Boston University Medical Campus
Student Financial Services

Debt Management

DEBT MANAGEMENT An important step in managing your debt is exploring all options for financing your education and keeping your educational debt load to a minimum. It is wise to research and consider other options such as private grants and scholarships, bank trusteeships, and other low-interest private loan programs offered through community groups and organizations. The National Health Service Corps (NHSC) and military services also offer scholarship programs to consider as a possible means of funding your education. Realize that each of these programs has its pros and cons, but that a student should consider them as an alternative for financing a health professions education. Existing Federal and private educational loan programs can become expensive tools for financing education.

DEFERMENT If you borrowed student loans prior to attending BUMC, it is your responsibility to file the necessary deferment forms. Certification of deferment forms is done by your school’s Registrar. It is important to follow up on the receipt of the deferment forms by the servicing agencies to insure that your loans will be properly deferred. Neglecting to file deferment forms with your specific lenders may result in your loans going into repayment and may impact your ability to obtain adequate financial aid for current studies. Keep your deferments up to date and know the deferment options for each loan you have.

DEFAULT A pending or existing default will adversely impact your ability to participate in the Federal loan programs. It may also result in your being unable to obtain adequate financing for your education at BUMC and may force you to postpone your educational plans until you can resolve your default. To participate in any of the following options to resolve a student loan default problem, the student must negotiate directly with their respective guarantee agency.

Reinstatement of Eligibility To regain Title IV (Direct Loans, Perkins Loans, and College Work-Study) eligibility, the student must contact their guarantee agency to begin a specific program for reinstatement. The student will regain Title IV eligibility upon completion of six consecutive monthly payments following default on the loan; lump sum payments do not qualify. The guarantee agency cannot demand monthly payments in excess of an amount that is considered “reasonable and affordable.” The amount is based on the borrower’s total financial circumstances. However, the payments must comply with the federally required “10-year rule” and cannot be less than $50 per month. The only exception is for a condition of hardship documented with the guarantee agency for which a negotiated amount is considered. Payments must be voluntary, as garnishments do not qualify. Failure to keep to the negotiated program with the guarantee agency will result in elimination from consideration for reinstatement of eligibility.

Rehabilitation Repayment arrangements are made by the borrower and the current guarantor, and follow the same format as a reinstatement of eligibility program. Upon completion of 12 consecutive monthly payments, the guarantor will arrange the sale of the loan to an eligible lender. The borrower is required to complete a Rehabilitation Agreement prior to the guarantor arranging the sale of the loan. Again, failure to keep the negotiated program with the guarantor will result in elimination from consideration for rehabilitation.

Reaffirmation of Debt If a borrower had their loans canceled and written-off by the guarantee agency due to disability or bankruptcy and wishes to regain eligibility for Title IV funds, the borrower must first reaffirm the canceled debt. This will include completing a Reaffirmation Agreement to acknowledge the debt as well as to agree to repay the debt. If the debt was in good standing prior to cancellation, the borrower regains eligibility for Title IV funds once the debt is reaffirmed. The guarantee agency will then arrange for sale of the loan to an eligible holder. However, if the debt was in default prior to cancellation, the borrower must follow a program of reinstatement of eligibility for Title IV funds once the debt is reaffirmed.

General Repurchase If default occurred through no fault of the borrower (i.e. an error by the loan holder/servicer), the guarantee agency will arrange for the sale of the loan to an eligible holder. Once the sale of the loan is finalized with a new holder, the borrower regains eligibility to use Title IV funds and all derogatories reported to the credit bureaus will be deleted. To participate in this option, the borrower must be able to document that the default originally occurred due to an error by the guarantee agency.

LEAVING SCHOOL If you leave school for any reason or are enrolled less than half time during your medical, dental, or public health career, you must contact SFS to schedule an Exit Counseling Session to discuss your repayment obligations. When you leave school or are enrolled less than half time, a grace period begins which can last a variable amount of time, depending on the loan program; then repayment of your loans begins. You may want to check your promissory notes for the exact terms of your grace period. If you plan to return to school, you should be sure to arrange to do so before the end of the grace period.

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