Grace-Period Follow-Up Steps Help Keep Borrowers Informed
Submitted by Linda Athearn, Account Executive, USA Funds Services

Federal Stafford-loan borrowers generally have a six-month grace period after they leave school, during which the borrower is not required to make payments. Toward the end of the grace period, the borrower and loan servicer establish repayment schedules and review alternative repayment plans. USA Funds®’ online Best Practices in Debt Management Manual recommends that financial-aid administrators contact borrowers during the grace period to encourage them to begin repayment on time. The following are some tips for keeping students up-to-date about their education-loan-repayment status:

• Send at least two letters during the grace period to all students who have received Federal Stafford loans. The purpose of the letters is to help ensure that borrowers begin repayment on time and are informed of the options available if they are unable to begin or continue to make payments on a timely basis.
  
  
• Keep copies of all letters mailed during the borrower’s grace period in the borrower’s financial-aid file. Mail all correspondence in envelopes stamped “Forwarding and Address Correction Requested.”
  
  
• All letters should provide a date – two weeks from the day the letters are sent is a good time frame – by which the student borrower must reply. Financial-aid staff should contact borrowers who do not reply, and document all telephone contact.
  
  
• Seek more-current contact information for borrowers whose letters returned are unopened. If necessary, send letters and make follow-up calls to the addresses of parents and all references in an effort to contact the borrower.
  
  
• Update school records with any new data obtained regarding the student’s address, telephone number, e-mail address and other contact information. Advise the borrower’s lender of new information received.
  
  
• Send letters with language that is appropriate for borrowers’ specific length of time before repayment begins.

More information and sample grace-period follow-up letters to borrowers are available in the Best Practices in Debt Management Manual. To access the manual, visit USA Funds®’ Web site, www.usafunds.org, and select “Financial-Aid Professionals,” “Debt Management” and “Best Practices in Debt Management Manual.”