you will be unable to make your monthly payment, communicate with the servicer of your loan immediately. Avoid the costs and consequences of delinquency (late payments) and default (no payments). Under certain conditions, you may be eligible for a forbearance, a deferment or cancellation.
When interest on your loans continues to accumulate and is not paid, the accrued interest will be capitalized—added to the principal. You will then be paying interest on the accrued interest and the disadvantage is you pay more interest over the life of the loan. Interest may be capitalized quarterly, yearly or at graduation.
Continuing education at another institution
Inform your servicer of your plans. The servicer will determine if you are eligible for an "in-school deferment" that allows your payments to be delayed. Once you no longer meet the conditions of the deferment, your repayment period begins immediately.