Guide to Federal Student Loan Repayment
All student loans must be repaid with interest. This means students must repay the principal amount borrowed plus all interest accrued over the life of the loan. The amount of repayment depends on the amount borrowed, the interest rate, and the length of repayment. Students will generally have to start repaying their loans six months after they graduate or drop below half-time status. (Half-time status is defined as a minimum of six hours.) Students must repay their loans regardless if they complete their degree.
- Parent PLUS loan repayment begins sooner for borrowers than student loans. This information does not apply to students who have borrowed private student loans. This page is a guide as to what borrowers should expect when repaying student loan debt.
What to Expect: An Overview
Highlights of the Video:
- Prior to the first payment, students should be contacted by the loan servicer regarding repayment.
- Borrowers are generally given a repayment period of 10 years, but students can request different repayment options to fit their financial limitations.
- Students wanting to contact their servicer or view other details of their loan history should visit the National Student Loan Database
Questions Regarding Loan Repayment
- When will I begin repaying my loans?
- How much will my monthly payment be?
- What are the different repayment plans?
- What if I want to consolidate my student loan debt?
- What if I cannot make payments right away?
- What happens if I fail to make payments?
- How can I get out of default?
- Can my debt be forgiven, cancelled, or included in a bankruptcy?
- What is Student Outreach Solutions?
Payment for Stafford and Perkins loans are deferred while the borrower is in college; however, once a student's enrollment drops below six hours they will enter into repayment. Initially, Stafford Loans borrowers are offered a six-month grace period following their change in enrollment before the first loan payment is due. So, if a student graduates college in May their first loan payment will be due in November.
There are many factors involved with determining a monthly payment amount. These factors include length of repayment, interest rate, and principal amount borrowed; however, perhaps the biggest factor in determining one's monthly payment amount is the principal borrowed. The more you borrow the larger your monthly payment will be. That is why it is important for students to be responsible with their student loan borrowing.
Though students can opt for different repayment plans if they qualify, all borrowers are assigned to the Standard Repayment Plan, which consists 120 payments over 10 years. To better understand your specific situation, you can use a Student Loan Calculator to determine how much your monthly payment will be.
Though the Standard Repayment plan of 10 years is useful to many borrowers, it does not fit the needs of every student borrower. Everyone wants students to repay their loans without the debt being a crippling burden to financial independence. Therefore, Congress and the U.S. Department of Education have developed various repayment plans for federal Stafford student loans. These plans vary in terms of length and monthly amount. Some are designed only for those students with financial hardship. To better understand the various plans offered visit Federal Student Aid Guide to Repayment Plans.
Students are allowed to combine multiple federal student loans into one loan. This will mean a student can make a single monthly payment instead of multiple payments. Consolidation is not necessary for every student, and can place limitations on the loans. Therefore, students should carefully consider whether or not they want to consolidate their loans. To better understand this process, students can visit Federal Student Aid Guide to Consolidation.
It is not uncommon for new graduates to need a little extra time getting their finances in order. That is why student loans do not come due until about six months after the student leaves school. Borrowers are given the option of delaying repayment temporarily under certain circumstances. These delays are referred to as Deferment or Forbearance. Students who need to suspend repayment will need to contact their loan servicer or TCC students can contact Student Outreach Solutions for help.
Students who miss payments on their student loans may face serious, lasting consequences.
The day after you miss your first payment your loan becomes delinquent. You will remain delinquent until you become current on your payments. If you are delinquent for 90 days or more, this will be reported to the major credit bureaus, resulting in a negative credit rating.
If you continue to fail to make monthly payments for 270 days your loan will become defaulted. Once in default, your ability to receive additional federal student aid (including grants) will be terminated until your loan is out of default. Defaulted borrowers lose eligibility for deferment, forbearance, and repayment plans. Defaulted borrowers may have their taxes withheld or their wages partially garnished until the default is resolved. Defaults will also have a negative impact on one's credit rating.
If you believe you are at risk for delinquency or default due to financial hardship, you should contact TCC, your loan servicer, or Student Outreach Solutions. You have more options before you have missed a payment than after you miss one.
For more information about delinquency and default, students should visit the Federal Student Aid Guide to Understanding Default.
Students have a few options to reverse their default. These options are:
Loan Repayment: A borrower can reverse the default by paying the loan in full.
Loan Rehabilitation: Borrowers can rehabilitate their loans by arranging a payment plan with a lender and making voluntary payments on time.
Loan Consolidation: Borrowers can consolidate defaulted loans and begin making voluntary, on-time payments.
In many ways, student loan debt is not like other kinds of debt. It is difficult to have it included in a bankruptcy. It is also difficult to have the debt canceled or forgiven. Bankruptcy is possible with student loan debt, but very rarely happens due to strict rules regarding this type debt. To better understand forgiveness, cancelation and bankruptcy, students should borrow Federal Student Aid Guide to Forgiveness, Cancellation, and Discharge.
TCC has partnered with Oklahoma College Assistance Program and Student Outreach Solutions to help TCC students with their student loans and financial literacy. Student Outreach Solutions will contact student loan borrowers who are struggling with repayment to help them devise solutions so they can avoid default. They will also contact defaulted students to help them get into a repayment plan.