Education Loan Servicing

By: EconomyWatch Content   Date: 26 November 2009

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Education loan servicing programs cover a wide range of expenses pertaining to higher education, such as tuition, accommodation, books and supplies. The increasing demand for education loan servicing has lead to the growth of several private lenders in the industry. Initially, the industry was dominated by the federal government. 

Obtaining Federal Education Loan Servicing

Unlike private education loans, federal loans are not offered on the basis of a student’s credit score. A federal education loan servicing program considers a student’s academic performance and extra-curricular participation while short-listing candidates. That is why maintaining a good track record improves a student’s chances of loan confirmation.

For obtaining a federal education loan servicing, it is essential to first complete the Free Application for Federal Student Aid (FAFSA) form. A borrower must fill applications of educational institutions separately, besides the FAFSA, after ensuring that they accept financial aid students.

Some popular federal education loan servicing programs are:

Federal Stafford Loan: This loan servicing program is offered by the government to low-income individuals. Interest on this student loan is borne by the government during the duration of the course. This way, a student becomes liable for the same only after graduation.

Perkins Loan: This loan is offered to students who are deemed to be in financial need by the US Department of Education. Information that is disclosed by a borrower in the FAFSA is utilized by the US Department of Education for comparing and short-listing candidates.

Federal Education Loan Servicing: Entrance and Exit Counseling

The federal government requires students to take part in loan counseling prior to obtaining a federal education loan. This entrance counseling explains different aspects of a student loan, such as interest rate and repayment terms. A student borrower’s rights and responsibilities towards federal education loans are also covered. A borrower has to qualify through a question-answer session to obtain a federal student loan.

Similarly, exit counseling is a mandatory requirement under federal education loan servicing. This is held prior to graduation, wherein the borrower is informed about various education loan servicing options like deferment and forbearance. Exit counseling also helps to set up a repayment plan, following the expiry of the grace period. Suitable payment dates are also established during exit counseling.


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