July 11, 2006, 11:03 am : Glossary Q - Z
Filed Under: Interest RatesDiscussion:
Reasonable and Affordable Payments
Rehabilitating a defaulted loan or making satisfactory payment arrangements requires borrowers to make “reasonable and affordable” payments. The holder of a Direct Loan or FFEL Program loan determines on a case-by-case basis what constitutes a reasonable and affordable payment on defaulted loans. Loan holders consider disposable income and such expenses as housing, utilities, food, medical costs, work related expenses, dependent care, and other Federal education loan debt. Borrowers are then provided with a written statement of the payment and an opportunity to object to those terms.
Rebate (Direct Loan Up-Front Interest Rebate Program)
The amount of the up-front interest rebate given to Direct Subsidized Loan, Direct Unsubsidized Loan and Direct Plus Loan borrowers beginning with loans made for the 2000 - 2001 program year. The rebate amount is equal to 1.5 percent of the loan amount borrowed. Borrowers must make their first 12 required monthly payments on time or the rebate amount will be added back to the principal balance on their loans.
Refund
The total amount of funds returned to the Direct Loan Program as unused for the student’s education.
Rehabilitation
The process of bringing a loan out of default and removing the default notation on a borrower’s credit report. To rehabilitate a Direct or FFEL loan, a borrower must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period. To rehabilitate a Perkins Loan, a borrower must make twelve (12), on-time, monthly payments of an agreed amount to the Department. Rehabilitation terms and conditions vary for other loan types and can be obtained directly from loan holders.
Repayment (also repayment period)
Making payments on a loan. The “repayment period” is the period during which payments are required to be made.
Satisfactory Repayment Arrangements
Borrowers in default on Direct Loan and FFEL Program loans who wish to consolidate their loans in a plan other than the Income Contingent Repayment (ICR) plan must have made satisfactory repayment arrangements with the loan holder(s). Three consecutive, voluntary, on-time monthly payments on a defaulted Direct Loan or FFEL Program loan constitute satisfactory repayment arrangements. Borrowers must work with their current loan holders to set up reasonable and affordable payments. Borrowers who wish to consolidate defaulted Perkins or health professions loans should contact their loan holders for information on satisfactory repayment arrangements under those programs.
Separation Date
The actual or anticipated date when the borrowers graduate, leave school, or drop to a less than half-time status. The separation date is used to determine the loan’s graceperiod and the date the first loan payment will be due.
Servicer
An entity designated to track and collect a loan on behalf of a loan holder.
Simple Daily Interest
The method used to calculate interest on student loans.
Subsidized Loan
A loan for which a borrower is not responsible for the interest while in an in-school, grace, or deferment status. Subsidized loans include Direct Subsidized , Direct Subsidized Consolidation Loans, Federal Subsidized Stafford Loans and Federal Subsidized Consolidation Loans.
Unsubsidized Loan
A loan for which a borrower is fully responsible for paying the interest regardless of the loan status. Interest on unsubsidized loans accrues from the date of disbursement and continues throughout the life of the loan. Unsubsidized loans include: Direct Unsubsidized Loans, Direct PLUS Loans, Direct Unsubsidized Consolidation Loans, and Federal Unsubsidized Stafford Loans, Federal PLUS Loans, and Federal Unsubsidized Consolidation Loans.
Variable Interest
The rate of interest charged on a loan that changes annually and fluctuates with a stated index.
Verification Certification
The process by which a consolidation lender requests that a loan holder certify a loan’s payoff balance.
William D. Ford Federal Direct Loan Program (Direct Loan Program)
The Federal program that provides loans to eligible student and parent borrowers under Title IV of the Higher Education Act. The loan programs include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans. Funds are provided directly by the federal government to eligible borrowers through participating schools.