US Loans FAQs

The Free Application for Federal Student Aid (FAFSA) is the form used by the US Department of Education to determine your Expected Family Contribution (EFC) by conducting a ‘need analysis’ based on financial information, such as income, assets, and other household information, which you (and your parents if you are a dependent student) will be asked to provide. The form is submitted to, and processed by, a federal processor contracted by the US Department of Education (ED), and the results are electronically transmitted to the financial aid offices of the schools that you list on your application.

The FAFSA is the application used by nearly all colleges and universities to determine eligibility for federal, state, and college-sponsored financial aid, including grants, educational loans, and work-study programs.

A Master Promissory Note is a legally binding document under which the borrower promises to repay the loan and to comply with the terms and conditions of the agreement.

The Student Aid Report is a compilation of all the information that was submitted on the FAFSA.  The information will be used by the school to assess eligibility for Federal loans and, therefore, it is important that the information is accurate.  Changes can be made by logging back into the FAFSA website.

The total amount of money that a student will require to attend school is known as the Cost of Attendance (COA).  This is set annually by the RNCM. Federal law allows the value to include:

• Tuition fees
• An allowance to assist with any disability
• An allowance for books, supplies and transport (including airfares)
• An allowance to cover room and board (rent or hall charges)
• An allowance for dependent care, if necessary

The Expected Family Contribution is the amount that dependent students are expected to receive in financial support from their parents.

EFC is determined by a Federal government calculation that examines the family resources available from a family’s income (less allowances for taxes and living expenses) and assets (less allowances for retirement) to assist a student in their studies.  A percentage of these available amounts are earmarked as EFC.

Deferment is a temporary period during which a borrower is not required to make payments.

For Stafford Loan borrowers, many deferments are subsidised, meaning the interest that accrues on the loan during the deferment is paid by the federal government. Some deferments are unsubsidized, meaning the interest that accrues must be paid by the borrower.

Forbearance is a temporary postponement of your loan repayments, for students who are not entitled to deferment. Again, it is recommended that you seek more information from your lender.

If you default, it means that you have failed to make payments on your student loan according to the terms of your promissory note. Default is a serious matter. Some of the consequences of default are:

• National credit bureaus can be notified of your default, which will harm your credit rating, making it more difficult to buy a car or house;
• You would be ineligible for additional federal student aid if you decided to return to university;
• Loan payments can be deducted from your paycheck;
• State and federal income tax refunds can be withheld and applied toward the amount you owe;
• You will have to pay late fees and collection costs on top of what you already owe; and,
• You can be sued.

You may have a default fee and/or origination fees associated with your loan.

The default fee (previously known as the ‘guarantee fee’) is a charge made by the Department of Education to cover any costs incurred if you miss repayments once you have graduated.

The origination fee is a charge made by the Department of Education to cover the administrative charges related to your loan.