This section gives you basic information on loan repayment. For more information, go online to www.FederalStudentAid.ed.gov.
To view a video about 4 Things You Need to Know About Repaying Your Student Loans visit the US Department of Education site at: www.ed.gov/blog.
FREQUENTLY ASKED QUESTIONS:
When do I start paying back my student loans?
- 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.
How much time do I have to repay mystudent loans?
- 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.
When do parents and graduate and professional degree students begin repaying a PLUS Loan?
The repayment period for a PLUS loan begins on the date the loan is fully disbursed—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.
How much will I have to repay and how often do I make payments?
Direct or FFEL Stafford Loan—usually, you’ll make monthly payments. Your 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.myedaccount.com
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.
Do I have repayment options?
Yes. Repayment plans offered for Direct Stafford Loans are generally the same as those offered for FFEL Stafford Loans. However, the Direct Loan program offers an Income-Contingent Repayment plan and the FFEL program offers an Income-Sensitive Repayment plan.
The repayment periods for Stafford Loans vary from 10 to 25 years. When it comes time to repay, you can pick a repayment plan that’s best-suited to your financial situation. The following repayment plans will be 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 Loans. 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 fixed monthly payment is 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): 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, the unpaid portion will be forgiven. However, you may have to pay income tax on the amount that is forgiven. As of July 1, 2009, graduate and professional student PLUS borrowers in the Direct Loan program are eligible to use the ICR plan. Direct Loan parent PLUS borrowers are not eligible for the ICR repayment plan. Visit www.myedaccount.com for more information for Direct Loan Income Contingent Repayment Plans.
- 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 (the income-sensitive repayment plan in the FFEL program and the income-contingent repayment plan in the Direct Loan program will continue to be available to borrowers) is available as of July 1, 2009, to all FFEL and Direct Loan borrowers who have a partial financial hardship, except for FFEL or Direct Loan parent PLUS Loan borrowers or a FFEL or Direct Loan Consolidation Loan borrowers, who repaid parent PLUS loans through the Consolidation Loan. Under this plan, your required monthly payment amount will be based on your income during any period when you have a partial financial hardship. Your monthly payment amount may be adjusted annually. The maximum repayment period under this plan may exceed 10 years. If you repay under this plan and meet certain other requirements over a specified period of time, you may qualify for cancellation of any outstanding balance on your loans. Contact the Direct Loan Servicing Center (for Direct Loans) or your FFEL lender (for FFEL Program loans) for more information about the Income-Based Repayment 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 below shows typical 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 & Total Amounts Repaid Under Different Repayment Plans||For Direct Loans Only: Income Contingent(c) (Income = $25,000)|
|Initial Debt When you Enter Repayment||Standard (not to exceed 10 years)||Extended(a)||Graduated(b)||Single||Married/HOH(d)|
|Per Month||Total Repaid||Per Month||Total Repaid||Per Month||Total Repaid||Per Month||Total Repaid||Per Month||Total Repaid|
Payments are calculated using the fixed interest rate of 6.8 percent for student borrowers.
a For a FFEL borrower, the requirement is that the borrower (1) must have had no outstanding balance on a FFEL Program loan as of Oct. 7, 1998, or on the date the borrower obtained a 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 http://www.mappingyourfuture.org/paying/standardcalculator.htm.
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
|Total Loan Amount||Number of Payments||Approximate Monthly Payment||Total Interest Charges||Total Repaid|
Federal Perkins Loans do not have different repayment options. Your payment depends on the amount you borrow, but the minimum is $40 per month.
How do parents or graduate and professional degree students repay their PLUS Loan?
Your parents and graduate and professional degree students have nearly all the repayment options that Direct and FFEL Stafford Loan borrowers have. The exception is that the Direct Loan Income Contingent Repayment Plan and the Income-Based Repayment Plan are not available to parent PLUS Loan borrowers.
Are there tax incentives while paying back student loans?
Yes. Tax benefits are available for certain higher education expenses, including a deduction for student loan interest for certain borrowers. This benefit applies to all loans used to pay for post secondary education costs, including PLUS Loans. The Internal Revenue Service (IRS) Publication 970, Tax Benefits for Higher Education, explains these credits and other tax benefits. You can get more information online at www.irs.gov or by calling the IRS at 1-800-829-1040. TTY callers can call 1-800-829-4059.