Accepting / Declining a Loan
Declining a loan is a good thing.
If you borrow less, then you owe less.
Which loans do I accept and which loans do I decline?
If you are offered more loan funds than you will need for the academic year, then you should decline the excess loan funds. Remember that what you need is always less than what you want. Because you are declining a portion of your loan funds, you must choose which loan or loans to decline. Never decline a loan based on the amount of the loan. Decline a loan based on the loan’s properties.
Although each student’s award package is different, there are some guidelines for declining a loan that will apply to most all students. However, as a borrower of money, you need to read and understand about each loan that you are receiving. It is your responsibility to be an educated borrower. If you do not understand a loan’s requirement or benefit, then you need to ask either The Office of Student Financial Aid or the lender. If you are given an answer that you do not understand, then you need to inform the person with whom you are speaking that you do not understand and ask him/her to explain it again or speak to someone else. You are borrowing money, and you need to understand your loan’s requirements and benefits.
1. Decline the unsubsidized loans before the subsidized loans.
Always decline an unsubsidized loan before you decline a subsidized loan because you are not responsible for the interest of the loan while you have an in-school status. While you have an in-school status, you must pay the interest that is accruing on your unsubsidized loan funds either now or when you begin repayment. While you have an in-school status, the federal government pays your interest for your Federal Stafford Subsidized Student Loan. While you have an in-school status, your federal campus-based program loans do not accrue interest. While you have an in-school status, your institutional loans excluding the Health Care Professions Student Loans offered by the UMC Office of Nurse Recruitment, UMC Department of Radiology, and UMC Department of Respiratory Therapy do not accrue interest. The Health Care Professions Student Loans do accrue interest while you are in-school.
You have been awarded a $2,000.00 Subsidized Federal Stafford Student Loan (interest rate of 6.80%) and a $3,000.00 Unsubsidized Federal Stafford Student Loan (interest rate of 6.80%). You only need $3,000.00 in loan funds this academic year; therefore, you need to decline $2,000.00 in loan funds. You should decline $2,000.00 of your Unsubsidized Federal Stafford Student Loan. Your aid package now will be composed of a $1,000.00 Unsubsidized Federal Stafford Student Loan and a $2,000.00 Subsidized Federal Stafford Student Loan.
Federal campus-based loans and institutional loans are subsidized loans; therefore, you always would decline a part of or all of an unsubsidized loan before declining any other type of loan expect for an alternative or private loan.
Remember that you decline a loan based on
the loan’s properties not the loan’s amount.
2. Decline the loan with the greatest interest rate and no cancellation property.
You have been awarded a $4,000.00 Subsidized Federal Stafford Student Loan (interest rate of 6.80%), a $3,000.00 Federal Perkins Student Loan (interest rate of 5.00% and cancellation property upon meeting The Untied States Department of Education’s requirements), and a $1,000.00 George Jones Smith Student Loan (interest rate of 3.00%). You need only $7,000.00 in loan funds; therefore, you need to decline $1,000 in loan funds. Because the Federal Perkins Student Loan has a cancellation property, you need to determine if you will meet the cancellation provisions before declining the Federal Perkins Student Loan. However because the Subsidized Federal Stafford Student Loan has a greater interest rate than the Perkins Federal Student Loan, you will not choose the Perkins Federal Student Loan. Neither the Subsidized Federal Stafford Student Loan nor the George Jones Smith Student Loan has cancellation provisions; therefore, you should decline $1,000.00 of your Subsidized Federal Stafford Student Loan because of the greater interest rate. Your award package now is composed of a $3,000.00 Subsidized Federal Stafford Student Loan, a $3,000.00 Federal Perkins Student Loan, and a $1,000 George Jones Smith Student Loan.
Remember that you decline a loan based on
the loan’s properties not the loan’s amount.
3. Decline the loan that does not have a cancellation property.
You have been awarded a $4,000.00 Federal Perkins Student Loan (interest rate of 5.00%) and a $3,000.00 Pearl Bailey Morris Student Loan (interest rate of 3.50%). You only need $5,000.00 in loan funds; therefore, you need to decline $2,000.00 in loan funds. Because the Federal Perkins Student Loan has cancellation provisions for some students, you should determine if the cancellations provisions would apply to you. If you can have your Federal Perkins Student Loan cancelled, then you should decline $2,000.00 of your Pearl Bailey Morris Student Loan because the cancellation property supersedes the greater interest rate. If you will not meet the criteria to have your Federal Perkins Student Loan cancelled, then you should decline $2,000.00 of your Federal Perkins Student Loan because of the greater interest rate.
Remember that you decline a loan based on
the loan’s properties not the loan’s amount.
4. Decline the loan with the shorter grace period.
You have been awarded a $3,000.00 Wayne Newton Williams Student Loan (interest rate of 3.00%) and a $5,000 Charlie Pride Johnson Student Loan (interest rate of 3.00%). You need only $3,000.00 in loan funds; therefore, you need to decline $5,000 in loan funds. Because the interest rates are the same, you need to determine which loan has the shorter grace period. The Wayne Newton Williams Student Loan has a nine-month grace period, and the Charlie Pride Johnson Student Loan has twelve-month grace period. Therefore, you should decline the $3,000.00 Wayne Newton Williams Student Loan and decline $2,000.00 of the Charlie Pride Johnson Student Loan. Your award package now is composed of a $3,000.00 Charlie Pride Johnson Student Loan.
Remember that you decline a loan based on
the loan’s properties not the loan’s amount.
5. Decline the loan with the least amount of benefits.
You have been awarded a $4,000.00 Federal Perkins Student Loan (interest rate of 5.00%) and a $2,000.00 Rosemary Clooney Brown Hospital Student Loan (interest rate of 5.00%). You need only $1,000.00 in loan funds; therefore, you need to decline $5,000 in loan funds.
Because both loans have cancellation provisions, you should review the requirements for the loan’s cancellation before accepting the loan. The Rosemary Clooney Brown Hospital Loan requires the borrower to work in his/her field at UMC and to pay taxes on this benefit upon beginning work at UMC; the Federal Perkins Student Loan requires the borrower to work in his/her field directly with patients in the United States. Because the Federal Perkins Student Loan’s cancellation provision is better than the Rosemary Clooney Brown Hospital Student Loan’s cancellation provision, you should choose the Federal Perkins Student Loan. Therefore, you should decline the $2,000.00 Rosemary Clooney Brown Hospital Student Loan and $3,000.00 of the Federal Perkins Student Loan. Your award package now is composed of a $1,000 Federal Perkins Student Loan.
Remember that you decline a loan based on
the loan’s properties not the loan’s amount.
Declining a loan can be a difficult process because you have to compare all of your loans together and separately. However, it is very important to make these comparisons because it can save you from paying thousands of dollars to your various lenders when you begin repayment.
The UMC Office of Student Financial Aid has various preferred-lender partners. Each year, a lender-partner’s performance is reviewed. If the requirements and expectations as set forth by the Office of Student Financial Aid are met or exceeded, then the close working-relationship with lender-partner will continue. If the lender-partner’s performance does not meet the requirements and expectations, then the lender-partner relationship is discontinued. Therefore, review the information provided about the lender-partners; and compare the various borrower benefits and repayment benefits that each lender-partner offers to its borrowers. Do your homework, and be an informed borrower before you choose your lender. You are not required to use a lender-partner. However, again, do your homework; and know who your lender is and what the loan’s requirements and benefits are before you borrow the money. If you have questions, then please contact us at
acct-financial-aid@accounting.umsmed.edu.
