Student Loans

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Generally defined, a student loan is a loan arrangement made between a lending institution and an individual for the purpose of continuing the individual’s education. In most cases, repayment of the loan will not commence until after the borrower has either graduated from the educational institution or has otherwise terminated his educational pursuits.

Student loans fall into two categories, depending upon who assumes responsibility for the repayment of any interest due throughout the life of the loan.

  • The borrower is totally responsible for the interest due throughout the life of the loan.
  • The Federal Government assumes responsibility for full or partial payment of interest due, at least during the period when the borrower is enrolled in school.

The Options and GL Account fields in the Student Loan group box on the Loan Profiles - Additional Information tab specify the student loan options.

Understanding Student Loan Processing

Student loans in which the borrower pays the interest due are essentially processed the same manner as any other loan. When a loan payment is made, the entire interest due is subtracted from the payment amount and the balance is applied toward the payment of the loan principal balance. This rule applies to any period during the life of the loan.

Student loans in which the government pays any interest due, release the borrower from responsibility of paying any interest during the enrollment, grace, and, occasionally, the repayment period.

During the enrollment/grace period, the government is usually responsible for full payment of interest due. If the borrower elects to pay a portion of the loan principal balance prior to the start of the Repayment period:

  • If the government is fully responsible for the interest payment, the system will not collect any interest from the borrower’s payment. Instead, the system advance the interest paid-to-date to the transaction effective date and any interest calculated is added to uncollected interest (FCCBNC). The entire loan payment will be applied toward the loan principal balance.

If the borrower elects to pay a portion of the loan principal balance prior to the start of the Repayment period:

  • If the government is only partially responsible for the interest payment, only a portion is added to uncollected interest (FCCBNC). The remaining interest-due amount will be subtracted from the loan payment amount and the difference will be applied toward the payment of the loan principal balance.

During the repayment period, all loan payment will use the interest rate supported by the government as follows:

  • The interest due from the student (based on the total interest rate less government-supported interest rate) is collected from the loan payment and the systems advance the interest paid-to-date to the transaction effective date.
  • The interest due from the government is calculated based on the government-supported interest rate and is added to the Government Interest Due field on the Loans – Student Loan tab.

The Student Loan Report 330 lists student loans, indicating which class (enrollment or repayment) and who pays the interest (government, student, or both), and interest amounts for each loan.