Repay Student Loans » Student Loan Repayment

Make sure you make your student loan payment on time

admin — Tue, 01 Feb 2011 03:22:58 +0000

Just like mortgage payments, student loan repayments need to be on time also. Your loan servicer will provide information about repayment and will notify you of the date loan repayment begins. In most cases, your loan payment will be monthly. It is very important that you make your loan payment on time every month. You should treat it as your mortgage payments even if you don’t have mortgage payment yet. If you don’t pay your mortgage payments, you could end up with bank foreclosures. If you don’t pay your student loan payments, you could end up in default, which has serious consequences.

Many new grads don’t realize that the student loan payments are as real as it gets. This might be the most serious financial commitment you’ve made so far. Stick to it and pay it.

Source: ed.gov

Some federal education loans are eligible for consolidation into a Direct Consolidation Loan

admin — Mon, 01 Nov 2010 02:11:27 +0000

If you have several student loans and are overwhelmed by the payment, you need to consider the option of consolidating. If you have a federal education loan, you can consolidate it into a Direct Consolidation Loan. The subsidized loans that can be consolidated are:

Subsidized Federal Stafford Loans
Direct Subsidized Loans
Subsidized Federal Consolidation Loans
Direct Subsidized Consolidation Loans
Federal Insured Student Loans (FISL)
Guaranteed Student Loans (GSL)

Source: Department of Education

There are some student loans you can’t consolidate

admin — Wed, 29 Sep 2010 19:07:41 +0000

This is the perfect time to consolidate your student loans. The rates are low and you won’t see this kind of rates once the economy starts growing again. While most federal education loans are eligible for consolidation into a direct consolidation loan including subsidized loans and unsubsidized loans. There are a few exceptions that some students loans are always ineligible for consolidation.

While these loans may not be included in a Direct Consolidation Loan, they may be considered in the calculation of the maximum repayment period under the Graduated or Extended Repayment Plan. These include but are not limited to the following:

Loans made by a state or private lender and not guaranteed by the federal government
Primary Care Loans
Law Access Loans
Medical Assist Loans
PLATO Loans

So if you are still in school and are planning on taking out more loans or going to Medical or law school, study your options.

Source: U.S. Department of Education. www.ed.gov

Once you leave or graduate your school, you have 6 months grace period

admin — Fri, 10 Sep 2010 01:51:45 +0000

Did you know that when you leave school which includes graduating, withdrawing, or dropping below half-time attendance, you have 6 months of grace period before you have to make student loan payments. This applies to direct subsidized and unsubsidized loans.

But be very careful with one scenario:

There’s no second grace period. If you have an in-school deferment on a Direct Subsidized or Unsubsidized Loan and you have used the 6-month period, there will be grace period. You will be required to make payments right away, whether you graduated, withdrew, or dropped below half time.

Source: Department of Education

You have the Borrower Grace Periods no matter what the lender says

admin — Sat, 07 Aug 2010 00:12:06 +0000

You are graduating, or you have graduated for 3 moths and yet there’s no sign of a full time job. You’re still hunting for that job and you’re losing sleep over the upcoming payment of your student loans. You are worried that someone from the lender will call you soon and you will receive a written notice.

Regardless what people tell you, there’s a Borrower Grace Period.
Here’s what it stands for: 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 Stafford Loan (Direct Loan Program^SM or Federal Family Education Loan (FFEL^SM) Program).
Nine months for Federal Perkins Loans.

It does offer some relief in a bad economy such as this one, but you will still need to find that job soon.

Source: studentaid.ed.gov

The Direct Consolidation Loan Program offers four repayment plans

admin — Wed, 13 May 2009 19:57:37 +0000

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

What you need to know about repaying student loans

admin — Tue, 12 May 2009 19:35:05 +0000

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

Repaying Defaulted Student Loans Held By a Guaranty Agency

admin — Thu, 30 Apr 2009 18:33:57 +0000

Under the Federal Family Education Loan (FFEL) Program, after your student loan is placed in default by the holder of the loan, an insurance claim for the amount of the loan is paid by the guaranty agency (the organization that administers the FFEL Program for your state) to the holder of the loan. To find out more about your repayment options for your loan held by a guaranty agency, please call the agency servicing your loan. You can call the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243), to find out which guaranty agency holds your loan.

Source: U.S. Department of Education

How is the amount of payment calculated under the ICR plan

admin — Wed, 22 Apr 2009 19:20:35 +0000

The ICR Plan is designed to keep payments affordable. Generally, borrowers pay the lesser of:
the amount they would pay if they repaid their loan in 12 years, multiplied by an income percentage factor that varies with their annual income, or
20 percent of their discretionary income (AGI minus the poverty level for their family size)
Under the ICR plan, the monthly payment is $0 for borrowers with family incomes that are less than or equal to the U.S. Department of Health and Human Services poverty level for their family size. Borrowers whose calculated monthly payment is greater than $0 but less than $5 are required to make a $5 monthly payment. Other borrowers must pay the calculated monthly payment.
Until the Department receives income information from the IRS or alternative documentation of income, borrowers’ monthly payments are equal to the interest that accrues each month. If they are unable to make the interest -only payments, borrowers may request a forbearance until the first scheduled Income Contingent Repayment (ICR) plan payment is due.

The monthly payment in Example E is calculated as follows:

Step 1:
Multiply the principal balance by the constant multiplier for 8.25 percent interest (0.0109621)
$15,000 x 0.0109621 = $164.4315

Step 2:
Multiply the result by the income percentage factor that corresponds to the borrower’s income.
88.77 (0.8877) x 164.4315 = $146

Step 3:
Determine 20 percent of discretionary income (based on the poverty guidelines for a family of one).
($30,000 – $10,210) x 0.20 / 12 = $329.83

Step 4:
Payment is the amount determined in step 2 because it is less than 20 percent of discretionary income.

NOTE: This example is based on the 2007 income percentage factors and U.S. Department of Health and Human Services (HHS) poverty level guidelines.

Source: U.S. Department of Education

About Income Contingent Repayment (ICR) Plan

admin — Wed, 22 Apr 2009 19:19:16 +0000

The ICR Plan gives borrowers the flexibility to meet their obligations without causing them financial hardship. Monthly payments are based on borrowers’ annual Adjusted Gross Incomes (AGI), loan balance and family sizes. Income is obtained from the Internal Revenue Service (IRS) or from an Alternative Documentation of Income Form (discussed below) submitted by the borrowers.

To participate in the ICR Plan, borrowers (and if married, their spouse) must sign the Income Contingent Repayment Plan Consent to Disclosure of Tax Information Form. This authorizes the IRS to release borrowers’ income information to the Department of Education to calculate monthly payments. Monthly payments are adjusted annually to reflect inflation, family size and income.

Monthly payment amounts for some borrowers may not be enough to cover the interest accruing on their loans. This situation is referred to as negative amortization. In such cases, the unpaid interest is capitalized and added to the principal balance once per year. The amount added to the principal balance will never exceed 10 percent of the original Direct Consolidation Loan amount. Once this capitalization limit has been reached, interest continues to accrue but is not capitalized. The capitalization limit does not apply to interest that accrues during deferment or forbearance.

Under this plan, it is possible a borrower will not make payments large enough to pay off his or her loans in 25 years. If loans are not fully repaid after 25 years of repayment, any unpaid amount will be forgiven. The maximum 25-year repayment period may include prior periods of repayment under certain other repayment plans, and certain periods of economic hardship deferment. The forgiven amount may be considered taxable income.

Source: U.S. Department of Education