Repaying Your Student Loans

Student Loans

Did you know that most loans afford you a period of six or nine months after you graduate, leave school, or drop below half-time enrollment before you must begin making payments? Use this time to get financially settled, to determine your expected income and expenses, and to select a repayment plan. Once you enter repayment, you must make your payments on time to avoid recurring loan default

Grace Period

If you received a federal student loan, you are required to complete Exit Counseling before you graduate, leave school (for any reason), or drop below half-time enrollment. Exit counseling is a mandatory information session that explains your loan repayment responsibilities and when repayment begins. However, make sure you do your own research before entering any suggested repayment plan.

Loan Information

You loan information is usually contained in your Student Loan Borrowing History. For each federal student loan, your school or loan servicer must provide you with information about it. This reflects the amount you borrowed and the interest rate. It is a great plan to run this information, to track your borrowing, and to arrange for repayment of your loan. You still have the opportunity to see your federal student loan information on the FederalStudent Aid website.

Sevicer

Make sure you have the name of the servicer for each of your loans and where to send your payments. The Department of Education assigns various servicers to manage your loans at no cost to you. However, many of these servicers are in current litigation for mishandling student loans and unfair and deceptive practices. So make sure you do your due diligence before agreeing to any loan balances, disbursements, or interest rates. We would highly advise you to review your Master Promissory Note (MPN).

Revised Pay As You Earn Repayment Plan (REPAYE)

Revised Pay As You Earn Repayment Plan (REPAYE) Generally your payments will be 10 percent of yourdiscretionary income. Complete payment will take 20 years if all loans you are repaying under the plan were received for undergraduate study; and 25 years if any loan you are repaying under the plan were received for a graduate or professional study.

Pay As You Earn Repayment Plan (PAYE

Pay As You Earn Repayment Plan (PAYE) Payment under this plan is generally 10 percent of your discretionary income, but never more than the 10-year Standard Repayment Plan amount. The repayment period under this plan is 20 years.

Income-Based Repayment Plan (IBR)

Generally, repayment is 10 percent of your discretionary income if you’re a new borrower on or after July 1, 2014, but never more than the 10-year Standard Repayment Plan amount. However, if you’re not a new borrower on or after July 1, 2014, payment is generally 15 percent of your discretionary income but never more than the 10-year Standard Repayment Plan amount. How long will I be in repayment under each plan? 20 years if you’re a new borrower on or after July 1, 2014; 25 years if you’re not a new borrower on or after July 1, 2014. More information on the IBR is available HERE.

Income-Contingent Repayment Plan (ICR)

Generally, your payment will be either 20 percent of your discretionary income or what you would normally pay on a repayment with a fixed amount over 12 years, adjustable according to your income. If you have Parent Plus loans this would be the only repayment plan you would qualify for based on your income.

Loan Forgiveness

Under all four plans, any remaining loan balance is forgiven if your federal student loans aren’t fully repaid at the end of the repayment period. For any income-driven repayment plan, periods of economic hardship deferment, periods of repayment under certain other repayment plans, and periods when your required payment is zero will count toward your total repayment period.