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Loan repayment is the process through which a borrower fulfills his/her legal obligation to repay the lender for funds disbursed, plus interest. Conversion to repayment involves the lender moving a borrower from an interim (in-school) status to repayment status. For Federal Stafford loan borrowers, this conversion occurs on the day after the end of the borrower’s grace period. For Federal PLUS loan borrowers, conversion to repayment occurs once the loan is fully disbursed.
In converting a loan to repayment status, the lender must establish an accurate repayment start date and first payment due date, disclose repayment terms, and ensure the loan is converted to repayment status in a timely manner.
If the lender fails to establish a first payment due date in accordance with federal regulations, due diligence violations may occur that result in the cancellation of the loan’s guarantee.
The following outlines the timeline lenders must follow when converting a loan to repayment. For more specific information on conversion, see the Common Manual.
Stafford Loans
The first payment due date for Federal Stafford loans must be no later than:
- 60 days after the beginning of the repayment period.
- 60 days after the last day of a deferment or forbearance period, unless the borrower makes a prepayment during this period that advances the due date.
- 60 days after the last day of a post-deferment grace period (available to pre-1981 borrowers).
- 75 days after the date the lender learns that the borrower’s loan has entered repayment without the lender’s knowledge (late notification that the borrower ceased at least half-time enrollment).
PLUS Loans
The first payment due date for Federal PLUS loans must be no later than:
- 60 days after the date the loan is fully disbursed.
- 45 days after the last day of a deferment or forbearance period, unless the borrower makes a prepayment during this period that advances the due date.
- 75 days after the date the lender learns that the borrower’s loan has entered repayment without the lender’s knowledge (late notification that the borrower’s dependent student withdrew from school before the loan was fully disbursed).
Federal Supplemental Loans for Students (SLS)
The Federal Supplemental Loans for Students (SLS) program was combined with the unsubsidized Federal Stafford loan program on July 1, 1994. Although, no new SLS loans were made after July 1, 1994, some lender may continue to service these loans. For specific information on servicing SLS loans, refer to the Common Manual.
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