When do I begin repayment on my Federal Direct loan?
Your loan will enter repayment six months after graduation or dropping below half-time status. Typically, a student who is taking 6 or more credits is considered half-time. It is important to check the enrollment status requirements at your school to be certain you are enrolled at least half-time.
What happens to my Federal Direct loan if I do not attend school at least half-time?
What happens to my Stafford Loans if I do not attend college at least 1/2 time?
The government pays the interest on a Subsidized Stafford loan as long as you are enrolled in school at least half-time. If you drop below half time status, your six-month grace period will begin. During the grace period, you will not have to make loan payments.
Beginning July 1, 2012 the government will no longer pay the interest on subsidized Stafford loans during your grace period, and interest will begin to accrue once you fall below half time enrollment status.
If you resume to over half-time enrollment status within the six month grace period window, your grace period will be reset to six months to begin the next time you fall below a half time status. If you do not resume at least half-time during this period, your loan will go into repayment at the end of the six month grace period. It is important to check the enrollment status requirements at your school to be certain you are enrolled at least half-time.
What are my repayment options?
You may prepay your loan at any time without penalty.
You may be able to structure your repayment plan to fit with your financial situation. To inquire about the best payment plan for you, contact your lender or loan servicer.
Four common repayment options are:
A standard plan whereby you pay a fixed amount each month for ten years.
A graduated plan whereby you pay more over time.
An extended plan whereby you extend the time it takes to repay a loan. This option is often reserved for students with significant debt loads.
An income-based repayment (IBR) plan whereby your monthly payment amount is capped at 15% of your discretionary income. To be eligible for IBR, you must demonstrate partial financial hardship. Borrowers who have not repaid their entire loan balance after 25 years may be eligible for loan forgiveness, which means the federal government will cancel the remaining loan balance.
For more information about repayment plans please visit the Department of Education website at:www.studentaid.ed.gov/repay-loans
What is an Income-Based Repayment Plan?
Effective July 1, 2009 the Income-Based Repayment (IBR) plan is a new repayment option for federal student loan borrowers. Under IBR, your student loan payments are intended to be affordable based on your income and family size. IBR caps your monthly payment amount at 15% of your discretionary income. To be eligible for IBR, you must demonstrate partial financial hardship.
What is the repayment period under an Income-Based Repayment Plan?
The maximum repayment period for loans under the IBR plan is 25 years. Borrowers who have not repaid their entire loan balance after 25 years may be eligible for loan forgiveness, which means the federal government will cancel the remaining loan balance.
If you are currently in repayment and wish to speak to someone about possibly changing your repayment plan to the IBR plan, contact your current servicer or lender.
For more information about repayment plans please visit the Department of Education website at: http://studentaid.ed.gov/PORTALSWebApp/students/english/OtherFormsOfRepay.jsp
What percentage of my post-college income should I plan to pay toward my loans?
As a general rule, it is recommended that you aim to pay at most 10-12% of your pre-tax salary on your loan debt.
Everyone's situation is unique, so the important thing is to be prudent about your debt and spend wisely.
Do you have any suggestions for what I should be doing now to prepare myself for repaying my loans?
• Prepare a realistic budget and stick to it
• Contact your lender or servicer if you have not received repayment information.
Effective July 1st, 2010, all new Stafford Student Loans and PLUS Loans are Direct Loans through the US Department of Education. If you have loans prior to July 1st, 2010, you may have a bank as a lender. It is important you know who your lender is.
It is your responsibility to make your payments on time. • Open all of your mail Your lender may transfer or sell your loan. It is the responsibility of the lender to notify you if such a transaction occurs. This notification is usually communicated by mail.
When should I consolidate my federal loans?
The answer to this question depends on your situation, interest rates, and the types of loans you have.
To make an informed decision about consolidation, you should educate yourself about the pros and cons of doing so.
Be aware that consolidation can help you manage your loans by giving you a single payment. It can also lower the amount you owe each month. However, you may also wind up paying more in interest in the long-run.
If, on the other hand, you have high variable interest loans, and can consolidate to a lower, fixed interest loan, you will be able to save yourself money through lower interest payments.
The key thing is to figure out what makes the most sense in your specific situation.
To determine if this is a good idea, discuss the option with a financial aid administrator or a representative from Direct Loans.
What are my Stafford or Federal Direct Subsidized and/or Unsubsidized loan cancellation options?
Your Stafford or Federal Direct Subsidized and/or Unsubsidized loan may be cancelled in the case of death or permanent disability. Documentation of your death or disability must be submitted to your lender.
What is Loan Forgiveness?
In certain circumstances you may be eligible to apply for loan forgiveness. Loan forgiveness means that the federal government will cancel all or part of your Federal Direct Subsidized and/or Unsubsidized loan for:• Performing volunteer work; • Serving in the military• Teaching or practicing medicine in certain types of communities; • or, • Meeting other criteria specified by the forgiveness program. To see if you are eligible for loan forgiveness, visit: http://studentaid.ed.gov/PORTALSWebApp/students/english/discharges.jsp?tab=repaying
What is Public Service Loan Forgiveness?
If you borrowed a Direct Loan, or have consolidated your loans into a Direct Consolidation Loan, you may be eligible for Public Service Loan Forgiveness. Under this program, any remaining debt after 10 years of full-time employment in public service will be forgiven. Only payments made on or after October 1, 2007 count toward the required 120 monthly payments.
For more information on the Public Service Loan Forgiveness program, visit:
What happens if I default on a loan?
Defaulting on a loan has very serious negative consequences.
The following are some of the consequences you may face.
Your loan may become due and you will have to pay off the entire amount.
Your loan may be turned over to a collection agency and you may be responsible for collection costs.
You will be ineligible for any more Financial Aid.
Your credit score will be negatively affected.
The IRS will be notified to intercept any refunds.
Your wages may be garnished.
You may be susceptible to litigation.
You will lose the right to defer your loan payments.
Your college may withhold academic transcripts.
If I default on a student loan, how can I fix it?
If you are in default on a student loan, you are jeopardizing your financial health.
Default will negatively affect your credit history, meaning you will pay more for credit in the future, and may be denied credit.
Fixing the situation requires a thoughtful plan of action.
Above all, it is important that you contact your lender. The lender may be able to work with you to develop a more flexible payment plan.
You might also contact the college’s financial aid administrators, who can provide helpful advice.
You should be sure to keep your loan documents organized and easily accessible. A folder organized with all of your records and paperwork is a good idea.
If you speak with anyone about your loans, be sure to keep a record of the date and time, and their name.
Going forward, look at your personal budget to see if you can cut back on unnecessary spending.
Put a plan together to get out of default as quickly as is practically possible.
Are my parents responsible for paying back my student loans?
No. Parents are not typically responsible for paying back educational loans taken out by their children.
Students themselves are responsible for paying back their educational loans.
Parents are responsible for paying back PLUS Loans and any loans they co-sign for students under 18 years old.
Can I get federal financial aid if I am in default on a student loan?
No. If you are in default on a student loan, you are ineligible to receive federal financial aid.
Where can I find information about my loans?
The National Student Loan Data System (NSLDS) is the U.S. Department of Education’s central database for student aid. NSLDS is available to answer questions about Title IV loans and/or Pell Grants. Go to http://www.nslds.ed.gov for information on loan amounts, outstanding balances, loan statuses and disbursements. Or call the Federal Student Aid Information Center toll-free at (800) 4-FED-AID.
What happens to my loan if I move or change schools?
As a Federal Loan borrower, it is your responsibility to notify your school and/or servicer of certain changes.
You must notify your financial aid office if you:
• Reduce your enrollment status to less than half time
• Withdraw from school
• Stop attending classes
• Fail to re-enroll for any term
• Change your expected graduation date
• Change your name, local address, permanent address, or email address
You must notify your school and/or servicer if you:
• Change your address or telephone number
• Change your name (for example, maiden name to married name)
• Withdraw from school or begin attending less than half time
• Transfer from one school to another
• Change employer or employer’s address or telephone number changes
• Have any other change in status that would affect your loan (for example, the loss of eligibility for an unemployment deferment by obtaining a job)
Remember: It is your responsibility to repay your loan(s) on-time and to communicate any change in status to your financial aid office and servicer.