Loan Repayment Options
This page is intended to give a broad overview of loan repayment options. Links are provided for more specific information at various points on this page.
See additiona information on our Pay as Your Earn and Public Service Loan Forgiveness pages.
This page is divided into several sections noted below. Click on the desired heading.
Types of Plans
You agree to repay the entire amount borrowed in monthly installments along with the interest amount associated with your loan. The default repayment plan is a Standard 10-year repayment schedule. You may contact your loan servicer to request a variety of other options which are described below:
♦ Standard - 10 years, loan paid in full, same payment every month
♦ Extended - 25 years, loan paid in full, same payment every month
♦ Standard Graduated - 10 years, paid in full, payments begin low then increase every 2 years
♦ Extended Graduated - 25 years, paid in full, payments begin low then increase every 2 years
With an income-driven plan, the amount you pay each month on your loan is determined by your income. It is not based on the amount of your loan. Income-driven plans also have a point in time (e.g., 20 years) at which time, the borrower may have unpaid debt discharged (forgiven).
The amount a borrower pays, when based on income, is typically between 8% and 10% of adjusted gross income (AGI).
At the point in time your loans go into repayment, the default repayment plan is a Standard 10-year repayment schedule. There are two other options:
Pays as You Earn Repayment (PAYE) – 240 payments (20 years) based on your income. Any debt remaining after 20 years is discharged. Current tax code treats discharged debt as taxable income. Depending on the amount of debt and the borrowers income, the amount of debt may be substantial even after 20 years of repayment. You may get an estimate of how much debt will be discharged by using various calculators that are available online such as ones found at www.IBRinfo.org
or [link to finaid.org].
Income Based Repayment (IBR) – 300 payments (25 years) based on your income. Any debt remaining balance after 25 years is discharged. Current tax code treats discharged debt as taxable income. Depending on the amount of debt and the borrowers income, the amount of debt may be substantial even after 25 years of repayment. You may get an estimate of how much debt will be discharged by using various calculators that are available online such as ones found at www.IBRinfo.org
or [link to finaid.org].
The Department of Education has comprehensive information here
about loan repayment plans and calculators to assist you with planning for repayment. Another source of information is www.studentloans.gov
Use these links for additional discussion of the Pay As You Earn Repayment Plan:
Deferments and Forbearance
Deferment allows you to postpone payments on your Federal Loans for a specified period of time. While in deferment, interest does not accrue on your Subsidized Stafford Loans or portions of consolidation loans that are attributable to Subsidized Stafford Loans. Unsubsidized loans continue to accrue interest which is capitalized at the end of the deferment period.
Forbearance is also available to postpone payments on both your Federal and Private Loans. Unlike deferment, interest continues to accrue on all loans, including the Subsidized Stafford loan. The following are some Deferment and Forbearance options. Click on each for a brief overview. Contact your loan servicer for additional information and to discuss which option is best for your situation.
♦ The Perkins Loan program has only one repayment plan: 10 years. Pre-payment may be made with no penalty.
♦ A Perkins Loan may be consolidated with Direct Stafford and Direct PLUS Loans. Repayment plans described above are applicable to Federal Direct Consolidation Loans.
For the most part, loan consolidations are no longer needed. The original group of federal student loans (Stafford and PLUS), usually referred to as FFELP (Federal Family Education Loan Program) Loans was eliminated as of June 30,2010 and replaced by the Federal Direct Loan Program (DL). Direct Lending (DL) continued the Stafford and PLUS Loan programs, but with some distinct advantages, and in particular eligibility for loan forgiveness. Borrowers who had FFELP loans were allowed to consolodate those loans into DL to take advantage of the Public Service Loan Forgiveness
Consolidation is available to borrowers for whom loans are being serviced by multiple loan servicers (e.g., Sallie Mae, Nelnet, Great Lakes, FedLoan Servicing, etc.).
Loan consolidation is a relatively simple online process and may be completed at www.studentloans.gov
. Before you begin the loan consolidation process you will want to review and print a copy of your complete federal student loan history at www.nslds.ed.gov
The interest rate on a Federal Consolidation Loan will be a fixed interest rate based on a weighted average
of all loans consolidated.