The federal government provides several options for repayment of your federal loans ranging from standard monthly payments for up to ten years, extended payments for up to thirty years, a graduated payment that allows you to pay a smaller rate in the beginning and a larger rate later on, as well as payments based on income, and a "pay as you earn" plan if you are experiencing financial hardships.
Full details on these repayment opportunities can be found at:
- If you decide to prepay part of your loan while in an in-school status or grace period--and you are holding both Subsidized and Unsubsidized Direct Loans--be sure to specify that you want the payment applied to your Unsubsidized Loan first. This option is available only prior to entering repayment.
- You may be able to deduct up to $2,500 of the interest you paid on a student loan. The amount of your deduction will be gradually reduced if your modified adjusted gross income (MAGI) is between $50,000 and $65,000 (between $100,000 and $130,000 if you file a joint return). If your MAGI is $65,000 or more ($130,00 or more for a joint return) you will not be able to take this deduction.To see if you qualify for this tax advantage and to obtain the appropriate forms, visit the IRS web site at www.irs.gov/pub/irs-pdf/p970.pdf.
Exit Counseling Session
An Exit Counseling Session completed online at www.studentloans.gov is required prior to graduating or when you have ceased half-time enrollment, whichever occurs first. The purpose of this is to summarize your student loan activity, to review repayment, deferment and forbearance options, and to provide you with the mailing and web site address and telephone number for the your Loan Servicing Center.
Deferment and Forbearance Options
If you are having difficulty making your loan payments--and switching payment plans is not sufficient--you are encouraged to request either a deferment or a forbearance. A deferment temporarily postpones payment on your student loan. If a portion of your loan is subsidized, the interest does not accrue on that amount during an approved deferment period. Interest does, however, continue to accrue on the unsubsidized amount. A forbearance takes the form of: a temporary postponement of payment; a reduction of loan payments for a specified period of time; or an extension of time to repay your loan. During an approved forbearance interest does continue to accrue on the total loan principal. To determine eligibility for one of these options and to either complete a form online or download a form in .pdf format, please access the Servicing Center's Web site. The Unemployment Deferment and General Forbearance requests now can be completed and submitted online using your PIN. Both the deferment and forbearance options
Defaulted Student Loans
If you become 270 days (nine months) delinquent in making a payment on your loan, you have defaulted on your student loan. If you fail to make loan payments on time or if you default, the consequences are serious:
- Garnishment of wages
- Claims against your federal income tax refunds
- Legal action against you
- Asset seizure and property liens
- A black mark on your credit rating
- Ineligibility to receive federal student financial aid in the future
- Loss of monthly payment plan, deferment and forbearance options
- Late fees, additional interest, court costs, collection fees, attorney fees, and other costs can be added to your total debt
You are encouraged to call or send an email at any time if you have a question about your student loan, even if you already have completed your program of study here. And, as mentioned previously, the Department of Education also works with student loan borrowers to informally resolve loan disputes and problems through its Office of the Ombudsman. To contact this office, please use the toll-free number (877) 557-2575 or visit their web site at www.ombudsman.ed.gov. Their address is: U.S. Department of Education, FSA Ombudsman, 830 First Street, NW, Washington, DC 20202-2575.
If you have other federal student loans, such as loans from the Department of Education -- Federal Student Aid (Stafford Student Loans, Unsubsidized Stafford Student Loans) or Federal Perkins Loans, you can consolidate them into a Federal Direct Consolidated Loan, allowing you to make one monthly payment to one source. A Consolidation Loan calculates the weighted average of your existing loans, rounds this amount up to the closest 1/8%, and offers you a fixed rate. For additional information on loan consolidation, please visit http://www2.ed.gov/offices/OSFAP/DirectLoan/RepayCalc/dlindex2.html or contact the Office of Financial Aid.