Bankruptcy must be filed for in court and has serious long-term financial implications for a person's credit history. In bankruptcy proceedings, student loans less than five years old can be challenged by the lender. For federal need analysis purposes, the base year is the calendar year preceding the award. When a lender accrues interest before the borrower goes into repayment, then adds that amount to the principal. Capitalizing increases the total to be repaid and the size of the minimum monthly payment.
Students can avoid capitalizing interest by paying the accrued interest.
Consolidation Combining two or more loans into one new loan that has a longer repayment term and a single monthly payment that is smaller than the sum of previous monthly payments. Note that while this may ease the borrower's cash flow, consolidation can add significantly to the amount of overall interest that is paid over time. The student's cost of attendance includes not only tuition and fees, but also the student's living expenses while attending school. The cost of attendance is estimated by the Seminary, within guidelines established by federal law. The cost of attendance is compared to the student's expected family contribution to determine the student's need for aid.