Loan Counseling: Loan Repayment
Federal Stafford Loan repayment is deferred while a student is enrolled at least half-time in a degree granting program at an accredited institution. If a student has been out of school (whether or not the student has started repaying their loans) and returns to school the student's loans may be eligible for deferment again. A student must be enrolled at least half-time in order to be eligible for loan deferment.
Students are granted a one time six-month grace period after leaving school, graduating or dropping below half-time enrollment before repayment begins. If a student has used all or part of the six-month grace period and returns to school, he/she may not be eligible for an additional grace period again before repayment begins. Students should contact their lender to find out when repayment begins, the interest rate, the amount of each loan payment, etc.
For more information about student loan repayment, go to the U.S. Department of Education's
loan repayment information page:
For the Department of Education Repayment Plans and Calculators:
Repaying Student Loans
When it comes time to start repaying student loan(s), borrowers can select a repayment plan thats right for their financial situation. Generally, the borrower will have from 10 to 25 years to repay their loan, depending on which repayment is chosen.
Loan Repayment Plans:
- Standard or Level Repayment—the most common and typically the least expensive option in terms of total interest costs. This plan provides a fixed monthly payment of at least $50 over a period of up to 10 years. If the monthly payments under this plan exceed 8-10 percent of the students gross monthly income, the student might want to consider one of the other repayment options below or loan consolidation. To calculate your estimated loan payments, go to the Standard Repayment plan calculator.
- Graduated Repayment—monthly payments start low and increase over time. This may be a good choice if the student has a limited income to start, but expects higher earnings in the future. The maximum repayment under this plan is 10 years. Total interest costs are higher with this plan than with standard/level repayment. To calculate your estimated loan payments, go to the Graduated Repayment plan calculator.
- Income-Contingent Repayment (DL only) —This plan gives you the flexibility to meet your Direct Loan obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse's income if you're married), family size, and the total amount of your Direct Loans. Under the ICR plan you will pay each month the lesser of: 1)the amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, 2) or 20% of your monthly discretionary income*. If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized.The maximum repayment period is 25 years. If you haven't fully repaid your loans after 25 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged. You may, however, have to pay taxes on the amount that is discharged.
- Income-sensitive repayment (FFELP only) — payments can be adjusted up or down annually to account for changes in your income. The repayment period of 10 years can be extended to 15 years under a special forbearance provision. Total interest costs are higher with this plan than with standard/level repayment.
- Extended Repayment—available only if the student did not have a balance on a federal student loan as of October 7, 1998. It is only available if the student’s outstanding education loan balance is more than $30,000. Under this plan, the student may reduce the monthly payment amount by spreading payments over a period of up to 25 years. Students may choose to make payments over this extended period under a level or graduated schedule. Because payments are stretched over a longer term, total interest costs are higher than under the other repayment plans. To calculate your estimated loan payments, go to the Extended Repayment plan calculator.
- Loan Consolidation—allows a student to bundle all of their federal education loans into one convenient single monthly loan payment at a fixed interest rate. Depending on the student’s total outstanding loan balance, students may also be able to extend the repayment period and lower their monthly payments. By extending the payment period and making smaller payments over a longer period of time, students will pay more total interest.
Income Based Repayment Plan (as of July 1, 2009)
Income-Based Repayment(IBR)—This new repayment option (the income-sensitive repayment plan in the FFEL program and the income-contingent repayment plan in the Direct Loan program will continue to be available to borrowers) is available as of July 1, 2009, to all FFEL and Direct Loan borrowers who have a partial financial hardship, except for FFEL or Direct Loan parent PLUS Loan borrowers or a FFEL or Direct Loan Consolidation Loan borrowers, who repaid parent PLUS loans through the Consolidation Loan. Under this plan, your required monthly payment amount will be based on your income during any period when you have a partial financial hardship. Your monthly payment amount may be adjusted annually. The maximum repayment period under this plan may exceed 10 years. If you repay under this plan and meet certain other requirements over a specified period of time, you may qualify for cancellation of any outstanding balance on your loans. Contact the Direct Loan Servicing Center (for Direct Loans) or your FFEL lender (for FFEL Program loans) for more information about the Income-Based Repayment Plan.
Income Based Repayment Plan- PAYE (as of December 21, 2012)
To qualify for Pay As You Earn (PAYE), you must have a partial financial hardship. You have a partial financial hardship if the monthly amount you would be required to pay on your eligible federal student loans under a 10-year Standard Repayment Plan is higher than the monthly amount you would be required to repay under Pay As You Earn. For this purpose, your eligible student loans include all of your William D. Ford Federal Direct Loan (Direct Loan) Program loans that are eligible for Pay As You Earn, as well as certain types of Federal Family Education Loan (FFEL) Program loans. Although your FFEL Program loans cannot be repaid under Pay As You Earn, the following types of FFEL Program loans are counted in determining whether you have a partial financial hardship:
- Subsidized and Unsubsidized Federal Stafford Loans
- Federal PLUS Loans made to graduate or professional students
- Federal Consolidation Loans that did not repay any PLUS loans for parents
The following Direct Loans are eligible for Pay As You Earn:
- Direct Subsidized Loans
- Direct Unsubsidized Loan
- Direct PLUS Loans made to graduate or professional students
- Direct Consolidation Loans without underlying PLUS loans made to parents
You also must be a new borrower as of Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. You are a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program loan as of Oct. 1, 2007, or had no outstanding balance on a Direct Loan or FFEL Program loan when you received a new loan on or after Oct. 1, 2007.
Your payment amount may increase or decrease each year based on your income and family size. Once you've initially qualified for Pay As You Earn, you may continue to make payments under the plan even if you no longer have a partial financial hardship.
For more information: http://studentaid.ed.gov/sites/default/files/pay-as-you-earn.pdf
Income Based Repayment Plan- REPAYE (as of December 17, 2015)
For Revised Pay As You Earn (REPAYE), there is no income requirement to qualify. Eligible student loans include all of your William D. Ford Federal Direct Loan (Direct Loan) Program loans that are eligible for Pay As You Earn, as well as certain types of Federal Family Education Loan (FFEL) Program loans. Borrowers may qualify for loan forgiveness after 20 years of repayment for undergraduate loans, or after 25 years of repayment for graduate study. Any forgiven loan debt is taxable under current tax laws. Unlike with other income-driven plans including PAYE, REPAYE calculates discretionary income for married borrowers according to joint adjusted gross income regardless of whether each spouse files separately.
Your payment will generally be 10 percent of your discretionary income. In addition, the REPAYE Plan also will provide a new interest subsidy benefit to prevent ballooning loan balances for those whose income-driven payments cannot keep up with accruing interest.
The following loans are not eligible for repayment under Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE):
- Direct PLUS Loans made to parents
- Direct Consolidation Loans that repaid PLUS loans (Direct or FFEL) made to parents
- Private education loans
Click here for more information.
Loan Forgiveness for Public Service Employees
There is a new loan forgiveness program for public service employees. Under this program, the amount forgiven is the remaining outstanding balance of principal and accrued interest on an eligible Direct Loan for a borrower who is not in default and who makes 120 monthly payments on the loan after October 1, 2007. The borrower must be employed full-time in a public service job during the same period in which the qualifying payments are made and at the time that the cancellation is granted. For more information: http://studentaid.ed.gov/students/attachments/siteresources/LoanForgivenessv4.pdf.
If you have trouble making your education loan payments, contact immediately the organization that services your loan. You might qualify for a deferment, forbearance, or other form of payment relief. It's important to take action before you are charged late fees. For Federal Perkins Loans, contact your loan servicer or the school that made you the loan. For FFEL Loans, contact the lender or agency that holds your loan. For Direct Loans, contact the Direct Loan Servicing Center at www.dl.ed.gov or by calling 1-800-848-0979 or 1-315-738-6634. TTY users should call 1-800-848-0983.
Deferment—You can receive a deferment for certain defined periods. A deferment is a temporary suspension of loan payments for specific situations such as reenrollment in school, unemployment, or economic hardship. For a list of deferments, click here. You don't have to pay interest on the loan during deferment if you have a subsidized FFEL or Direct Stafford Loan or a Federal Perkins Loan. If you have an unsubsidized FFEL or Direct Stafford Loan, you're responsible for the interest during deferment. If you don't pay the interest as it accrues (accumulates), it will be capitalized (added to the loan principal), and the amount you have to pay in the future will be higher. You have to apply for a deferment to your loan servicer (the organization that handles your loan), and you must continue to make payments until you've been notified your deferment has been granted. Otherwise, you could become delinquent or go into default.
Military Service Deferment—An active duty military deferment is available to borrowers in the FFEL, Direct Loan and Perkins Loan programs who are called to active duty during a war or other military operation or national emergency. This deferment is available while the borrower is serving on active duty during a war or other military operation or national emergency or performing qualifying National Guard duty during a war or other military operation or national emergency and, if the borrower was serving on or after Oct. 1, 2007, for an additional 180-day period following the demobilization date for the qualifying service.
Active Duty Student Deferment—Effective Oct. 1, 2007, a FFEL, Direct Loan, or Perkins Loan borrower who is a member of the National Guard or other reserve component of the U.S. Armed Forces (current or retired) and is called or ordered to active duty while enrolled at least half-time at an eligible school, or within six months of having been enrolled at least half-time, is eligible for a deferment during the 13 months following the conclusion of the active duty service, or until the borrower returns to enrolled student status on at least a half-time basis, whichever is earlier.
Economic Hardship Deferment—A FFEL, Direct Loan, or Federal Perkins Loan borrower may qualify for an economic hardship deferment for a maximum of three years if the borrower is experiencing economic hardship according to federal regulations. The Loan Deferment Summary Chart here shows Stafford Perkins Loan deferments for loans disbursed on or after July 1, 1993. For information on deferments for loans received before that date, Direct Stafford and PLUS Loan borrowers should contact the Direct Loan Servicing Center at 1-800-848-0979. TTY users should call 1-800-848-0983. Or, go online at www.dl.ed.gov. FFEL Stafford and PLUS Loan borrowers should contact their lender. For more information on deferments, contact your lender or the financial aid office at your school.
Forbearance— Forbearance is a temporary postponement or reduction of payments for a period of time because you are experiencing financial difficulty. You can receive forbearance if you're not eligible for a deferment. Unlike deferment, whether your loans are subsidized or unsubsidized, interest accrues, and you're responsible for repaying it. Your loan holder can grant forbearance in intervals of up to 12 months at a time for up to 3 years. You have to apply to your loan servicer for forbearance, and you must continue to make payments until you've been notified your forbearance has been granted.
Note to PLUS Loan borrowers: Generally, the same eligibility requirements and procedures for requesting a deferment or forbearance that apply to Stafford Loan borrowers also apply to you. However, since all PLUS Loans are unsubsidized, you'll be charged interest during periods of deferment or forbearance. If you don't pay the interest as it accrues, it will be capitalized (added to the principal balance of the loan), thereby increasing the amount you'll have to repay.