Wednesday, March 10, 2010

Repayment Information

What you need to know about repaying student loans...

After you graduate, leave school, or drop below half-time enrollment, you have a period of time before you have to begin repayment. This “grace period” will be
  • six months for a Federal Stafford Loan(Federal Family Education Loan ProgramSM or Federal Direct Student Loan ProgramSM).
  • nine months for Federal Perkins Loans
The repayment period for all PLUS loans begins on the date the loan is fully disbursed, and the first payment is due within 60 days of the final disbursement. However, a graduate student PLUS loan borrower (as well as a parent PLUS borrower who is also a student) can defer repayment while the borrower is enrolled at least half time, and, for PLUS loans first disbursed on or after July 1, 2008, for an additional six months after the borrower is no longer enrolled at least half-time. Interest that accrues during these periods will be capitalized if not paid by the borrower.
Parent PLUS loan borrowers whose loans were first disbursed on or after July 1, 2008, may choose to have repayment deferred while the student for whom the parent borrowed is enrolled at least half-time and for an additional six months after that student is no longer enrolled at least half-time. Interest that accrues during these periods will be capitalized if not paid by the borrower.

Exit Counseling

You'll receive information about repayment, and your loan provider will notify you of the date loan repayment begins. We can't emphasize enough the importance of making your full loan payment on time either monthly (which is usually when you'll pay) or according to your repayment schedule. If you don't, you could end up in default, which has serious consequences (scroll down to the Default discussion below). Student loans are real loans—just as real as car loans or mortgages. You have to pay back your student loans. Find out about your obligations in this section so you can stay on top of your loans.

Get Your Loan Information

The U.S. Department of Education's National Student Loan Data System (NSLDSSM) allows you to access information on loan and/or federal grant amounts, your loan status (including outstanding balances), and disbursements made. Go to

Paying Back Your Loan(s)

You have a choice of repayment plans. How much you pay and how long you take to repay your loans will vary depending on the repayment plan you choose. There are several repayment plans available: Standard, Extended, Graduated, Income Based Repayment (IBR), Income Contingent Repayment (ICR) (available to borrowers with Direct Loans), and Income-Sensitive Repayment (available to borrowers with FFEL Loans).
Go to Repayment Plans and Calculators for more information about the various repayment plans and to calculate your estimated repayment amount under each of the different plans.
The Publication Funding Education Beyond High School: The Guide to Federal Student Aid provides additional information on repayment options, with examples of monthly payments for different loan amounts, and covers other topics you need to consider when managing your loans. You can see the entire publication here.

Federal Family Education Loans (FFELSM) and Federal Perkins Loans

After you've looked at Funding Education Beyond High School: The Guide to Federal Student Aid, if you have specific questions about repaying these types of loans, please contact your loan provider. (In the case of Perkins Loans, this will be the school that made you the loan). Don't know who your loan provider is? Go to to find out.

How can I calculate the amount of interest on my own?

To determine the amount of interest you will be required to pay each month, use the following formula called the Simple Daily Interest formula:
Simple Daily Interest Formula
Number of days since last payment
Principal Balance Outstanding
Interest Rate Factor
Interest Amount
Practice Example: Let's say the remaining balance on your loan is $9,500.00. You sent in a payment of $160.00, 32 days after your previous month's payment. Your interest rate is 8.25% (interest rate factor is .00022587).
32 (days) x $9,500.00 (PBO) x .00022587 (interest rate factor)
You would pay $68.66 toward interest and $91.34 toward the principal balance. This would leave you with a loan balance of $9,408.66 after the $160.00 payment was applied.

Interest Rate Factor

The interest rate factor is used to calculate the amount of interest that accrues on your loan. It is determined by dividing your loan's interest rate by 365.25 (the number of days in a year). See the following table to see some examples of interest rate factors.

to Decimals
Rate Factor

Why does the amount of interest I pay vary from month to month?

Interest accrues on a daily basis on your loans. Factors such as: the number of days between your last payment, the interest rate, and the amount of your loan balance, determine the amount of interest that accrues each month.
You can calculate how much will accrue on your loan by using the Simple Daily Interest Formula.

Direct Loan Servicing Online

If you have questions about your Direct LoansSM, you can go online to find the answers. With your PIN, you can view your detailed account information, complete exit counseling, make an online payment, enroll in any of our electronic services, and much more. For the payment address to send your Direct Loan payments, click here.

Electronic Payment

In some cases, you might be able to reduce your interest rate if you sign up for electronic debiting. Find out more about electronic payment and debiting here.

Trouble Making Payments

If you're having trouble making payments on your loans, contact your lender as soon as possible. Your lender will work with you to determine the best option for you. Options include:

  • Changing repayment plans.
  • Deferment - if you meet certain requirements. A deferment allows you to temporarily stop making payments on your loan.
  • Forbearance - if you don't meet the eligibility requirements for a deferment but are temporarily unable to make your loan payments. A forbearance allows you to temporarily stop making payments on your loan, temporarily make smaller payments, or extend the time for making payments. Read more about deferments and forbearance options.

If you stop making payments and don't get a deferment or forbearance, your loan could go into default, which has serious consequences. Contact your lender regarding options for postponing repayment if you are having trouble making payments.


If you default, it means you failed to make payments on your student loan according to the terms of your promissory note, the binding legal document you signed at the time you took out your loan. In other words, you failed to make your loan payments as scheduled. Your school, the financial institution that made or owns your loan, your loan guarantor, and the federal government all can take action to recover the money you owe. Here are some consequences of default:

  • National credit bureaus can be notified of your default, which will harm your credit rating, making it hard to buy a car or a house.
  • You would be ineligible for additional federal student aid if you decided to return to school.
  • Loan payments can be deducted from your paycheck.
  • State and federal income tax refunds can be withheld and applied toward the amount you owe.
  • You will have to pay late fees and collection costs on top of what you already owe.
  • You can be sued.

For more information and to learn what actions to take if you default on your loans, see the Department of Education’s Default Resolution Group Web site.

Loan Discharge (Cancellation)

In certain circumstances, your loan can be discharged/canceled. Read about cancellation provisions here.

Cancellation and Deferment Options for Teachers

If you're a teacher serving in a low-income or subject-matter shortage area, it may be possible for you to cancel or defer your student loans. Let us help you find out if you qualify.

Loan Forgiveness for Public Service Employees

Under the Loan Forgiveness for Public Service Employees Program, the borrower must be employed full-time in a public service job during the same period in which the qualifying payments are made and at the time that the cancellation is granted. The amount forgiven is the remaining outstanding balance of principal and accrued interest on an eligible Direct Loan for a borrower who is not in default and who makes 120 monthly payments on the loan after October 1, 2007.

Loan Consolidation

A Consolidation Loan allows you to combine all the federal student loans you received to finance your college education into a single loan. Read this section to help you decide whether consolidation is right for you.

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