How to Repay Student Loans
For Federal Stafford Loans, loan repayment is deferred while a student is enrolled at least half-time in a degree granting program at an accredited institution. If you have been out of school (whether or not you started repaying your loans) and return to school your student loans may be eligible for deferment again. A student must be enrolled at least half-time in order to be eligible for loan deferment.
Students are granted a one-time 6-month grace period after leaving school, graduating or dropping below half-time enrollment before repayment begins. If a student has used all or part of the 6-month grace period and returns to school, he/she may not be eligible for an additional grace period again before repayment begins. Students should contact their lender to find out when repayment begins, the interest rate, the amount of each loan payment.
For more information about how to repay student loans, go to the US Department of Education's loan repayment information page.
Student Loan Repayment Advice
There are several student loan repayment options. Here are a few things you need to know about them.
- How much do you owe and to whom? Your first step is to contact your student loan lender or servicer to find out how much you owe, when repayment begins, and the repayment terms. If you do not remember who your lender is, visit the National Student Loan Data System (NSLDS) at www.nslds.ed.gov to find your loan provider's name and contact information. You will also be able to view a detailed list of the loans you have borrowed while in school.
- How much can you afford to pay each month? In general, education lenders recommend that student loan payments not exceed 8-10 percent of your gross monthly income. For example, if your annual income is $35,000 generally you can afford monthly student loan payments of no more than $233-$292.
Student Loan Repayment Options
- Standard or Level repayment — the most common and typically the least expensive option in terms of total interest costs. This plan provides a fixed monthly payment of at least $50 over a period of up to 10 years. If your monthly payments under this plan exceed 8-10% of your gross monthly income, you might want to consider one of the other repayment options below or loan consolidation.
- Graduated Repayment — monthly payments start low and increase over time. This may be a good choice if you have a limited income to start, but expect higher earnings in the future. The maximum repayment under this plan is 10 years. Total interest costs are higher with this plan than with standard/level repayment.
- Income-sensitive repayment — payments can be adjusted up or down annually to account for changes in your income. The repayment period of 10 years can be extended to 15 years under a special forbearance provision. Total interest costs are higher with this plan than with standard/level repayment.
- Extended repayment — available only if you did not have a balance on a federal student loan as of October 7, 1998. It is only available if your outstanding education loan balance is more than $30,000. Under this plan, you may reduce the amount of your monthly payment by spreading payments over a period of up to 25 years. You may choose to make payments over this extended period under a level or graduated schedule. Because payments are stretched over a longer term, total interest costs are higher than under the other repayment plans.
- Loan consolidation — allows you to bundle all of your federal education loans into one convenient single monthly loan payment at a fixed interest rate. Depending on your total outstanding loan balance, you may also be able to extend your repayment period and lower your monthly payments. By extending your payment period and making smaller payments over a longer period of time, you will most likely pay more total interest. For additional information about loan consolidation, visit Sallie Mae at www.smartloan.com/student.
The following websites provide additional information about managing your student loans and loan repayment:
After you leave school and start to repay your student loans, it's important to stay in touch with your student loan lender, especially if you are having difficulty making payments because there may be alternative repayment options available to you. If you need contact information for your lender, please contact the Regent University Financial Aid Office at 757.352.4125 or firstname.lastname@example.org. Defaulting on a student loan is serious. Default is reported to all national credit bureaus. This could mean that you would not be able to obtain a credit card, mortgage or a car loan. Your name will also be given to the Internal Revenue Service (IRS) who may take your State and Federal Income Tax refund. You will lose your rights to deferments and forbearances. Finally, legal action may be taken against you and the interest rate you pay on your loan may increase, and your wages may be garnished. In addition, you will not be eligible for financial aid at any school until your default status has been resolved satisfactorily.