| |
This section gives you basic information on loan repayment. For more information, go online to www.studentaid.ed.gov/repaying.
- Federal Perkins Loans—The grace period is nine months. However, if you're attending less than half-time, check with your financial aid office to determine your grace period. During the grace period, you don't have to pay any principal, and you won't be charged interest.
- Direct or FFEL Stafford Loans—The grace period is six months.
- Subsidized loan—During the grace period, you don't have to pay any principal, and you won't be charged interest.
- Unsubsidized loan—You don't have to pay any principal, but you will be charged interest. Remember, you can either pay the interest as you go along or it will be capitalized (i.e., added to the principal loan balance) later.
Your lender will send you information about repayment, and you'll be notified of the date repayment begins. However, you're responsible for beginning repayment on time even if you don't receive this information. Failing to make payments on your loan can lead to default. Default occurs when you fail to meet the terms and conditions of the promissory note, such as not making timely payments on the loan.
- Federal Perkins Loans—Up to 10 years.
- Direct and FFEL Stafford Loans—Your repayment period varies from 10 to 25 years, depending on which repayment plan you choose. See more on repayment options later in this section.
You'll get more information about repayment choices before you leave school (exit counseling), and later, during your grace period, from your loan holder.
The repayment period for a PLUS loan begins on the date the loan is fully disbursed as there is no grace period. However, graduate and professional student PLUS borrowers may defer repayment while they are enrolled in school at least half-time and (for PLUS loans first disbursed on or after July 1, 2008) for six months after they cease to be enrolled at least half time. Parent PLUS borrowers whose loans were first disbursed on or after July 1, 2008, may defer repayment while the dependent student for whom they borrowed is enrolled at least half-time and for six months after the student ceases to be enrolled at least half time.
Interest is charged on PLUS loans during all periods, beginning on the date of the first loan disbursement. A PLUS borrower may pay the interest as it accrues during a deferment, or allow it to accrue and be capitalized at the end of the deferment period.
The information in this guide was compiled in the summer of 2009. For changes to the federal student aid programs since then, visit www.FederalStudentAid.ed.gov.
At the time this publication went to print, Congress was considering a proposal that would eliminate the FFEL Program, beginning with the 2010–11 school year, and would have Stafford, PLUS and consolidation loans funded from the Direct Loan ProgramSM. For up-to-date information, please visit www.FederalStudentAid.ed.gov.
Direct or FFEL Stafford Loan—Usually, you’ll make monthly payments and your monthly repayment amount will depend on:
- the size of your debt;
- the length of your repayment period; and
- the repayment plan you choose.
Direct Stafford Loan:
- You’ll make payments to us through our Direct Loan Servicing Center. Direct Loan borrowers can view and pay their bills online using their PIN at: www.dl.ed.gov
FFEL Stafford Loan:
- You’ll repay the private lender that made you the loan.
Federal Perkins Loans:
- You’ll make monthly payments to the school that loaned you the money.
- You’ll have up to 10 years to repay your loan.
- Federal Perkins Loans do not have different repayment plan options.
The chart at the bottom of the page shows typical monthly payments and total interest charges for three different Perkins Loan amounts over a 10-year period at the 5% rate.
Stafford Loan borrowers may choose from several repayment plans. Repayment plans offered for Stafford Loans are generally the same in the FFEL and Direct Loan programs, except for the Income-Contingent Repayment plan (available only in the Direct Loan Program) and the Income-Sensitive Repayment plan (available only in the FFEL Program).
The period for repaying a Stafford Loan varies from 10 to 25 years, depending on the amount owed and the repayment plan that you choose. When it comes time to repay, you can pick a repayment plan that’s best-suited to your financial situation. The following repayment plans are available to Direct and FFEL Stafford Loan borrowers:
- A Standard Repayment Plan with a fixed annual repayment amount paid over a fixed period of time not to exceed 10 years.
- A Graduated Repayment Plan paid over a fixed period of time not to exceed 10 years. With this plan, your payments start with a relatively low amount and then increase, generally every two years.
- An Extended Repayment Plan with a fixed annual or graduated repayment amount to be paid over a period not to exceed 25 years. If you’re a FFEL borrower, you must have more than $30,000 in outstanding FFEL Program loans. If you’re a Direct Loan borrower, you must have more than $30,000 in outstanding Direct LoansSM. This means, for example, that if you have $35,000 in outstanding FFEL Program loans and $10,000 in outstanding Direct Loans, you can choose the extended repayment plan for your FFEL Program loans, but not for your Direct Loans. Your monthly payment will be lower than it would be under the Standard Plan, but you’ll ultimately pay more for your loan because of the interest that accumulates during the longer repayment period. Income-Contingent Repayment (ICR) Plan (Direct Loans only): Your monthly payments will be based on your annual income (and that of your spouse, if married), your family size, and the total amount of your Direct Loans. Borrowers have 25 years to repay under this plan; any unpaid portion that remains after 25 years will be forgiven. However, you may have to pay income tax on the amount that is forgiven. Direct PLUS Loans made to parent borrowers may not be repaid under the ICR Plan. Visit www.dl.ed.gov for more information for the Direct Loan ICR Plan.
- Income-Sensitive Repayment Plan (FFEL Loans): With an income-sensitive plan, your monthly loan payment is based on your annual income. As your income increases or decreases, so do your payments. The maximum repayment period is 10 years. Ask your lender for more information on FFEL Income- Sensitive Repayment Plans.
- Income-Based Repayment (IBR):This new repayment option became available July 1, 2009. To qualify for the IBR Plan, you must have a partial financial hardship. Under this plan, during any period when you have a partial financial hardship, your required monthly payment amount will not exceed 15 percent of the difference between your adjusted gross income and 150 percent of the Federal Poverty Guideline amount for your family size and state. You are considered to have a partial financial hardship if the amount you would be required to repay on your eligible student loans under a Standard Repayment Plan with a 10-year repayment period is more than the amount you would be required to repay under the IBR Plan. If you repay under this plan and meet certain other requirements over a 25-year period, any remaining balance on your loans may be cancelled. PLUS Loans made to parent borrowers, and consolidation loans that repaid parent PLUS Loans, may not be repaid under the IBR Plan. Contact the Direct Loan Servicing Center (for Direct Loans) or your FFEL lender (for FFEL Program loans) for more information about the IBR Plan.
Key Facts About Repaying Direct and FFEL Stafford Loans
- If you don’t choose a repayment plan when you first begin repayment, you’ll be placed under the Standard Repayment Plan.
- You can change plans to suit your financial circumstances.
|
You’ll get more information about repayment choices before you leave school and, later, from the holder of your loan. You can also get more details about repayment plans from our Web site, www.FederalStudentAid.ed.gov. The chart on the next page shows repayment plans for both programs. This chart also shows estimated monthly payments for various loan amounts under each plan and assumes that the student is making regular monthly payments on any unsubsidized loans and is not capitalizing the interest while in school. If the interest is capitalized, (added to the outstanding principal balance), the cumulative payments and total interest charges will be higher than shown in the chart.
Examples of Typical Direct and FFEL Stafford Loan Repayments
| Estimated Monthly Payments and Total Amounts Repaid Under Different Repayment Plans
|
For Direct Loans Only: Income
Contingentc (Income = $25,000) |
| Initial Debt When You Enter Repayment |
Standard (not to exceed 10 years) |
Extendeda |
Graduatedb |
Single |
Married/HOHd |
| |
Per Month |
Total Repaid |
Per Month |
Total Repaid |
Per Month |
Total Repaid |
Per Month |
Total Repaid |
Per Month |
Total Repaid |
| $3,500 |
$50 |
$4,471 |
Not Available |
Not Available |
$25 |
$5,157 |
$27 |
$6,092 |
$25 |
$6,405 |
| $5,000 |
$58 |
$6,905 |
Not Available |
Not Available |
$40 |
$7,278 |
$38 |
$8,703 |
$36 |
$9,150 |
| $7,500 |
$83 |
$10,357 |
Not Available |
Not Available |
$59 |
$10,919 |
$57 |
$13,055 |
$54 |
$13,725 |
| $10,500 |
$121 |
$14,500 |
Not Available |
Not Available |
$83 |
$15,283 |
$80 |
$18,277 |
$76 |
$19,215 |
| $15,000 |
$173 |
$20,714 |
Not Available |
Not Available |
$119 |
$21,834 |
$114 |
$26,110 |
$108 |
$27,451 |
| $40,000 |
$460 |
$55,239 |
$227 |
$83,289 |
$316 |
$58,229 |
$253 |
$72,717 |
$197 |
$84,352 |
Payments are calculated using the fixed interest rate of 6.8 percent for student borrowers.
a For an FFEL borrower, the requirement is that the borrower (1) must have had no outstanding balance on an FFEL Program loan as of Oct. 7, 1998, or on the date the borrower obtained an FFEL Program loan on or after that date, and (2) must have more than $30,000 in outstanding FFEL Program loans. For a Direct Loan borrower, the requirement is that the borrower (1) must have had no outstanding balance on a Direct Loan Program loan as of Oct. 7, 1998, or on the date the borrower obtained a Direct Loan Program loan on or after that date, and (2) must have more than $30,000 in outstanding Direct Loan Program loans. The amounts were rounded to the nearest dollar and were calculated based on a 25-year repayment plan.
b This is an estimated monthly repayment amount for the first two years of the term and total loan payment. The monthly repayment amount will generally increase every two years, based on this plan.
c Assumes a 5 percent annual growth (Census Bureau) and amounts were calculated using the formula requirements in effect during 2006.
d HOH is Head of Household. Assumes a family size of two.
You can also find a repayment calculator at www.FederalStudentAid.ed.gov.
For a Perkins Loan, your school is the lender. Your school or its agent will provide you with the exact repayment amounts. The chart below is just an example of what a Perkins Loan repayment plan might be.
Examples Of Typical Perkins Loan Repayments Chart
| Total Loan Amount
| Number of
Payments
| Approximate
Monthly Payment
| Total Interest Charges
| Total Repaid
|
| $4,000 |
120 |
$42.43 |
$1,091.01 |
$5,091.01 |
| $5,000 |
120 |
$53.03 |
$1,364.03 |
$6,364.03 |
| $15,000 |
120 |
$159.10 |
$4,091.73 |
$19,091.73 |
Federal Perkins Loans do not have different repayment options. Your payment depends on the amount you borrow, but the minimum is $40 per month.
Parents and graduate and professional degree students have nearly all the repayment options that Direct and FFEL Stafford Loan borrowers have. The exception is the Income Contingent Repayment Plan (available only in the Direct Loan Program) and the Income-Based Repayment Plan are not available for PLUS Loans made to parent borrowers.
|
