Managing your student loan debt
What options are available to manage your student loan debt? What terms are available for repayment? This article addresses some options.
Stafford Loans have a six-month grace period after a student stops attending (drops to less than half time, graduates or withdraws) before the first payment is required. Interest will accrue on subsidized loans first made between July 1, 2012, and July 1, 2014, and all unsubsidized loans during grace periods.
If loan interest accrues during this time and is not paid off, it will be added to the principal balance of the loan when repayment begins. Each loan has only one grace period.
Parent Loan for Undergraduate Students (PLUS) borrowers enter repayment once the loan is fully disbursed. This loan has a fixed interest rate of 7.9 percent.
Repayment of PLUS for Graduate and Professional Degree Students begins six months after a student stops attending (drops to less than half time, graduates or withdraws). Borrowers may choose to pay accrued interest during the grace period or allow the interest to capitalize when the grace period ends.
In all cases, your loan servicer will notify you when your first payment is due. If not, contact the servicer to ensure it has your correct contact information.
When you first enter repayment, you will have the option to choose a repayment plan. If a choice is not made, you will be placed on the standard repayment plan.
- Standard: Monthly payments are a fixed amount, payable monthly until the loans are paid in full. The borrower has up to 10 years to repay loans. Standard repayment offers the fastest repayment schedule and generally requires larger monthly payments than the other plans. Monthly payments cannot be lower than $50 and are calculated for each borrower based on the total amount of the loan debt.
- Graduated: Monthly payments are lower at the start of repayment and usually increase every two years. The repayment period is limited to 10 years. Stafford Loan, PLUS, PLUS for Graduate and Professional Degree Students, and federal direct consolidation loans are all eligible for graduated repayment.
- Extended: This is a fixed annual or graduated repayment plan during 25 years for eligible borrowers with more than $30,000 in outstanding Federal Family Education Loans (FFEL) or outstanding Direct Loans. Be aware that extending the repayment period will also increase the amount of interest you pay over the life of the loan.
- Income-Based Repayment (IBR): This repayment plan bases the monthly payment on the amount of the borrower’s income and family size. In general, as the borrower’s income changes, the payment amounts change. The income-based repayment plan is not available for PLUS. The loan may be forgiven if a balance remains after 25 years of repayment in good standing.
Borrowers may be eligible for a deferment or forbearance that postpones payments and, in some cases, interest. To receive a deferment or forbearance, contact your loan servicer. If you aren’t sure who your student loan servicer is, go to nslds.ed.gov.
- Deferment: A period during which repayment of the loan principal and interest is temporarily delayed. Borrowers must meet certain criteria to qualify for a deferment, such as reenrollment in school at least half time, study in an approved graduate fellowship or rehabilitation training program for the disabled, qualifying active-duty military service or during the 13 months following qualifying active-duty military service, unemployment or economic hardship as determined by the servicer. Borrowers in default cannot qualify for a deferment. For more details, contact the student loan servicer.
- Forbearance: A period during which your monthly loan payments are temporarily suspended or reduced. You may qualify for forbearance if you are willing but unable to make loan payments due to certain types of financial hardships. During forbearance, principal payments are postponed, but interest continues to accrue. Accrued unpaid interest will be added to the principal balance (capitalized) of your loan(s) at the end of the forbearance period, increasing the total amount you owe. Borrowers in default cannot qualify for forbearance. For more details, contact the student loan servicer.
You can prepay your loan at any time. That means you can make payments while in school or during the grace period and lower your total interest paid. Prepaying is a good way to help manage your total student loan debt.
For more information on student loan repayment, please visit the Department of Education’s website.