US loan repayments and return of unearned funds

You have a six-month grace period for both Direct Subsidised Loans and Direct Unsubsidised Loans. This means that loan repayments start six months after you graduate, discontinue your course or drop below half-time enrolment.

There’s no grace period for Direct PLUS loans, but you can defer repayments while you’re enrolled at least half-time. You can also defer repayments for an additional six months after you graduate or drop below half-time enrolment. However, if you choose to defer repayments, any interest that accumulates during deferment adds to your loan amount.

You have a choice of several repayment plans and the Direct Loan Servicing Centre will let you know when your first repayment is due. If you don’t choose a repayment plan, you’ll be placed on the Standard Repayment Plan.

Direct Consolidation Loan

By the time you finish university, you may have a number of loans. The National Student Loan Data System (NSLDS) provides data on all your federal student loans to help you keep track of how much you’ve borrowed. You can consolidate all your federal student loans into a single Direct Consolidation Loan to have a single monthly repayment.

Deferment

A loan deferment postpones the repayment of your loan. To qualify for a loan deferment, you need to meet certain conditions.

You do not pay interest on subsidised loans during deferment, but interest continues to accumulate during deferment of an unsubsidised loan.

Forbearance

If you’re in financial difficulty with no loan deferment option, you may postpone repayments with loan forbearance. This allows you to stop making repayments temporarily, make smaller repayments or extend the time of making repayments.

Delinquency and default

If you fail to make a monthly repayment within 30 days of its due date, your loan will become delinquent. This could damage your credit rating for up to seven years.

After several months of delinquency, your loan status can go into default with serious consequences. For example, you might:

• have a portion of your wages withheld to repay the loan
• be sued and forced to pay for all legal costs
• need to pay 15–18% more interest on the loan if a collection agency is involved
• have your US federal income tax refunds withheld to repay the loan
• have your driver licence cancelled (this occurs in a number of US states)
• lose eligibility for all federal and state financial aid until you’ve made satisfactory repayment arrangements
• have your professional licence renewal denied until you make satisfactory payment arrangements.

Cohort default rate

Each year the US Department of Education calculates a cohort default rate to determine the percentage of federal loan borrowers at each university who default on their loan repayments. Monash University's official three-year cohort default rate (from the 2021 US federal fiscal year) is 0.0.

If you receive financial aid, discontinue your course and receive a fee refund, you may owe money to the US Department of Education. The Student Fees Refund Procedure (pdf) is independent of the regulations for the return of your Title IV aid to the US Department of Education.

Return of Title IV aid

The calculation of the percentage of Title IV (R2T4) aid earned is based on your enrolment:

number of days enrolled ÷ number of calendar days in the teaching periods x 100 = enrolment percentage

If you remain enrolled beyond 60% of the academic period, you earn 100% of the aid you received. If you discontinue your course at the 60% mark or earlier, the unearned portion of aid must be returned to the US Department of Education. Both you and the University share the responsibility to return unearned aid.

The unearned amount must be returned in this order:

1. Direct Unsubsidised
2. Direct Subsidised
3. Direct PLUS.

Unearned Direct Loan amounts must be returned no later than 45 days of the date of your course discontinuation.

If unearned aid results in a balance due, we’ll email you a revised tuition and fee invoice. It’s your responsibility to pay this balance.

Notification of return of funds

When you discontinue your course or take study leave (intermission), the financial aid administrator will notify you by email of any need to return unearned Direct Loan funds. (They’ll use your Monash and personal email addresses in the Web Enrolment System (WES).) This notice will tell you the amount of unearned Direct Loan funds and whether the University will return funds on your behalf.

If your study leave exceeds 180 days within a 12-month period, you’ll be considered as ‘withdrawn from school’ for loan repayment purposes. In this instance, you may wish to check your loan repayments and grace period with your loan servicer (the company contracted by the lender to handle administrative tasks such as payment collection).

For more information, visit the Federal Student Aid (FSA) website or contact the FSA Information Centre (FSAIC).