Financial Aid
Loan Repayment
When you borrow money for your education, you sign a promissory note legally obligating you to repay the loan according to stated terms and conditions. When the time comes for repayment, usually after your education is complete, meeting your student loan obligation promptly helps you earn a good credit rating, which follows you throughout your life.
If you don't repay your loans, you will suffer serious consequences.
- You will be ineligible for future financial aid.
- You may not be able to obtain more credit, (i.e., to buy a car or house).
- You may be turned down for a credit card.
- You will forfeit your tax refunds.
- Your employer can be ordered to garnish your pay (i.e., withhold what you owe from your paycheck).
- You will be sued and will owe collection fees and attorney fees, in addition to repaying your loan.
Remember, you must repay your student loans, EVEN IF
- You don't graduate or otherwise complete your education.
- You can't find a job after graduation.
- You aren't satisfied with the education you received.
Grace Period
After you graduate, leave school, or drop below half-time enrollment (less than 6 credits), you have a grace period (a period of time before you have to begin repayment). This grace period will be
- six months for a Federal Stafford Loan
(If you’re a parent reading this and you have a PLUS Loan, you don’t have a grace period—repayment generally must begin within 60 days after the loan is fully disbursed.)
Know your Loan Information
- Total amount borrowed
- Lender and servicer of your loans
- When your grace period ends
- Amount of payments
- Payment due dates
The U.S. Department of Education’s National Student Loan Data System (NSLDS) contains the status of your loans, balance amounts, and the agency who services your student loans. The agency that services your student loans is where you will be sending payments.
Stafford loans are serviced by either American Education Services (AES) or Sallie Mae. You can view your loan information and make payments on these agencies’ websites. The addresses for these websites are below.
- NSLDS – www.nslds.ed.gov
- AES – www.aessuccess.org
- Sallie Mae – www.salliemae.com
(the above sites will open in a new window)
Loan Forgiveness
Student loan forgiveness programs are generally designed to encourage students to pursue educational goals that will lead to employment in specific occupations. Typically, loan forgiveness programs apply only to student loans secured through the Federal Family Education Loan Program (FFELP). The loan forgiveness programs promote employment in these fields by forgiving part or all of your loan debts, provided you fulfill certain work-related requirements.
(the sites below will open in a new window)
Discharge/Cancellation
http://studentaid.ed.gov/PORTALSWebApp/students/english/discharges.jsp?tab=repaying
Armed Forces Loan Forgiveness Program
http://www.aessuccess.org/manage/cant_make_payment/armed_forces.shtml
Federal Child Care Provider Loan Forgiveness Program
http://www.aessuccess.org/manage/cant_make_payment/child_care_forgiveness.shtml
Federal Teacher Loan Forgiveness Program
http://www.aessuccess.org/manage/cant_make_payment/Federal_Teacher_Loan_Forgiveness.shtml
Nursing Loan Forgiveness For Healthier Futures
http://www.pheaa.org/loanforgiveness/healthier_futures.shtml
Quality Early Education Loan Forgiveness Program
http://www.pheaa.org/loanforgiveness/quality_early_education_loan.shtml
Agriculture Education Loan Forgiveness Program
http://www.pheaa.org/loanforgiveness/Agriculture_Education_Loan_Forgiveness_Program.shtml
Loan Forgiveness Program for State Veterans Homes Nurses
http://www.pheaa.org/loanforgiveness/svhn.shtml
Repayment Plans
Student loan repayment schedules fall into one of three categories.
Level/Equal
The monthly installment amount remains the same throughout repayment; small changes in the monthly installment amount may occur for loans with a variable interest rate if the annual interest rate increases.
Graduated
The monthly installment amount varies during repayment. Typically a graduated repayment schedule allows borrowers to elect a period of smaller payments during the beginning of the repayment period. Some graduated payment programs base the monthly installment amount on interest only for a limited period of time; others may allow a payment that is smaller than a level payment but still pays some principal and interest. Some programs base the monthly installment on a percentage of the borrower’s income for a limited period of time. Contact your loan servicer to determine what type is best for you.
Income Sensitive
The monthly payment amount will be established based on your monthly gross income and student loan debt. To apply for an Income-Sensitive Repayment Schedule for the next 12 months, contact your loan servicer. You may be required to submit documentation of your monthly income from all sources.
Tax Tip: The IRS provides tax breaks for individuals with student loans in repayment status in the Federal Family Education Loan Program (FFELP). You may be able to deduct up to $2,500 of the interest you paid. Visit www.irs.gov for specific tax-related information.
Having Trouble Making Payments?
If you have having trouble making payments, contact your loan servicer immediately!!!
They have several options that may help. You may qualify for a deferment or forbearance. There are also several different repayment plans that may lower your monthly payment.
Deferment
A deferment is an approved temporary suspension of loan payments based on certain events or criteria. A deferment enables borrowers under certain conditions to postpone loan repayment for specified periods of time. You must apply for a deferment through your loan servicer. If you have a subsidized Stafford Loan or Perkins Loan you will not accrue interest during a deferment. If you have an unsubsidized Stafford Loan you are responsible for the interest during the deferment. You can make interest payments or choose to have the interest capitalized. You must continue to make payments on the loan until you are notified that the deferment has been approved.
Deferments can be granted for students who are
- Enrolled at least half time at a postsecondary school
- Studying in an approved graduate fellowship program or in an approved rehabilitation training program for the disabled
- Unable to find full time employment
- Experiencing economic hardship
Forbearance
Forbearance is a temporary postponement or reduction of payments for a period of time because you are experiencing financial difficulty. You can receive forbearance if you’re not eligible for a deferment. Unlike deferment, however, interest accrues, and you’re responsible for repaying it. A forbearance is granted in increments of one year. You must apply for forbearance with your loan servicer. You must continue to make loan payments until you have been notified that the forbearance has been granted.
Loan Consolidation
Loan consolidation is a debt management tool to allow you to pay off multiple student loans with one new consolidation loan. Loan consolidation allows you to extend your repayment period from 10 years up to 30 years depending on the amount of money you have borrowed.
Advantages of Consolidation
Loan consolidation has many advantages.
- A fixed interest rate calculated as a weighted average of your individual loan interest rates rounded up to the next higher 1/8 of a percent.
- If you consolidate during your grace period you will also be eligible for an interest rate reduction of .60%.
- Multiple payments will be condensed into one payment to one servicer.
- Your monthly payments will be smaller because the repayment term is extended.
Disadvantages of Consolidation
There may be some disadvantages to consolidation.
- A longer repayment term will increase the amount of interest you pay over the life of the loan.
- You may also lose some deferments and Stafford Loan benefits. Some deferments that are available with a Stafford Loan do not carry over to a consolidation loan.
- Be sure to check your eligibility for loan forgiveness programs, as you may lose these options when consolidating.
When considering consolidation, it is best to discuss all of these points with the loan servicer or lender you are consolidating with.
Eligibility
To be eligible for loan consolidation you must fit the following criteria.
- Must be in repayment or grace period
- PLUS loan borrowers can consolidate at any time once fully disbursed
- Must have only one application pending
Eligible Loans
- Federal Stafford Subsidized or Unsubsidized Loans
- Federal PLUS Loans
- Federal Perkins Loans
- Federal Supplemental Loans for Students (SLS)
- Federal Insured Student Loans (FISL)
- Health Professions Student Loans
- Nursing School Loan
- Health Education Assistance Loans
- Consolidation Loans*
*Existing Consolidation Loans are only eligible if you have at least one other eligible loan.
Ineligible Loans
Private or Alternative Loans are not eligible for consolidation. Other types of personal debt, including credit cards and car loans can not be included in a consolidation loan.
How to Apply
To apply for a consolidation loan, contact your loan servicer or lender.
Repayment Plans
As with Stafford Loan repayment, there are several repayment plans available.
- Equal/Level – Principal and interest is applied evenly over the life of the loan. The amount of interest that accrues is dependent on the current loan balance.
- Income Sensitive – Payments are based on your monthly income and range from 4% to 20% of your gross monthly income.
- Graduated – Under the Graduated repayment options, your initial monthly installments will be significantly lower than the monthly payment required by the standard repayment plan but will increase at specified intervals. The Grad Choice 2 plan allows you to make interest-only payments for the first two years; at the beginning of the third year, the payment amount becomes fixed for the life of the loan. Under the Grad Choice 5 plan, you may make interest-only payments for the first five years; your monthly payment will increase at the beginning of the sixth year, to standard payments of principal and interest; your monthly payment also becomes fixed for the remainder of the payback period.
- Extended – If your underlying loan balance is $30,000 or more the repayment term can be extended to 25 years.
