Successful Student Loan Repayment
How well you manage your student loans and other personal
finances will impact how quickly you achieve your financial goals. Handling your student loans responsibly will
build a solid financial foundation and positively influence your future ability
to obtain credit cards, buy an automobile and purchase a home. Especially in the beginning, repayment of your
student loans can be confusing. Successful
repayment requires you understand the basics of your student loans.
It is important to know and be in contact with your
lender/servicer. Do not be afraid to ask
questions – there are no silly questions – and do not wait until it is too late
for them to help you if you are having financial difficulties. To make sure you have the most current
information on your federal student loans, it is a good idea to check the U.S.
Department of Education’s loan database, the National Student Loan Data System
(NSLDS), at www.nslds.ed.gov. If you have
private student loans but are not sure about your lender, check your paperwork
or you can check your credit report. You
can request a free credit report every 12 months from each of the nationwide
consumer credit reporting companies by going to www.annualcreditreport.com. It is always
a good idea to check the accuracy of your credit report on an annual basis.
Your success is also important to the Student Loan Ombudsman
Caucus. The Caucus consists of guaranty agencies, lenders,
servicers, and the Department of Education. We use a collaborative approach in
researching and responding to students and borrowers who have concerns that are
brought to our attention. Over the past
15 years we have been tracking and trending data regarding issues that are
brought to our individual offices. We are
focusing our efforts on providing information to aid in the successful
repayment of your student loans. The
information provided here is based on what we have found through our experience
to be the most popular topics related to student loan repayment. Topics will be added as they become available
so please check back.
Detailed information regarding the following topics is
available in the Student Loan Repayment Resources file library found at the
bottom of this page.
NCHER has produced a brochure which answers some of the most prominent questions student loan borrowers have in an easy-to-understand fashion, complete with links and phone numbers.
and Unsubsidized loans
Subsidized loans – Federally guaranteed
loans based on financial need. The
federal government pays the interest that accrues on subsidized loans while the
student is in school, in their grace period and during an authorized deferment.
Unsubsidized loans – Federally guaranteed
loans not based on financial need.
Interest will accrue from the time the loan is disbursed to the school
until the loan is paid in full. Students
will receive their grace period; however, interest continues to accrue
*See the Subsidized/Unsubsidized FAQ and Example in the
Student Loan Repayment Resources file library below.
It’s important to learn and compare the repayment plan
options that best meet your individual needs and circumstances based on :
- Your financial goals
- What you can afford to pay each month
To help make informed decisions, you should compare the:
- Monthly payment
- Total cost of paying the loan off, including both principal
Be sure and talk to your lender/servicer regarding which
repayment plan best meets your financial situation and helps you maintain
successful repayment of your student loans.
If the terms of another plan better meet your needs, you generally have
the option to change your repayment plan.
- Standard repayment
- Graduated Repayment
- Extended Repayment
The federal loan programs offer various repayment plans to
make your monthly student loan payment affordable and fit within your
budget. Various calculators are
available online to estimate your budget and monthly payments under each
plan. The Department of Education’s
calculator provides information across all of the repayment plans as well as
side-by-side results for all options, including information about the total
cost of a loan over time. This
calculator can be found at StudentAid.gov/repayment-estimator
Remember, there are no penalties or charges for paying off
your student laons early and you will save money by paying less interest.
Discount for Direct Debit – Check with your lender/servicer
regarding what interest rate deduction you may be eligible to receive by
signing up for direct debit to make your student loan payments. For Direct Loans, there’s a .25% interest
When you graduate, drop to less than full time, or withdraw
from college there is a one-time 6 month suspension period before your first
payment is due on any Stafford loans you borrowed. This is called a grace period.
Application and Prepayments
All educational loans, including
federal and private student loans, allow for penalty-free prepayment. This means you can make extra payments to
reduce the balance of the loan, or even pay off the entire balance early,
without having to pay an extra fee.
Prepayment can save you money by
paying off your loan earlier and by reducing the total interest paid over the
lifetime of the loan. Since the loan
balance is reduced, more of your subsequent monthly payments will go toward
further reducing the loan balance and less toward interest.
*See the Payment Application and Pre-Payment FAQ and Example
in the Student Loan Repayment Resources file library below.
Avoid Student Loan Default
If you do not make your monthly
payments as scheduled and you do not make any special arrangements with your
lender/servicer, your student loan will go into default. Once the loan goes into default, the entire
balance (principal, interest and collection fees) generally becomes immediately
due and payable. The consequences of
default are severe. For federal loans,
these consequences include wage garnishment, state and federal income tax
refund offset and litigation. Don’t wait
until it is too late to ask for help – you have more options available to you
if your student loan is not in default – rather than waiting until after
default and asking for help.
Short –term solutions to avoid
default include certain deferments for which you may be eligible and
forbearance. Contact your
lender/servicers for more details.
Options for Repaying Defaulted Federal Student Loans
If you do default on your student
loan, the following repayment options are available:
- Payment in full
- Loan rehabilitation
- Loan consolidation
Information and Links
detailed information regarding the topics below, please clink on the provided
servicer is a company that handles the billing
and other services on your federal
The loan servicer will work with you on repayment
plans and loan consolidation and assist you with other tasks related to
your federal student loan. It is important to maintain contact with your loan
servicer. If your circumstances change at any time during your repayment
period, your loan servicer will be able to help.
Consolidation Loan allows you to consolidate (combine)
multiple federal education loans into one loan. The result is a single monthly
payment instead of multiple payments.
There is no
application fee to consolidate your federal education loans into a Direct
Consolidation Loan. If you are contacted by someone offering to consolidate
your loans for a fee, you are not dealing with one of the U.S. Department of
Education’s (ED's) consolidation servicers. The U.S. Department of Education’s Student
Loan Ombudsman warns borrowers to beware of student loan debt relief offers
and credit repair deals.
The Public Service Loan Forgiveness (PSLF) Program is intended
to encourage individuals to enter and continue to work full-time in public
service jobs. Under this program, borrowers may qualify for forgiveness of the
remaining balance of their Direct Loans after they have made 120 qualifying
payments on those loans while employed full time by certain public service
A total and
permanent disability (TPD) discharge relieves you from having to repay a
William D. Ford FederalDirect Loan(Direct Loan) Program loan,Federal
Family Education Loan (FFEL) Program loan, and/or Federal
Perkins Loan(Perkins Loan) Program loan or complete
a TEACH Grant service
obligation on the basis of your total and permanent
disability. Before your federal student loans or TEACH Grant service obligation
can be discharged, you must provide information to the U.S. Department of
Education (ED) to show that you are totally and permanently disabled. ED will
evaluate the information and determine if you qualify for a TPD discharge.
detailed information regarding the TPD discharge process including how to
apply, click here
Thank you to the men and women in uniform for
your service and sacrifice to help protect our country. Whether you are
currently serving in the military or a veteran, we want to ensure that
servicemembers and their families understand the student loan benefits that are
currently available to eligible servicemembers. This page includes a high-level
summary of the major federal benefits and programs. Other student loan benefits
may be available at the state or local level. Please contact your current
lender/servicer for more detailed information, including what documentation may