Repaying your student loans

Federal student loans can move from servicer to servicer. This can get confusing. You will need to work with all your loan servicers to keep loans in good standing. To find out who holds your federal loans, your best option is www.nslds.ed.gov. You will need the PIN number you used to electronically sign your FAFSA. If you have forgotten that number, go to www.pin.ed.gov to request a duplicate.

For private, non-federal loans, you can usually find those on your credit report. Go to www.annualcreditreport.com to request a free copy of your credit report.

If you need help, ask for it by calling the loan servicer. If making payments is a struggle, you have options. Contact your loan servicer to learn more about changing your payment plan (to lower the monthly payment amount) or deferment and forbearance options (stop payment for a period of time). To protect your credit, it is best to do this before becoming delinquent on your loans.

What is a deferment? Is deferment right for me?

A deferment is a temporary suspension of student loan payments for a specific situation, such as unemployment or enrolling in school at least half-time. If you have a subsidized student loan, you don’t have to pay the accruing interest. If you have an unsubsidized loan, you are responsible for the accruing interest.

You can download a deferment form from your loan servicer’s website and return it to each of your loan servicers. Learn more about deferment options by visiting the student aid government site. Below are deferment forms for the most common types:

• Unemployment Deferment Form
• Update Economic Hardship form

What is a forbearance? Is forbearance right for me?

Forbearance is a temporary postponement or reduction of payments for a period of time when experiencing financial difficulty. Forbearance is not subsidized by the government, and that means you are responsible for payment of interest that accrues.

Forbearance might be an acceptable option for you if you don’t have other options to resolve a delinquency, as long as you understand the potential cost. Any time you stop making payment of at least interest or extend the repayment period, you increase the overall cost of loan repayment. You are responsible for interest during this period — and if you don’t pay it, it gets added to the principal balance (called capitalization). When that happens, the principal goes up, and the interest accrues on a higher balance for the rest of the life of that loan.

Forbearance is often seen as a feasible option — in many cases, it can be done over the phone with your loan servicer. But just because it’s feasible doesn’t mean it’s the best or right option. To make forbearance a better option, pay the interest that accrues before capitalization.

First, contact your loan holder for details about payment plans. Most servicers allow you to set up automatic payments, making it easier to pay bills on time.

When you first enter repayment, you have the option to pick a payment plan. If you didn’t pick one, you were automatically placed into standard repayment. Standard plans will usually cost the least because the loan is paid off faster and less interest accrues. If the standard payment is too high for you, there are several other plan options including Graduated, Extended and Income Based Repayment. Learn more about these repayment options and their definitions.

You can use the loan calculators on finaid.org or your servicer’s website to see how your monthly payment and total cost will change under different payment plans.

You can also view the Student Loan Repayment Chart that provides an estimate of your payments based on your loan type and loan balance.

Yes, and we strongly encourage you to do so. Paying while you are in school can save you money in the long run, and helps you track your total debt. Contact your loan holder for more information on how they accept payments before repayment—some will allow you to pay online, over the phone or by mail. No matter how you pay, it’s great to be proactive and take charge of your loans before graduation.

The loan servicers for U.S. Department of Education held loans are FedLoan Servicing, Great Lakes, Nelnet and Sallie Mae.

It’s estimated that a 30-day late payment drops a FICO score by about 90 points and a defaulted loan will generally drop a FICO score about 150-200 points. For most people with average credit, 90 points can damage your credit score.

The following is an example of delinquency and default impact on a $150,000, 30-year mortgage. You’ll see that not paying pack your student loans can have a big impact on your FICO score in turn, affecting the interest rate and monthly payment on a home loan. If you’re having trouble repaying some student loans, think about this chart and remember that you have many options.

A loan is in default when you fail to pay several regular installments on time or otherwise fail to meet the terms and conditions of the loan repayment agreement. Your federal student loan is considered in default when it reaches 270 days of delinquency.

You should never default on your loan. Through your loan holders, you have options to prevent default. Contact your loan holder to use those options.

If you do default on a federal student loan, there are serious consequences:

• Collection costs of up to 25% can be added to the balance.
• The holder of the loan can take legal action to recover the money.
• Your wages can be garnished administratively without a court order.
• Income tax refunds can be seized.
• Default is reported to the national credit reporting agencies.
• Loss of eligibility for future federal financial aid, unless a satisfactory repayment schedule is arranged.
• Generally, your student loan is not dischargeable in bankruptcy.

A consequence of default is losing eligibility for federal financial aid. To qualify, you have to do one of the following:

• Pay the loan in full.
• Make six consecutive, on-time monthly payments.
• You must continue monthly payments to retain eligibility.
• Make three consecutive, on-time monthly payments and then pay the default in full through consolidation.
• Make nine consecutive, on-time monthly payments and qualify to rehabilitate the loan.
• Rehabilitation is a good option because the loan is no longer in default and is reported as such to the national credit reporting agencies.

Students receiving federal financial aid have varying rights and responsibilities. In accordance with the Borrower’s Rights and Responsibilities Statement attached to the Master Promissory Note (MPN), the student has the right to:

• Written information on loan obligations and information on rights and responsibilities as a borrower
• A copy of the MPN, either before or at the time the loan is disbursed
• A grace period and an explanation of what this means
• Notification, if in grace period or repayment, no later than 45 days after a lender assigns, sells or transfers the loan to another lender
• A disclosure statement received before repayment begins that includes information about interest rates, fees, the balance owed and a loan repayment schedule
• Deferment or forbearance of repayment for certain defined periods, if qualified and requested
• Prepayment of loan in whole or in part anytime without an early-repayment penalty
• Documentation that loan is paid in full

In accordance with the Borrower’s Rights and Responsibilities Statement attached to the Master Promissory Note (MPN) the student has the responsibility for:

• Completing exit counseling before leaving school or dropping below half-time enrollment
• Repaying loan according to repayment schedule even if not completed academic program, dissatisfied with the education received or unable to find employment after graduation.
• Notifying lender or loan servicer if student:
• Moves or changes address
• Changes telephone number
• Changes name
• Changes SSN
• Changes employers, or employer’s address or telephone number changes
• Making monthly payments on loan after grace period ends, unless there is a deferment or forbearance
• Notifying lender or loan servicer of anything that might later change eligibility for an existing deferment or forbearance

If you qualify, paying for higher education may provide some tax relief. To learn more about different tax benefits, use the current tax year IRS Publication 970, Tax Benefits for Education.

The benefit most applicable when in repayment is the student loan interest deduction of up to $2,500 paid. The publication will provide more information about if you qualify. If you paid over $600 in interest to one loan holder, that holder will send you a 1098E with the total amount paid. If you do not receive a 1098E from a holder, you can contact them or use their online history to determine how much interest you paid to them.

Our commitment to you doesn’t end when you are no longer enrolled. Our Repayment Contact Center will communicate with you through calls and emails to help you prepare for repayment, keep you informed of student loan options and to let you know there are options available if you need them. We also partner with servicers who will communicate with you through mail, email or telephone to assist in the same way.

The servicers we partner with are ECMC Solutions, i3 and Student Outreach Solutions (formerly known as General Revenue Corp. or GRC).

Below are some questions you may ask about their services:

• I am not delinquent on my loans, why are they calling me?
  We assign accounts in repayment, even if they are not delinquent. They contact you to assist with successful repayment and that may involve communication when you are in a non-delinquent status. If the servicer said you were delinquent, please know there can be a lag of approximately one month for status updates between all parties. If your loan holder has notified you that all loans are current, advise the Apollo servicer and then follow-up if you hear from them again next month—it is possible you have other loans that are with a different loan holder.
• I did not authorize University of Phoenix to release my information to any other parties. Should they be calling me?
  The Privacy Act Notice section of the MPN authorizes release of information in your file to third parties permitting the servicing or collection of your loans and to counsel you in repayment efforts. The servicers are calling on behalf of the University to explain repayment options that will help with successful loan repayment.
• Why are the servicers asking for personal information if they called me?
  Servicers confirm your identity before disclosing any personal information and will ask for one of the following: last four digits of your SSN, birth date or home address. They ask for this information to protect your personal information.

A deferment is a temporary suspension of loan payments for specific situations such as unemployment, economic hardship or enrolling in school at least halftime. If you are unable to make your monthly payment and you meet the terms of the deferment, you would complete a deferment form and return to your loan servicer. The two most common types of deferment are unemployment and economic hardship. See a full list of deferment types.

If you know your loan servicer, you can use the list below:

ACS: For FFELP loans, call 800.835.4611 or go to acs-education.com
For Direct loans, call 800.848.0979 or go to myedaccount.com

AES/FedLoan Servicing: 800.699.2908 or myfedloan.org
Send payments to:
Department of Education FedLoan Servicing
P.O. Box 530210
Atlanta, GA 30353-0210

Send letters and correspondence to:
FedLoan Servicing
P.O. Box 69184
Harrisburg, PA 17106-9184

Great Lakes: 800.236.4300 or mygreatlakes.org
Email: borrowerservices@glhec.org
General Correspondence:
Great Lakes
P.O. Box 7860
Madison, WI 53707-7860

Nelnet: 888.486.4722 or www.nelnet.com

Sallie Mae: For FFELP loans, call 888.2. SALLIE (888.272.5543). For Department of Education loans, call 800.722.1300. For more information, go to salliemae.com
General Correspondence:
Sallie Mae, Inc.
P.O. Box 9555
Wilkes-Barre, PA 18773-9555

Payments:
Department of Education
P.O. Box 740351
Atlanta, GA 30374

FFELP/Commercial
P.O. Box 9533
Wilkes-Barre, PA 18773

If you are unsure who holds your federal loans, your best option is www.nslds.ed.gov. You will need the PIN you used to electronically sign your FAFSA. If you have forgotten that number, go to www.pin.ed.gov to request a duplicate.

Standard Repayment:
With the standard plan, you’ll pay a fixed amount each month until your loans are paid in full. Your monthly payments will be at least $50, and you’ll have up to 10 years to repay your loans.

Your monthly payment under the standard plan may be higher than it would be under the other plans because your loans will be repaid in the shortest time. For that reason, with a 10-year limit on repayment, you may pay the least interest.

Graduated Repayment:
Graduated plans can vary, but the idea is to start with a lower payment while income is lower and then increase every two years or so as income goes up.

The length of your repayment period will be up to 10 years. If you expect your income to increase steadily over time, this plan may be right for you. Your monthly payment will never be less than the amount of interest that accrues between payments. Although your monthly payment will gradually increase, no single payment under this plan will be more than three times greater than any other payment.

Extended Repayment:
The extended repayment period can go out to 25 years, and payments would be fixed or graduated. Keep in mind with all these longer plans: The longer you take to repay, the more you pay total. To qualify for this plan, you must have a minimum of $30,000 in FFEL Program and/or Direct loans. If you’re a FFEL borrower, you must have more than $30,000 in outstanding FFELP loans. If you’re a Direct Loan borrower, you must have more than $30,000 in outstanding Direct loans. This means, for example, that if you have $35,000 in outstanding FFELP loans and $10,000 in outstanding Direct loans, you can choose the extended repayment plan for your FFELP loans but not for your Direct loans. Your fixed monthly payment is lower than it would be under the standard plan, but you’ll ultimately pay more for your loan because of the interest that accumulates during the longer repayment period.

Income-Based Repayment:
You may enter the Income-Based Repayment plan, commonly called IBR, if your federal student loan debt is high relative to income and family size. The loan servicer will perform the calculation to determine your eligibility, but you can use the U.S. Department of Education’s IBR calculator to estimate whether you would likely qualify for the IBR plan. The calculator looks at income, family size and state of residence to calculate the IBR monthly payment. The payment is capped at 15 percent of annual discretionary income. If a borrower is married and files a joint federal tax return, and the spouse also has IBR-eligible loans, the spouse’s eligible loan debt is taken into account when determining IBR eligibility.

This program is available to FFELP and Direct loan borrowers. If subsidized and payment is less than interest accrual, the government pays the unpaid interest balance for up to three years. And it’s possible that the required payment is $0.

Each year, you must submit income documentation to remain in the IBR program. If there is a remaining balance at the end of 25 years, the balance is forgiven. There may be tax consequences when the debt is forgiven.

Income Contingent Repayment :
The income contingent repayment plan is available only for Direct loans. Each year, your monthly payment is calculated based on your adjusted gross income, family size and Direct loan debt.

Under this plan, your monthly payment is 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, or
2. 20 percent of your monthly discretionary income

If your monthly payment does not cover all accrued interest, the unpaid amount is capitalized (added to the principal balance) once a year — the capitalization will not exceed 10 percent of the original amount owed when the loan entered repayment.

Repayment can extend to 25 years, and any remaining balance is discharged — the discharged amount will be taxable.

The Public Service Loan Forgiveness program was established to encourage individuals to enter and continue in full-time employment in lower-paying but vital public service jobs. The program allows eligible borrowers to cancel the remaining balance of their Direct loans after serving full time at a public service organization for at least 10 years while making 120 qualifying monthly payments after Oct. 1, 2007.

To learn more about this program, go to FedLoan Servicing’s site.