Welcome to the Office of Financial Aid
Repaying your Student Loans
So you borrowed during school and accumulated other types of consumer debt. Maybe a little more than you planned. Now what? Managing debt after college can be challenging, but the reality is that it must be repaid. Will your salary be enough to pay your bills? Does your student loan payment fit into your budget? These are just some of the questions you might ask yourself when considering your student loan repayment options.
Take control of your student loan debt by calculating your monthly payment and making a side-by-side comparison of your repayment plan options.
There are many repayment options to meet your needs:
Standard repayment plan
Provides fixed annual payment amounts over a fixed period of time. The monthly payment amount is no less than $50, and the repayment period is a maximum of 10 years.
Example
A subsidized
|
Loan Amount |
Monthly Payment |
Total Amount Repaid |
|
$18,000 |
$207.14 |
$24,857.35 |
Two years' interest only: allows two years of interest-only payments, followed by larger payments in years three through 10.
Four years' interest only: allows four years of interest-only payments, followed by larger payments in years five through 10.
Example
A subsidized
|
Loan Amount |
Beginning Monthly |
Ending Monthly Payment |
Total Amount Repaid |
|
$18,000 |
$102.00 |
$243.62 |
$25,835.45 |
Example
A subsidized
|
Loan Amount |
Gross Monthly Income |
Monthly Payment |
Total Paid (Loan + Interest) |
|
|
First five years- Interest only |
Remaining 10 years |
|||
|
$10,000 |
$1,500 |
$56.67 |
$115.08 |
$17,209.80 |
|
$50,000 |
$4,000 |
$283.33 |
$575.40 |
$86,047.80 |
Example
A subsidized
|
Loan Amount |
Monthly |
Years to |
Total Amount |
|
$50,000 |
$347.04 |
25 |
$104,110.82 |
Saving money
Good financial habits have their rewards. Your lender or secondary market may offer incentives for good repayment behavior such as:
1/4 percentage point interest-rate reduction on eligible loans for using "direct pay" - having monthly payments deducted directly from your personal checking or savings account. Not only do you make payments on time, but you maintain good credit.
A two-percent interest rate reduction after making 48 consecutive monthly, on-time payments. On a $15,000 loan, you could save nearly $1,000 in interest and reduce your payments by six months.
No prepayment penalty for paying off some or the entire loan before payment is due. These options can save you hundreds, even thousands of dollars in interest.
If you make a monthly payment of $173 on a $15,000 student loan with a rate of 6.8 percent, it will take you 10 years to pay off your debt, and you will have paid $5,714 in interest charges, bringing the total amount repaid to $20,714. A majority of your loan payments goes toward interest charges for the first few years. Pay down your debt faster by making additional payments on the principle.
Pay an extra $50 a month
- 34 months faster - saves $1,766 in interest
Pay an extra $250 a month
- 80 months faster - saves $3,920 in interest
Pay an extra $500 a month
- 96 months faster - saves $4,633 in interest
Delinquency
If you fail to make the required payments on your loan(s) for a total of 240 days, the entire outstanding balance of your loan(s) is immediately due in full. Once your loan(s) is 270 days delinquent your loan(s) is in default. There are serious consequences of default:
The entire balance, plus collection fees assessed to the account, is due immediately.
If you miss a payment, contact your lender
Deferment
Deferments allow you to temporarily postpone payment of your loan. Deferments are not automatic; you must apply and be approved. The most common reasons for deferment include:
During periods of deferment on subsidized
Forbearance
If you do not qualify for a deferment, consider requesting a forbearance from your lender. Forbearance is the temporary postponement or reduction in your monthly payment. Often the amount of time it takes to repay your loan is extended. Interest continues to accrue during the period, increasing the loan balance. Possible reasons for forbearance include:
You are allowed to postpone payments for a combined period not to exceed a total of 12 months. The combined period equals any delinquency period plus any additional period requested.
Consequences of not resolving delinquency
If you don't make your required payments and have not made arrangements with your lender, your loan may go into default.
The trouble begins when you miss a required payment, so be sure you don't let this happen! If you do miss a payment, contact your lender immediately. They can offer you solutions to help. If you are 240 days late on making your payment, the entire amount of your loan becomes immediately due in full. Once your loan is 270 days delinquent, your loan(s) is in default.
As indicated in previous sections, there are many options to help you meet the repayment obligations on your student loan. There is no excuse for becoming delinquent or defaulting on your student loan(s).
Loan discharge/forgiveness- For Teachers
Consider loan discharge/forgiveness of your student loan if you meet the federally mandated requirements. If you are eligible for loan discharge, your student loan will be forgiven and you will not have to repay the loan.
Possible reasons for student loan discharge include:
Total and permanent disability
A student loan may be discharged if the borrower is totally and permanently disabled. To be eligible for a total and permanent disability discharge, a doctor of medicine or osteopathy must make the determination and certify the condition. A borrower is considered totally and permanently disabled if he/she is unable to work and earn money or attend school because of a medical impairment.
There are certification forms that must be completed to request student loan discharge for reason of total and permanent disability. Contact your lender for additional information.
Death
If a borrower dies, his or her loan is discharged. In the case of a parent loan (PLUS), if the dependent student for whom the parent obtained the loan dies on or after July 23, 1993, the parent's loan is discharged. An original certified death certificate must be provided to the holder of the loan. You can obtain additional information about this provision by contacting the holder of the loan.
Closed school
This option applies only to a very limited number of borrowers who were not able to complete their program of study because their school closed. The student must have been in attendance or on an approved leave of absence when the school closed or have withdrawn from school within 90 days of the school closure date. This discharge provision is only available to borrowers who received their loan on or after January 1, 1986. There are additional eligibility requirements, as well as certification forms, that must be completed in order to request this discharge.
If you believe you may be eligible for loan forgiveness because your school closed, contact your lender for additional information.
Bankruptcy
Some student loans may be discharged if the borrower requests a "hardship hearing" by filing a petition of adversary action through the bankruptcy court. Any questions on discharging your student loan(s) for reason of bankruptcy must be discussed with a licensed legal professional (e.g., an attorney or legal clinic).
False certification
This option applies to a very limited number of borrowers whose loan applications were falsely certified by their schools. The false certification of a student's "ability to benefit" from the education program may also qualify the borrower for loan forgiveness. This discharge provision is only available to borrowers who received their loan on or after January 1, 1986.
Effective July 1, 2006, the Higher Education Act of 1965 is amended to include identity theft as a reason for obtaining a false identification discharge.
There are additional eligibility requirements, as well as certification forms that must be completed in order to request this discharge.
Unpaid refund
Effective July 1, 2000, the Higher Education Act of 1965 was amended to create a new Unpaid Refund Discharge Program. If a student withdrew, did not attend or was terminated from a school within the timeframe allowed by the school's refund policy, the student is eligible for the discharge of the amount that should have been refunded by the school. Sections 682.402, 685.212 and 685.215 of the Code of Federal Regulations describe the eligibility requirements to discharge all or a portion of a student loan on the basis of an unpaid refund.
Resources
https://www.studentclearinghouse.org/secure_area/loan_locator.asp
