What happens to the status of my student loans if I transfer to a different college?
Andy M asks: I thinking about transferring to a different school but I still have student loans from my previous school (Sallie Mae and Federal Direct student loans). Are there clearing houses or other programs that my new enrollment status will be sent to so that the lenders are aware that I haven’t just stopped going to school (and thus cause my college loan payments to become due)? Do I have to obtain enrollment verification from my current school and send it to each of my lenders?
Student Loan Guru: The college that you’re currently going to will not transfer your student loans automatically. So if you’re thinking about transferring, you need to talk with your lender and the financial aid counselor at both your current school and your new school before transfering. You should also check with your new school to find out what additional financial aid programs are available to you and if qualify for them. If you plan to transfer, and you will be enrolled at least half time, contact the Direct Servicing Center to request an in-school deferment.
If you transfer and do not notify the lender or the schools, they may believe that you’ve quit school and may require you to start payments on your student loan.
Many college students fail to follow these steps and end up creating a huge mess of their financial aid. For whatever reasons, many feel that either school or the student loan lender will automatically do all the paperwork and transfer their student loans. No one said that college students had a lot of common sense! The college’s and lenders are not phsychic, they don’t know when you transferred or your status if you do not tell them and fill out the proper paperwork! Still, many always blame the college’s, lender or both for their lack of planning and action.
Be on the lookout for the deferment form to be sent to you, complete the borrower’s section and get it back to your current school. The school will complete the form and return it to the Servicing Center. They in turn should send you an acknowledgement that the form was received and that your loans are still in an in-school status.
Students with Direct Subsidized Loans will not be charged interest while their loans are in an in-school status. You also shouldn’t owe any payments.
If you have Direct Unsubsidized Loans, interest will accumulate while you are in school (you can pay the interest or have it capitalized), but you will not be required to make payments on the principal amount of your loans.
Don’t forget this one piece of valuable advice, if you have other federal education loans, you should keep the holders of those loans informed of your in-school status to request an in-school deferment.