Loans Student Loans 2 — Questions and Answers
Question 1: What is the Public Service Loan Forgiveness (PSLF) program?
- A program that forgives loans after 10 years of any employment
- Forgiveness of remaining federal loan balance after 120 qualifying payments while working for a qualifying public employer (Correct answer)
- A grant program for public school teachers only
- An automatic forgiveness program based on income alone
Correct answer: Forgiveness of remaining federal loan balance after 120 qualifying payments while working for a qualifying public employer
PSLF forgives the remaining balance on Direct Loans after the borrower makes 120 qualifying payments while employed full-time by a qualifying public or non-profit employer.
Question 2: Which of the following is NOT an income-driven repayment (IDR) plan for federal student loans?
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
- Pay As You Earn (PAYE)
- Graduated Extended Repayment (GER) (Correct answer)
Correct answer: Graduated Extended Repayment (GER)
Graduated Extended Repayment (GER) is not a federal IDR plan; the four IDR plans are IBR, ICR, PAYE, and SAVE.
Question 3: What is the annual borrowing limit for a first-year dependent undergraduate student under the federal Direct Loan program?
- $5,500 (Correct answer)
- $7,500
- $9,500
- $12,500
Correct answer: $5,500
First-year dependent undergraduates can borrow up to $5,500 in Direct Loans, of which no more than $3,500 may be subsidized.
Question 4: Student loan deferment allows borrowers to:
- Permanently eliminate the loan balance
- Temporarily postpone payments, though interest may still accrue (Correct answer)
- Transfer the loan to a family member
- Lower the interest rate immediately
Correct answer: Temporarily postpone payments, though interest may still accrue
Deferment temporarily pauses required loan payments; however, interest typically continues to accrue on unsubsidized and PLUS loans during deferment.
Question 5: What is the primary risk of refinancing federal student loans with a private lender?
- The interest rate always increases
- The borrower loses access to federal protections like IDR plans and PSLF (Correct answer)
- The credit score drops permanently
- The loan term is automatically extended to 30 years
Correct answer: The borrower loses access to federal protections like IDR plans and PSLF
Refinancing federal loans into a private loan means forfeiting all federal borrower protections, including income-driven repayment options and forgiveness programs.
Question 6: Which type of loan requires a credit check and can be taken out by graduate students or parents of undergraduates?
- Direct Subsidized Loan
- Direct Unsubsidized Loan
- Perkins Loan
- Direct PLUS Loan (Correct answer)
Correct answer: Direct PLUS Loan
Direct PLUS Loans require a credit check and are available to graduate/professional students and parents of dependent undergraduates.
Loans Student Loans 2
What is the Public Service Loan Forgiveness (PSLF) program?