Repay Student Loans

The Direct Consolidation Loan Program offers four repayment plans with various term selections:

• Standard Repayment Plan – Under this plan, you will pay a fixed amount of at least $50 each month for up to 10 to 30 years, based on your total education indebtedness. This plan may result in lower total interest paid when compared to repayment under one of the graduated plans.If you have not selected a repayment plan by the time repayment begins, your loan(s) will be placed on the Standard Repayment Plan.
• Graduated Repayment Plan – Under this plan, you will pay a minimum payment amount at least equal to the amount of interest accrued monthly for up to 10 to 30 years, based on your total education indebtedness. Your payments start out low, and then increase every two years. Generally, the amount you will repay over the term of your loan will be higher under the Consolidation Graduated Repayment Plan than under the Consolidation Standard Repayment Plan. This plan may be beneficial if your income is low now but is likely to steadily increase.
• Extended Repayment Plan – To qualify for this plan, your Direct Loan balance must be greater than $30,000, and you will have up to 25 years to repay your loan(s). Plan options include:
  • Fixed Monthly Payment Option – You will pay a fixed amount of at least $50 each month for up to 25 years. Repayment under this plan will result in lower total interest paid when compared to graduated plans with similar terms.
  • Graduated Monthly Payment Option – You will pay a minimum payment amount of at least $50 or the amount of interest accrued monthly, whichever is greater, for up to 25 years. Your payments start out low and then increase every two years. Repayment under this plan may provide lower initial monthly payments, although the total interest paid may be greater when compared to plans with similar terms with fixed payments. This plan may be beneficial if your income is low now but is likely to steadily increase.

  **Extended repayment terms are available to Direct Loan borrower with no outstanding principal or interest balances as of October 7, 1998 and with more than $30,000 in Direct Loans.

• Income Contingent Repayment (ICR) Plan – payment amount is based on your income (and your spouse’s income, if you are married), loan balance and family size, and can vary year-to-year for up to 25 years.

Source: U.S Department of Education

After you graduate, leave school, or drop below half-time enrollment, you have a period of time before you have to begin repayment. This “grace period” will be

* six months for a Federal (FFEL) or Direct Stafford Loan.
* nine months for Federal Perkins Loans

The repayment period for all PLUS loans begins on the date the loan is fully disbursed, and the first payment is due within 60 days of the final disbursement. However, a graduate student PLUS loan borrower (as well as a parent PLUS borrower who is also a student) can defer repayment while the borrower is enrolled at least half time, and, for PLUS loans first disbursed on or after July 1, 2008, for an additional six months after the borrower is no longer enrolled at least half-time. Interest that accrues during these periods will be capitalized if not paid by the borrower.

Parent PLUS loan borrowers whose loans were first disbursed on or after July 1, 2008, may choose to have repayment deferred while the student for whom the parent borrowed is enrolled at least half-time and for an additional six months after that student is no longer enrolled at least half-time. Interest that accrues during these periods will be capitalized if not paid by the borrower.

Source: U.S. Department of Education

All loans received under programs authorized by Title IV, of the Higher Education Act can be canceled for several different circumstances including: (1) in the event of your death; or (2) if you become totally and permanently disabled after the loan is disbursed.

In addition, some loan types may qualify for loan discharge under a variety of conditions. Some of the most common cancellation provisions are listed for you below:

* the school you attended improperly certified your ability to benefit from the training given.
* the school you attended closed while you were in attendance or within 90 days after you withdrew from the school.
* A National Defense Student Loan can be canceled in 2 additional circumstances: (1) full-time teaching and (2) military service.
* Finally, your obligation to repay your loan may be discharged in bankruptcy.

Source: U.S. Department of Education

You may want to consider rehabilitating your defaulted loan(s). Advantages of rehabilitation include:

• Your loan(s) will no longer be considered to be in a default status.
• The default status reported by your loan holder to the national credit bureaus will be deleted.
• You will be eligible for the same benefits that were available on the loans before the loans defaulted. This may include deferment, forbearance, and Title IV eligibility.
• Wage garnishment ends and the Internal Revenue Service no longer withholds your income tax refund.

If you are a Direct Loan Borrower:

To rehabilitate a Direct Loan, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the U.S. Department of Education (Department). Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) will be returned to the Direct Loan Servicing Center.

If you are a FFEL loan borrower:

To rehabilitate a FFEL, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the Department. Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) may be purchased by an eligible lending institution.

If you are a Perkins loan borrower:

To rehabilitate a Perkins Loan, you must make nine (9) on-time, monthly payments of an agreed amount to the Department. Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) will continue to be serviced by the Department until the balance owed is paid in full.

Source: U.S. Department of Education