What are my options?
The best way to repay will depend mostly on your individual circumstances. If you choose a plan and it doesn’t work, you can switch your plan up to once a year by contacting your lender or servicer. Repayment plan options include:
- Standard: You pay monthly installments of at least $50 over a 10-year period, with payments based on the amount you borrowed. This option is the most common and generally the most economical.
- Extended: If you have more than $30,000 in Stafford loans borrowed after October 7, 1998, you may be eligible to extend the term of your payments for up to 25 years. Remember, though, that a longer term adds interest to your overall balance.
- Graduated: If your loan balance is high or your income low, you may choose this plan because it offers lower payments to start, gradually increasing over time, with up to 10 years to repay. However, the amount of interest you pay overall is higher than with standard repayment.
- Income-Sensitive: Payments are determined by comparing your debt to your monthly income, are adjusted annually, and can only be used for five years. Then payments revert to the standard plan.
- Income-Based Repayment: Available to borrowers who display partial financial hardship. Payments are based on your adjusted gross income, family size and balance on eligible loans.
- TIP: You can save on interest and re-pay your loans sooner by making early payments or adding a little on to your regular payment whenever you’re able.
This sample chart highlights the different repayment plans with monthly payments. Click here for a PDF version.
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Can I reduce my payments?
Be sure to ask your lender what’s available. Chances are, they’ll offer some ways to reduce your payments and loan balance with special programs that reward things like:
- Having your payment automatically deducted from your bank account
- Keeping a solid track record of on-time payments
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What happens if I pay late or default on my loan?
Think of paying back your student loans as your end of the deal – you’re obligated to repay the debt just like any other. Paying on time offers huge rewards for your financial future, but late payments and defaulting on your debt have serious consequences, such as:
- A poor credit rating that will keep you from getting a car or home loan
- Losing the option to make monthly payments and end up owing your entire balance at once
- Piling up late charges and collection fees
- Garnished wages
- TIP: Whenever you move, be sure to provide your lender or servicer your new mailing address and contact numbers.
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What programs are out there to help me get back on track?
- Deferment: If your lender approves it, you may be able to temporarily stop making payments for reasons such as economic hardship, unemployment, or returning to school full-time. With deferment, interest on subsidized Stafford and Perkins loans is paid. For unsubsidized loans, though, you’ll still be responsible for paying the interest.
- Forbearance: As with deferments, getting a forbearance means your payments are temporarily postponed. Your lender must approve the forbearance. During forbearance, you’ll still be responsible for paying the interest that builds on your loans.
- Consolidation: If you have multiple loans through multiple lenders, you may find it more efficient and less expensive over the long term to consolidate all of your loans into one larger loan. You’ll need to carefully weigh the circumstances, though, calculating things like whether your monthly payments are substantially lowered, how much (if any) additional interest you’ll pay, and more.
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How can I find out more about these programs?
Help is there when you need it. To find out about deferment and forbearance programs and where to get application forms, contact your lender.
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