Repaying Your Loans

What you need to know about repaying student loans...

After you graduate, leave school, or drop below half-time enrollment, you have a period of time before you have to begin repayment. This “grace period” will be

(If you're a parent reading this and you have a FFEL or Direct PLUS Loan, you don't have a grace period-repayment generally must begin within 60 days after the loan is fully disbursed.)

New Deferment Information

The College Cost Reduction and Access Act (CCRAA), enacted on Sept. 27, 2007, modified the Military Service Deferment, created the Active Duty Student Deferment and changed the poverty line standard for the Economic Hardship Deferment for borrowers in the FFEL, Direct Loan and Federal Perkins Loan programs. See “Difficulty Repaying” for detailed information.

Exit Counseling

You'll receive information about repayment, and your loan provider will notify you of the date loan repayment begins. We can't emphasize enough the importance of making your full loan payment on time either monthly (which is usually when you'll pay) or according to your repayment schedule. If you don't, you could end up in default, which has serious consequences (scroll down to the Default discussion below). Student loans are real loans—just as real as car loans or mortgages. You have to pay back your student loans. Find out about your obligations in this section so you can stay on top of your loans.

Get Your Loan Information

The U.S. Department of Education's National Student Loan Data System (NSLDS) allows you to access information on loan and/or federal grant amounts, your loan status (including outstanding balances), and disbursements made. Go to www.nslds.ed.gov.

Paying Back Your Loan

You have a choice of repayment plans if you received a FFEL or a Direct Loan. Federal Perkins Loans don't have repayment plan choices; you generally have up to 10 years to repay, however. Your monthly payment will depend on the size of your debt and the length of your repayment period. Funding Education Beyond High School: The Guide to Federal Student Aid explains available repayment options, includes examples of monthly payments for different loan amounts, and covers other topics you need to consider when managing your loans. You can see the entire publication here.

Click here to use our calculator to determine your repayment amounts under each of the different repayment plans.

Note to parents: Generally, Direct PLUS Loan borrowers can choose all but the Income Contingent Repayment Plan. FFEL PLUS Loan borrowers usually can choose from among all the FFEL repayment plans. See Funding Education Beyond High School: The Guide to Federal Student Aid and contact your loan holder for details.

Federal Family Education Loans (FFEL) and Federal Perkins Loans

After you've looked at Funding Education Beyond High School: The Guide to Federal Student Aid, if you have specific questions about repaying these types of loans, please contact your loan provider. (In the case of Perkins Loans, this will be the school that made you the loan). Don't know who your loan provider is? Go to www.nslds.ed.gov to find out.

How can I calculate the amount of interest on my own?

To determine the amount of interest you will be required to pay on each month, use the following formula called the Simple Daily Interest formula:

Practice Example: Let's say the remaining balance on your loan is $9500.00. You sent in a payment of $160.00, 32 days after your previous month's payment. Your interest rate is 8.25% (interest rate factor is .00022587).

32 (days) x $9500.00 (PBO) x .00022587 (interest rate factor)

You would pay $68.66 toward interest and $91.34 toward the principal balance. This would leave you with a loan balance of $9408.66 after the $160.00 payment was applied.

Interest Rate Factor

The interest rate factor is used to calculate the amount of interest that accrues on your loan. It is determined by dividing your loan's interest rate by 365.25 (the number of days in a year). See the following table to see some examples of interest rate factors.

Why does the amount of interest I pay vary from month to month?

Interest accrues on a daily basis on your loans. Factors such as: the number of days between your last payment, the interest rate, and the amount of your loan balance, determine the amount of interest that accrues each month.

You can calculate how much will accrue on your loan by using the Simple Daily Interest Formula.

Direct Loan Servicing Online

If you have questions about your Direct Loan, you can go online to find the answers. With your PIN, you can view your detailed account information, complete exit counseling, make an online payment, enroll in any of our electronic services, and much more. For the payment address to send your Direct Loan payments, click here

Electronic Payment

In some cases, you might be able to reduce your interest rate if you sign up for electronic debiting. Find out more about electronic payment and debiting here.

Difficulty Repaying

If you don't repay your student loans on time or according to the terms of your promissory note, you might go into default, which will affect your credit rating. There is assistance for borrowers having difficulty repaying their education loans, including deferment and forbearance.

Loan Discharge (Cancellation)

In certain circumstances, your loan can be discharged/canceled. Read about cancellation provisions here.

Cancellation and Deferment Options for Teachers

If you're a teacher serving in a low-income or subject-matter shortage area, it may be possible for you to cancel or defer your student loans. Let us help you find out if you qualify.

Loan Forgiveness for Public Service Employees

There is a new loan forgiveness program for public service employees. Under this program, the amount forgiven is the remaining outstanding balance of principal and accrued interest on an eligible Direct Loan for a borrower who is not in default and who makes 120 monthly payments on the loan after October 1, 2007. The borrower must be employed full-time in a public service job during the same period in which the qualifying payments are made and at the time that the cancellation is granted.

Loan Consolidation

A Consolidation Loan allows you to combine all the federal student loans you received to finance your college education into a single loan. Read this section to help you decide whether consolidation is right for you.

Default

If you default, it means you failed to make payments on your student loan according to the terms of your promissory note, the binding legal document you signed at the time you took out your loan. In other words, you failed to make your loan payments as scheduled. Your school, the financial institution that made or owns your loan, your loan guarantor, and the federal government all can take action to recover the money you owe. Here are some consequences of default:

Obviously, you don't want to let your loan go into default. However, should this happen, find out what options are available. Click on this link to our Guide for Defaulted Borrowers to find comprehensive information developed by the Department's FSA Collections section. Clicking on various tabs within that publication will give you information about how to remove your loan from default, what to do if you have a dispute about your loan's default status, and how to get answers to questions you might have.

If you have a defaulted federal education loan and need the payment address of where to send your payments, click here.