Loan Repayment

Monthly Payment | Scholarship Resources|
Family Program | Basic Eligibility | Stafford Loan |
Repayment | Rights & Responsibilities | Related Policies |
Database Match | Private Loan Programs | Tax Benefits |
Postscript - Using Home Equity Loans |

Repayment of Federal Stafford Loans begins six months after you cease half-time enrollment (not necessarily upon graduation, as is commonly assumed). During your six-month grace period the federal government continues to provide an interest subsidy on your Subsidized Loan. Prior to entering repayment you will be asked to select a repayment plan from one of the following four options:

• Standard Repayment--requires a fixed payment fee of at least $50 a month for a repayment period of up to 10 years. If at the time you enter repayment you have not notified the Loan Servicing Center of your preference, you automatically will default into this plan.
• Extended Repayment--also requires a fixed payment fee of at least $50 a month, but the period of time for repayment will vary from 12 to 30 years depending upon the total amount of principal. (See the "Exit Counseling Guide for Borrowers" for a repayment table.)
• Graduated Repayment--allows payments to begin at a lower rate and then increase every two years thereafter. The repayment period, like the Extended Repayment plan, will vary from 12 to 30 years depending upon the amount of principal borrowed. The scheduled payment cannot be less than the amount of interest that accumulates between monthly payments. It also cannot be less than one-half nor more than one-and-one-half times the amount you would be required to make under the Standard Repayment plan.
• Income Contingent Repayment--bases the repayment amount on the borrower's (and the spouse’s, if married) annual adjusted gross income. Each year your monthly payment will be based on your annual adjusted gross income, as reported on your federal income tax return. The loan is repaid over an extended period of time, not to exceed 25 years.

Approximately three months into your six-month grace period the Loan Servicing Center will mail you a disclosure packet. In this mailing you will receive a document which lists your total outstanding principal balance, the due dates of your initial and subsequent payments, plus the monthly payment amounts and grand total you would repay under the Standard, Extended and Graduated Repayment Plans. The applicable interest rates are listed on the second page of this form. Also enclosed will be a Repayment Plan Choices description and Repayment Plan Selection form. If you do not complete and return the Plan Selection form, you automatically will default into the Standard Repayment Plan. Please keep in mind that if your financial situation changes at any time in the future, you always have the option to contact the Servicing Center and change your repayment plan to a more or less accelerated schedule.

As a reminder: you can access your personal account information on our loan servicing center's Web site by utilizing your PIN. Click on "Your Account" or "Log In To Your Account" to view your account balance(s), check recent payment information, etc. Under "Manage Your Account" you can enroll in electronic correspondence, apply for a deferment or forbearance, and change your repayment plan or payment due date. Under "Payments & Billing Options" you can make online payment, enroll to have your payments automatically withdrawn from your checking or savings account with EDA, and enroll to receive or view your bill online. The online budget calculator under "Tools & Planning" also is designed to help you manage your student loan debt.

Helpful Tips:

• If you decide to prepay part of your loan while in an in-school status or grace period--and you are holding both Subsidized and Unsubsidized Direct Loans--be sure to specify that you want the payment applied to your Unsubsidized Loan first. This option is available only prior to entering repayment.
• You may be able to deduct up to $2,500 of the interest you paid on a student loan during 2006. The amount of your deduction will be gradually reduced if your modified adjusted gross income (MAGI) is between $50,000 and $65,000 (between $100,000 and $130,000 if you file a joint return). If your MAGI is $65,000 or more ($130,00 or more for a joint return) you will not be able to take this deduction.To see if you qualify for this tax advantage and to obtain the appropriate forms, visit the IRS web site at www.irs.gov/pub/irs-pdf/p970.pdf.

Exit Counseling Session
An Exit Counseling Session completed online at mapping-your-future is required prior to graduating or when you have ceased half-time enrollment, whichever occurs first. The purpose of this is to summarize your student loan activity, to review repayment, deferment and forbearance options, and to provide you with the mailing and web site address and telephone number for the your Loan Servicing Center.

Deferment and Forbearance Options
If you are having difficulty making your loan payments--and switching payment plans is not sufficient--you are encouraged to request either a deferment or a forbearance. A deferment temporarily postpones payment on your student loan. If a portion of your loan is subsidized, the interest does not accrue on that amount during an approved deferment period. Interest does, however, continue to accrue on the unsubsidized amount. A forbearance takes the form of: a temporary postponement of payment; a reduction of loan payments for a specified period of time; or an extension of time to repay your loan. During an approved forbearance interest does continue to accrue on the total loan principal. To determine eligibility for one of these options and to either complete a form online or download a form in .pdf format, please access the Servicing Center's Web site. The Unemployment Deferment and General Forbearance requests now can be completed and submitted online using your PIN. Both the deferment and forbearance options are designed to help you avert default.

Defaulted Student Loans
If you become 270 days (nine months) delinquent in making a payment on your loan, you have defaulted on your student loan. If you fail to make loan payments on time or if you default, the consequences are serious:

• Garnishment of wages
• Claims against your federal income tax refunds
• Legal action against you
• Asset seizure and property liens
• A black mark on your credit rating
• Ineligibility to receive federal student financial aid in the future
• Loss of monthly payment plan, deferment and forbearance options
• Late fees, additional interest, court costs, collection fees, attorney fees, and other costs can be added to your total debt

You are encouraged to call or send an e-mail at any time if you have a question about your student loan, even if you already have completed your program of study here. And, as mentioned previously, the Department of Education also works with student loan borrowers to informally resolve loan disputes and problems through its Office of the Ombudsman. To contact this office, please use the toll-free number (877) 557-2575 or visit their web site at www.ombudsman.ed.gov. Their address is: U.S. Department of Education, FSA Ombudsman, 830 First Street, NW, Washington, DC 20202-2575.

Consolidation Loans
If you have other federal student loans, such as loans from the Federal Family Education Loan Program (Stafford Student Loans, Unsubsidized Stafford Student Loans) or Federal Perkins Loans, you can consolidate them into a Federal Consolidation Loan, allowing you to make one monthly payment to one source. A Consolidation Loan calculates the weighted average of your existing loans, rounds this amount up to the closest 1/8%, and offers you a fixed rate. For additional information on loan consolidation, please contact the Financial Aid Office to obtain a list of lenders.

You should certainly compare the terms of all lenders who offer Federal Consolidation Loans. While it is mandated that all lenders/guarantors use the same weighted-average formula, they all differ in the incentives they will offer you. Probably all of the lenders will offer you the .25% deduction if you repay using electronic debiting. However, not all may offer the same incentive when it comes to making a number of on-time payments. Before you decide on a lender, be sure they offer repayment plans flexible enough to meet your financial needs both now and in the future.

Back to top