Students who borrow a loan are required to pay back the full amount of the loan plus any accrued interest. There are several repayment options available to students to provide options for students to make their payments on time each month. Failure to make payments can impact the student's credit and, if the loan goes into default, prevent the student from receiving further federal financial aid. This section is designed to assist students with the repayment process.
Students can view information on all their federal loans online at www.nslds.ed.gov (The National Student Loan Data System). Students may sign into this site and view information on their loans including disbursed amounts, type of loan, outstanding principle and interest, the name and contact information for the agency servicing the loan, and the total amount the student borrowed in loans. Payments are made to the agency servicing your loan. The student then works with this servicer to make payments, change addresses, request deferments, forbearance, or a new repayment plan. Detailed information and repayment calculators for each repayment option is available at www.studentloans.gov or by viwing other repayment optionsHERE. A summary of the five repayment options is provided below.
Standard Repayment Plan
Under this plan, a student pays a fixed amount each month. Monthly payments are at least $50, but the minimum payment may be higher based on the total amount borrowed (view a Monthly Repayment Table). There is a 10-year limit on repayment under the Standard Repayment plan.
Example: Susan has graduated and borrowed a total of $7500 in Stafford loans with an interest rate of 6.8%. Her monthly payments under the Standard Repayment plan are approximately $86.31 for 120 months. This student will pay a total of $10,357.20 when her loans are paid in full.
Extended Repayment Plan
Under this plan, a student pays a fixed annual or a graduated repayment amount over a period of time. The maximum time period for this plan cannot exceed 25 years. To apply for this plan, a student must have over $30,000 in loans for one loan program (FFEL or Direct Loan program). This means that a borrower who has $5000 in the FFEL program (which was discontinued June 30, 2010) and $35,000 in the Direct Loan program will only be able to do the extended repayment option for the $35,000 in the Direct Loan Program.
Example: Stanley borrows $37,750 in Stafford loans under the Direct Loan program. His loans have a 6.8% interest rate. Under the standard repayment plan, his payments would be approximately $575.40. Billy cannot make this payment so he applies for the extended repayment plan through his servicer. His payments are now a fixed $347.04 a month for 300 months. However, under the plan, he will pay significantly more in interest. His total payments will be $104,112 if he only pays the minimum payment for the full 300 months.
Graduated Repayment Plan
Under this plan, the payments start low and are increased every two years. The payment period is ten years. This plan is for students who expect their income to increase steadily over the payment period. For more information and to calculate repayment amounts go to the Department of Education's Repayment Plans and Calculators at studentloans.gov.
Income Based Repayment (IBR)
Under this plan, a student can set up a plan with the servicer which should be affordable based on the income and family size. Students should qualify if the repayment amount calculated is less than the monthly amount for the Standard Repayment plan. Please checkout more information and the IBR calculator at the studentloans.ed.gov website.
Income Contingent Repayment (ICR)
The ICR plan is only available to Direct Loan borrowers. Monthly payments are recalculated annually using the student's Adjusted Gross Income (AGI) from the student's taxes, spouse's income (if married), family size, and the total amount in Direct Loans. For more information and for ICR calculator, visit studentloans.gov or to view more repayment options.
Deferments and Forbearance
If you are having trouble making your payments it is important that you contact the agency servicing your loan immediately. You may qualify for a deferment, forbearance, or another plan to help you make your payments.
Deferment is a temporary suspension of loan payments. Payments are not required for loans in deferment status, but interest still accrues on unsubsidized Stafford and PLUS loans. Forbearance is a temporary postponement or reduction of payments for a period of time due to economic hardship. More information is available online at studentloans.gov or to view more repyament options.
Consolidation is the process where a student can combine the borrower's federal education loans into one new consolidation loan. To apply or for more information go to www.studentloans.gov and select "Direct Loan Consolidation."