Payment in Full

If you have the money to pay off your balance, then you are encouraged to do so in order to save on the interest and other fees. You can contact the Student Loan Management Team or your servicer to find out what your “pay off amount” is.

Minimum Payments

Another option is making the minimum payments that are due every month. There are not penalties if you pay more than the minimum amount. Some borrowers may have multiple lenders and multiple loans, and they may consider bundling up all of those Federal student loans through the Direct Loan Consolidation program.

Standard Repayment

If you have not chosen a repayment plan yourself, then your servicer will automatically place your account into the standard repayment plan. Although this is considered the highest monthly payment plan; normally, a borrower will pay off the total loan balance (minimum 5 years) in 10 years. This is the best choice and least expensive loan repayment option in terms of total interest costs you will repay.

Graduated Repayment

If you are not able to meet the obligations under the standard repayment plan option, then consider the graduated repayment plan. This plan allows up to 10 years to repay your loans. For the first 2 years, you only pay the interest, then your monthly payments increase every 2 years. Consider this plan if you expect your income to increase in the future. Eligibility is based on adjusted income, family size, and total loan debt.

Specialized Repayment Plans

The following repayment plans are only available to certain borrowers, and eligibility is determined by specific borrower criteria, as outlined below. Please contact your loan servicer for additional information about these repayment plans.

• IBR (Income Based Repayment Plan)
  • The Income Based Repayment (IBR) plan may be one of the most affordable plans, but not everyone qualifies. If your loan payments are more than 15 percent of your “discretionary” income, you may qualify for this option. Also, your payments may be less than the accruing interest, and you may qualify to pay back your loans over a period of up to 25 years. If you owe a balance after 25 years of on time payment, the remaining balance of your outstanding Federal student loan with be forgiven.
• PSLF (Public Service Forgiveness Program)(Direct Loan borrowers only) ­ 
  • You may qualify to participate in the Public Service Loan Forgiveness repayment program if you work in a job with the government or nonprofit 501 (c)(3) organization. While employed with an eligible job, you must make qualifying payments for a total of 10 years (120 monthly payments). Any remaining debt after qualifying payments will be forgiven. This program is only available to Direct Loan borrowers.
• ICR (Income Contingent Repayment)
  • ​With this plan any borrower with eligible Federal student loans can make payments under this plan and no partial financial hardship is needed.  Payments are usually 20 percent of your discretionary income and payments can be made for 25 years.
• PAYE (Pay As You Earn)
  • ​The only eligible Federal loans are Direct Subsidized and Unsubsidized for Undergraduates and Direct Plus for Graduates and Professionals. Please note that this does not include Direct Plus Loans issued to parents. Applicants must prove Partial Financial Hardship. This includes not just income, but number of family members and their income as well. You must be a new borrower as of October 1, 2007, and must have received a disbursement of a Direct Loan on or after October 1, 2011. You are a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program loan when you received a Direct Loan or FFEL Program loan on or after October 1, 2007. This plan is generally 10 percent of your discretionary income, but never more than the 10 year Standard Repayment Plan amount.
• REPAYE (Re-Pay As You Earn)
  • ​The REPAYE Plan improves upon the current Pay As You Earn Plan while extending its protections to all student borrowers with Direct Loans. As with the Pay as You Earn repayment option, payments are limited to 10 percent of borrower’s discretionary income. Borrowers of all Direct Loans (except parent PLUS loans and consolidation loans that repaid a parent PLUS loan) are eligible. Borrowers may qualify for loan forgiveness after 20 years of repayment for undergraduate loans, or after 25 years of repayment for loans received for graduate study. But any forgiven loan debt is taxable income under current tax laws. There is no income requirement to qualify. Note, however, that borrowers in REPAYE who do not face partial financial hardships may have higher total loan costs because of capitalized interest. REPAYE cuts in half the remaining interest fees not covered by a borrower’s income-driven monthly payment amount. Unlike with other income-driven plans, REPAYE calculates discretionary income for married borrowers according to joint adjusted gross income regardless of whether each spouse flies separately.

** For Income-Based Repayment, Pay As You Earn, REPAYE and loan rehabilitation, discretionary income is the difference between your income and 150 percent of the poverty guideline for your family size and state of residence.

***For Income-Contingent Repayment, discretionary income is the difference between your income and 100 percent of the poverty guideline for your family size and state of residence.

• The poverty guidelines are maintained by the U.S. Department of Health and Human Services and are available at https://aspe.hhs.gov/poverty-research. 

Defaulting on student loan payments is a very serious matter. When you sign your Master Promissory Note, it is a legal contract to the terms and conditions of your loans, which include repayment. Here are some of the consequences:

Credit Rating Decline

Defaulted loans are reported to credit bureaus, causing you, the borrower, to sustain long-term damage to your credit score. This will likely make it difficult for you to obtain other types of consumer credit, such as a home mortgage or car loan.

Wage Garnishment

Your loan servicer can notify your employer to withhold a portion of your pay, which will be applied to your unpaid loan balance. This also applies to Social Security benefits.

Additional Cost

Outstanding interest is capitalized and collection fees may be added, resulting in a loan balance that is higher than the amount borrowed.

Income Tax Refund Seized

Your Federal income tax refunds and other Federal payments maybe seized to satisfy the outstanding loan balance you owe.

Federal Financial Aid Ineligibility

If you wish to return to school, you will not be eligible for any additional Federal student aid until you make arrangements to repay your defaulted loan.

Lawsuit

Your servicer or the Federal Government may file a lawsuit seeking a civil judgement against you for the amount you owe.

Licensure Ineligibility

If you’re applying for a professional license from your state, your servicer may be able to prevent that from happening until you start paying your loans.

Lifetime Debt

Your unpaid loan will stay with you until you pay it back. Collections efforts continue until you resolve your defaulted account. 

Loan Consolidation

Although this option may result in monthly payments (and maybe a lower fixed interest rate), you are likely to pay more total interest because you lengthened your repayment period by making smaller payments over a longer term. The consolidation option allows you to bundle multiple Federal education loans into one new loan with the benefit of a convenient single monthly loan payment. Loan consolidation is not the best choice for every borrower – be sure to speak with your school’s specialist or servicer for more information.

Deferment

You may qualify for deferment if you are unemployed, are working less than 30 hours a week, are actively seeking full-time employment (more than 30 hours a week), are registered with an employment agency, are facing certain economic hardships, are on active duty, are receiving payments under Federal or state public assistance program, or are returning to school. Proof of documentation is also required. There is unlimited usage on the In-school Deferment, and up to 3 years on the Unemployment and Economic Hardship Deferment forms.

Forbearance

If you can’t make your scheduled monthly loan payments, but don’t qualify for a deferment, your loan servicer may be able to grant you a forbearance. With forbearance, you may be able to stop making payments or reduce your monthly payments for up to 12 months. Interest will continue to accrue on your subsidized and unsubsidized loans (including all PLUS loans). There are two types of forbearances: Discretionary and Mandatory. For discretionary forbearances, your lender decides whether to grant forbearance or not. For mandatory forbearances, if you meet the eligibility criteria for the forbearance, your lender is required to grant the forbearance.

In-School Deferment

If you return to school and are actively enrolled at an eligible institution at least half time, then you may be qualified for the in-school deferment. The in-school deferment will postpone payment while you are attending school.

Military Deferment

If you are in your grace period, this deferment can extend your grace period up to 3 years if you are serving on active duty in the U.S. Armed Forces. The deferment ends 180 days after you are demobilized from active duty service.