Loan Repayment

Understanding the repayment process for your federal student loans can go a long way toward building a solid financial foundation. Here are some resources for navigating the repayment process.

Federal Direct Student Loans are similar to car loans/mortgages and have the same, if not worse, consequences for non-payment. You must repay a student loan even if your financial circumstances become difficult. Your student loans cannot be canceled because you didn’t get the education or job you expected, or because you didn’t complete your education.

Repayment is much easier if you have been a responsible borrower. Click on this Responsible Borrowing link for more information about what you can do to plan ahead and graduate with less debt.

Know What You Owe

Federal Student Aid is the most accurate source for determining how much you have borrowed through federal loan programs (Student Direct, Perkins, and PLUS loans). The first and most important part of developing a successful repayment plan is knowing how much you have borrowed. This website will also inform you of who the loan servicers are for each of your loans. Keeping in regular contact with your servicer is essential.

For estimated repayment calculations, visit the FSA repayment calculator.

Choosing a Repayment Plan

• You have a choice of several repayment plans that are designed to meet your needs. The amount you pay and the length of time to repay your loans will vary depending on the repayment plan you choose. A chart outlining available repayment plans is available here.
• Having trouble figuring out which plan will work best for you?  Visit the repayment calculator. This site will help you calculate monthly payments for each loan as well as show you how long and the total cost you will pay over the life of the loan. You will need to contact your loan servicer to change your repayment plan.

Deferment and Forbearance

Deferment and a forbearance offer a way for you to temporarily postpone or lower your loan payments while you are attending school, in the military, experiencing financial hardship or in certain other situations.

• A deferment is a period during which repayment of the principal amount and interest of your loan is temporarily delayed. During a deferment, you do not need to make payments.
• Situations in which you may apply for a deferment include military service, attending half time at a college or career school, unemployment or economic hardship.

• If you are unable to make your scheduled loan payments, but do not qualify for a deferment, your loan servicer may be able to grant you a forbearance. With a forbearance you may be able to stop making payments or reduce your monthly payment for up to 12 months.

You should contact your servicer to arrange for either of the above options.

Default

• Failure to make your monthly loan payments will cause you to become delinquent on your student loan and you will risk going into default. Once your loan goes into default, not only will it affect your credit rating, you will also lose the ability to receive future federal aid until the loan is paid in full, or satisfactory arrangements are in place. While the loan is in default you will lose repayment, deferment and forbearance options. Also, the federal government will be able to garnish your wages.
• Federal student loans cannot be cancelled in bankruptcy so this debt WILL NOT go away.
• Contacting your loan servicer is the best way to prevent you from going into default or getting yourself out of default. Explain your situation and ask the servicer what your options are.

For additional information about loan repayment, please visit http://studentaid.ed.gov/repay-loans.