Repaying Your Student Loan
Repaying your student loan is an important obligation. When it’s time to start making payments, you should evaluate your situation and options. Your future financial health depends on understanding your options, the hazards of default, and how to resolve federal student loan disputes.
You will be obliged to begin repayment when you
- Graduate from school
- Withdraw from school
- Drop below half-time enrollment
Make certain you have all the facts:
1. Identify Your Lender/Servicer
The first step to repaying federal student loan(s) is to know who the lender and servicer are for each loan. (They may not be the same.)
You can find this information on the National Student Loan Data System website at www.nslds.ed.gov. The site will also enable you to retrieve information about the terms of your loan(s) and review your borrowing history.
Your lender and servicer will be your point of contact for discussing repayment options and options to avoid default.
2. Evaluate Your Repayment Options
There are several flexible repayment options available for borrowers with federal loans. The Federal Student Aid website provides more information and calculators that can be helpful when assessing your options.
- You pay a fixed monthly amount, based on principal and interest.
- The minimum monthly payment is $50.
- Repayment period is up to 10 years. (It may be shorter.)
- This plan is generally suited for borrowers expecting large salary increases in their profession.
- Monthly payments are lower at the beginning of the repayment period, then increase gradually every two years. (No increase can be three times greater than the previous payment.)
- Repayment period is 10 years.
- Monthly payments must be at least the amount of interest that has accrued.
- Plan is designated for FFEL (Federal Family Education Loan) and Direct Loan borrowers with more than $30,000 in loan debt.
- You pay a fixed annual or graduated payment amount.
- Repayment period cannot exceed 25 years.
- If you opt for a longer repayment period, you will pay more interest.
- Plan is designated for borrowers facing partial financial hardship.
- Monthly payment is capped at an amount intended to be affordable, based on income and family size.
- Repayment period may exceed 10 years.
- If you meet certain requirements over a specified period of time, you may qualify for having the outstanding remaining balance of the loan cancelled.
- Plan is designated for Direct Loan borrowers only. (It is not available for Direct Parent PLUS Loan borrowers.)
- Payments are recalculated on an annual basis.
- Monthly payments are calculated based on the adjusted gross income of the borrower (and borrower’s spouse, if married), family size, and total Direct Loan debt.
- Any unpaid interest not covered in payments for the year is capitalized once each year, with capitalization not to exceed 10 percent of the original loan amount. Interest continues to accrue, but is not added to the loan principal.
- The maximum repayment period is 25 years. After this amount of time (time spent in deferment or forbearance does not count), the unpaid portion is discharged; however you are still responsible for paying taxes on the amount that is discharged.
- Plan is designated for FFEL Loan borrowers only
- You must reapply each year, for a maximum of five years, after which time you must choose a new repayment plan, which can extend repayment another 10 years.
- You select a monthly payment amount between 4 and 25 percent of your monthly income.
- Your monthly payment must be greater than or equal to the amount of accrued interest.
- Plan is designated for Direct Loan borrowers facing partial financial hardship (FFELP Loans can be included in determining financial hardship.)
- To be eligible, you must be a new borrower as of October 1, 2007, who received a Direct Loan disbursement on or after October 1, 2011
- Payment amount may increase or decrease each year, based on income and family size.
3. Know How to Resolve Disputes
Do you and your loan servicer disagree about the balance or status of your loan(s)? The Federal Student Aid (FSA) Ombudsman Group of the U.S. Department of Education is designated to help students resolve loan disputes with Federal Direct/Perkins loans.
The FSA Ombudsman Group will research your problem in an impartial and objective manner to develop a fair solution. However, before speaking with the FSA ombudsman, you must contact your lender directly to attempt to resolve your disputes. You can contact the FSA ombudsman at
U.S. Department of Education
FSA Ombudsman Group
830 First Street, N.E. Fourth Floor
Washington, DC 20202-5144
4. Avoid Default
If you fail to make payments on your loan(s) as scheduled, you are considered to be in default, according to the terms of the promissory note that you signed at the time you took out your loan(s). The consequences of default can be severe.
Consequences of Default
- You lose eligibility for additional federal student aid.
- Your student loan debt will increase because of late fees, additional interest, court costs, collection fees, attorney’s fees, and any other costs associated with the collection process.
- The loan will be reported as delinquent to credit bureaus, damaging your credit rating.
- You lose eligibility for deferment, forbearance, and repayment plans.
- You may be denied credit cards, car loans, home loans, or apartment leases.
- Your federal and state tax refund may be withheld to collect your defaulted student loan.
- Your interest rate may rise on existing loans and credit cards.
- You may be unable to obtain or renew a professional license.
- You may be denied a job due to poor credit.
- Your employer may withhold money from your pay (at the request of the government) to apply toward your outstanding loan balance. This is referred to as a wage garnishment.
For more information about loan default, visit the Federal Student Aid website.
Postponing Payments to Avoid Default
Forbearance allows you to temporarily reduce or postpone your loan payments. You may pay interest, which continues to accrue during a period of forbearance, but you are not required to do so. Forbearance may be granted for up to one year at a time, but may not exceed a total of three years.
Type of Forbearance
Who Is Eligible?
Borrower experiencing financial hardship or poor health who does not otherwise qualify for a deferment. The lender makes the final decision on whether or not the forbearance will be granted.
Borrower not otherwise eligible for a deferment and meeting all other forbearance criteria can request a forbearance for any of the following reasons:
Deferment allows you to temporarily postpone making loan payments. Depending on the type of loan(s), interest may not accrue. After each deferment, you are entitled to a postdeferment grace period of six months.
Type of Deferment
Who Is Eligible?
Borrower enrolled as a regular student at least half time in an eligible school to obtain an approved degree or certificate.
Borrower in active-duty military service during a war, military operation, or national emergency.
Borrower experiencing a period of financial hardship. (Available up to three years.)
Borrower in a department-approved graduate/postgraduate fellowship program.
Borrower in a course of study that is part of a department-approved rehabilitation training program for disabled individuals.
Seeking Full-Time Employment
Borrower seeking and unable to find full-time employment. (Available up to three years.)
Post–Active Duty Service
Borrower who served as qualifying active-duty military servicemember may be eligible for a deferment during the 13 months following the conclusion of the service or until the borrower enrolls on at least a half-time basis if he or she is a member of the National Guard or other reserve component of the U.S. armed forces and was called or ordered to active duty while enrolled or within 6 months of being enrolled at least half-time.
Borrower who has agreed to serve on a full-time basis for a term of one year and is providing a service comparable to Peace Corps or ACTION service.
Other Qualifying Situations for Loans Made Before
Contact your loan servicer for more information.
For more specific details, visit http://studentaid.ed.gov/repay-loans/deferment-forbearance.
Selected forms are available at http://go.salliemae.com/content/edServicing/forms/.
Public Service Loan Forgiveness Program
Under this program, William D. Ford Direct Loan borrowers may qualify for forgiveness of the remaining balance of their Direct Loan(s). If you have loans under the Federal Family Education Loan (FFEL) program or the Federal Perkins Loan, you may consolidate those loans into a Direct Consolidation Loan to qualify. You must make 120 qualifying payments on the Direct/Direct Consolidated Loan(s) while employed full-time by certain public service employers to have your remaining loan balance forgiven.
Information about what loans are eligible for forgiveness, what kinds of employment qualify, and how to apply can be found on the Federal Student Aid website.