Loan Repayment

Time To Pay The Piper

When you accept a student loan, you sign a promissory note, which is a legal contract between you and the lender. Although you must honor the agreement you made to repay what you owe, you have options as to when and at what rate you repay the loan.

Re-Paying Federal Loans

Federal Stafford Loans come with a six-month grace period after graduation before repayment must begin. Perkins Loans have a nine-month grace period. During the grace period, you should be trying to get a job that allows you to meet all your monthly expenses, including your student loan. If this is not possible, you can consider modifying your repayment terms to ensure you loan remains in good standing.

After the grace period, you are responsible for the monthly payments that were originally agreed to by you and the lender. You may have between 10 and 25 years to re-pay a Stafford Loan, and 10 years to re-pay a Perkins Loan.

If you have an unsubsidized Stafford Loan, monthly payments on the interest are due within 60 days of disbursement of the loan. Most students, however, defer these payments, having the interest added to the principal.

Parent PLUS and GradPLUS loans do not have a grace period. Repayment of principal and interest begins 60 days after the loan is disbursed.

Federal Loan Repayment Options Are Flexible

  • Standard repayment is a 10-year repayment term with fixed monthly payments.
  • If you have an inconsistent income or a job that does not allow you to make a set monthly payment, income sensitive or income contingent repayment is appropriate.
  • Extended repayment is for borrowers with more than $30,000 of student loan debt. Monthly payments can be fixed or graduated up to 25 years.
  • Graduated repayment starts the monthly payment small and increases it over time.

Student Loan Consolidation

Loan consolidation allows the graduate with multiple loans to repay to roll all the payments into one low monthly payment. Public and private lenders all offer consolidation – it decreases the possibility of default. A coupld of aspects to consider:

  • You will still have a minimum monthly payment.
  • Your repayment term will be extended, which means you will end up paying back more than your initial loan and interest.

Loan Deferments

If you have trouble repaying your loans, it is critical that you talk with your lender promptly. Most public and private student loans allow deferments in certain situations:

  • If you go back to school at least half-time, you may defer your student loans, including interest accrual.
  • If you are unemployment you can have your student loans deferred.
  • If you earn less than the poverty level, you may apply for an economic hardship deferment.