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Repayment

Your student loan is a debt you owe for your education, and you should treat your loan as you would any other kind of debt - for example, a loan used to buy a car or a house. As with any debt, you are responsible for repaying your loan - in full - even if you did not:

  • complete school
  • cannot find a job in your field of study, or
  • feel you did not receive the educational or other services you purchased.

Repay your Federal Stafford Loan

  • After you stop attending school at least half time, your 6-month grace period begins. You receive only one grace period per loan.
  • Repayment begins after the grace period ends, with the first payment usually due 45-60 days later.
  • The maximum repayment period is 10 to 30 years.
  • Payments are expected each month.
  • The minimum monthly payment is $50, but may be higher depending on your balance.
  • You may prepay your loan at any time without penalty. Prepayment may substantially reduce your interest costs.

Payment plans

  • Standard:
    • Minimum monthly payment is $50, but may be higher depending on balance
    • Maximum repayment period of 10 to 30 years
  • Graduated:
    • Begins with lower payment amounts that increase over time
    • More interest will accrue over the life of the loan because the principal balance decreases at a slower rate.
  • Income-sensitive:
    • An adjusted payment amount based on gross income
    • Payment will be the greater of your monthly interest amount or 4 percent of your gross monthly income
    • Eligibility and payment amount verified annually
    • More interest will accrue over the life of the loan because the principal balance decreases at a slower rate.
  • Income-based:
    • Available for payments made on or after July 1, 2009
    • An adjusted payment amount based on income and family size
    • Payment will not be more than 15 percent of the amount by which your adjusted gross income exceeds 150 percent of the poverty line for your family size.
    • If the monthly payment amount is not enough to pay accrued interest on a subsidized Federal Stafford Loan, the Department of Education will pay the remaining interest for a period of three years.
    • Eligibility re-evaluated annually
    • More interest may accrue over the life of the loan because the principal balance decreases at a slower rate.
    • Any outstanding loan balance after 25 years will be forgiven
      • Very few borrowers will have a remaining balance after 25 years.
      • The amount that is forgiven may be taxable.
    • Estimate payment under the income based repayment plan.
  • Extended:
    • Available to new borrowers on or after October 7, 1998, who have a minimum balance of $30,000 in loans
    • Payment amounts can be either fixed annually or graduated.
    • Maximum repayment term is 25 years
    • More interest may accrue over the life of the loan because the principal balance decreases at a slower rate.

Repay your Grad PLUS Loan

  • Repayment begins the date the loan is fully disbursed, with the first payment due no more than 60 days later.
    • You can request a deferment while in school.
    • For loans first disbursed on or after July 1, 2008, you can can request a deferment while you are in school and until six months after you graduate, withdraw, or drop below half-time enrollment.
  • The maximum repayment period is 10 years.
  • Payments are expected each month.
  • The minimum monthly payment is $50, but may be higher depending on your balance.
  • You may prepay your loan at any time without penalty. Prepayment may substantially reduce your interest costs.

Payment plans

  • Standard:
    • Minimum monthly payment is $50, but may be higher depending on balance
    • Maximum repayment period of 10 years
  • Graduated:
    • Begins with lower payment amounts that increase over time.
    • More interest will accrue over the life of the loan because the principal balance decreases at a slower rate.
  • Income-sensitive:
    • An adjusted payment amount based on gross income
    • Payment will be the greater of your monthly interest amount or 4 percent of your gross monthly income
    • Eligibility and payment amount verified annually
    • More interest will accrue over the life of the loan because the principal balance decreases at a slower rate.
  • Income-based:
    • Available for payments made on or after July 1, 2009
    • An adjusted payment amount based on income and family size
    • Payment will not be more than 15 percent of the amount by which your adjusted gross income exceeds 150 percent of the poverty line for your family size
    • Eligibility re-evaluated annually
    • More interest may accrue over the life of the loan because the principal balance decreases at a slower rate.
    • Any outstanding loan balance after 25 years will be forgiven
      • Very few borrowers will have a remaining balance after 25 years.
      • The amount that is forgiven may be taxable.
    Extended:
    • Available to new borrowers on or after October 7, 1998, who have a minimum balance of $30,000 in loans
    • Payment amounts can be either fixed annually or graduated
    • Maximum repayment term is 25 years
    • More interest may accrue over the life of the loan because the principal balance decreases at a slower rate.

Loan Consolidation

Loan consolidation can greatly simplify loan repayment by centralizing your loans to one bill and can lower monthly payments by giving you up to 30 years to repay your loans. 

However, if you increase the length of your repayment period, you'll also make more payments and pay more in interest. Be sure to compare your current monthly payments to what monthly payments would be if you consolidated your loans.

Borrower benefits from your original loan, which may include interest rate discounts, principal rebates, or some loan cancellation benefits, can significantly reduce the cost of repaying your loans. You might lose those benefits if you consolidate. Most federal student loans are eligible for consolidation, but private education loans are not.

Generally, you are eligible to consolidate after you graduate, leave school, or drop below half-time enrollment. Repayment of a Direct Consolidation Loan can begin 60 days after the loan is disbursed, or sooner.

More information about loan consolidation


Loan Deferment

Situations when you may apply for deferment include:

  • At least half-time enrollment in college or career school.
  • Period of study in approved graduate fellowship program or approved rehabilitation training program for disabled
  • Period of unemployment or inability to find full-time employment
  • Period of economic hardship (includes Peace Corps service).
  • Active duty in military service.

A deferment is a period during which repayment of the principal and interest of your loan is temporarily delayed. During a deferment, you do not need to make payments.  Depending on the type of loan you have, the federal government may pay the interest on your loan during a period of deferment. 

The government does not pay the interest on your unsubsidized loans (or on any PLUS loans). You are responsible for paying the interest that accrues (accumulates) during the deferment period, but your payment is not due during the deferment period. If you don’t pay the interest on your loan during deferment, it may be capitalized (added to your principal balance), and the amount you pay in the future will be higher.

More information about loan deferment


Loan Forbearance

You can request a mandatory forbearance for the following reasons:

  • You are serving in a medical or dental internship or residency program, and you meet specific requirements. 
  • The total amount you owe each month for all the student loans you received is 20 percent or more of your total monthly gross income (additional conditions apply). 
  • You are serving in a national service position for which you received a national service award. 
  • You are performing teaching service that would qualify for teacher loan forgiveness. 
  • You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program. 
  • You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment.

If you can't make your scheduled loan payments, but don't qualify for a deferment, your loan servicer may be able to grant you a forbearance. With forbearance, you may be able to stop making payments or reduce your monthly payment for up to 12 months. Interest will continue to accrue on your subsidized and unsubsidized loans (including all PLUS loans).  

More information about loan forbearance


Other Strategies

  • Pay off variable private loans first. The interest rates on variable private loans (given by banks and credit unions) are currently lower than the fixed rates on federally backed and private loans. But historically this situation is unusual, and if the economy improves, interest hikes are probable in the near future. That’s why it’s wise to unload these balances as soon as possible. If you can, pay twice the required amount until you have eliminated this debt and make only the minimum monthly contribution toward your fixed-rate federal loans, since those rates cannot increase.
  • Biweekly Payments. First, you are paying less in interest because there is less time between payments for interest to accumulate. Second, you will end up making an extra month's worth of payments every year. This is because paying every other week equals 26 annual payments. It's a relatively painless way to reduce the cost of borrowing and pay off your loans faster. If you get paid biweekly, the payment feels the same on your wallet because you are taking half of a payment from each paycheck.
  • Adding small amounts each month. You may not be able to afford an extra payment a year, but you can afford to send in an extra $5 a month or $25 every other month. Every dollar you pay toward your student loans can save you up to 200% of the extra payment you sent.

 

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