Student Loan Repayment FAQ

What are Entrance and Exit Interviews?

If you have federal student loans, you will be required by law to complete an entrance interview prior to receiving a loan and an exit interview before you graduate. Entrance interviews help you understand your student loan responsibilities. Exit interviews are used to inform you about your repayment obligations and options. Certain schools allow you to complete your entrance and exit interviews online.

What is a grace period?

After you graduate, you may be entitled to a grace period, or a period during which you aren't required to make student loan payments, typically six months. Although this applies to all federal loans, not all private loans afford you this option so make sure to check with your lender to determine when you will need to begin making payments on your loans.

Making payments towards your student loans during your grace period can be a good idea. If you have Federal Subsidized Stafford Loans, your payments will be applied directly to your principal balance since during your grace period, interest will not accrue on your balance. If you have Federal Unsubsidized Stafford Loans or private loans, you may want to consider making payments during your grace period to reduce the amount of interest that is added to your balance and even reduce the total amount of interest that needs to be paid over the life of the loan.

What do I need to know before I enter repayment?

When your first loan payment is due
How much you will have to pay monthly/quarterly
Your lender – the company which originally made the loan – “your source of funds” – some lenders hold the loan until it is paid in full – others sell the loans
Your guarantor – the agency which insures your loan to be repaid, acting on behalf of the federal government
Your servicer – the company which administers the loan for the lender – send monthly bills, handles customer service, processes payments (sometimes the servicer is the same company as the lender, sometimes it is not)
Who you should contact if you change your name, address, phone number or social security number
Where to send your payments

Can I change my repayment schedule?

Federal loans offer several repayment options. Which option is best for you depends on your individual circumstances. With a standard/level repayment period, you will pay the least interest in the long run. However, graduated, extended and income-sensitive payment schedules can reduce your monthly payments, so this may be a good option for you if you are having trouble meeting your payments.

Standard/Level - Monthly payments that remain level over the life of the loan.
Graduated - Payments start lower and increase every 2 years for the life of the loan. Typically, this option will result in greater interest charges over the life of the loan.
Extended – For balances $30,000 or more. Increases the repayment term to up to 25 years, thereby lowering your monthly payment. A longer repayment term means you will pay more in interest charges over the life of the loan.
Income-Sensitive - Payments are adjusted annually according to income.
Income Based - New repayment option as of July 1, 2009 that caps your federal student loan payments based on your annual income and your family size. After making 25 years worth of qualifying payments, any remaining federal student debt may be eligible for forgiveness. You can calculate what your payments will be under this option and learn if you might qualify here. Students must meet certain eligibility requirements.

Below, you can see how your repayment term affects your monthly payment amount, repayment term and the amount of interest you will pay over the life of your loan.

* Income sensitive example shows a borrower using 2 years of the program. Examples above are estimates and are based on an interest rate of 6.8%.

Remember to contact your lender if you wish to change your repayment option or if you are having trouble making payments.

What is deferment and forbearance?

Your lender may grant you a temporary postponement of payments called a deferment or forbearance. Whether you receive a deferment or forbearance depends on your eligibility. If you are going to back to school at least half time, you are unemployed, in the military or performing another public service, or having trouble making your student loan payments for any other reason, contact your lender or student loan servicer to request a deferment or forbearance.

Can my loan be forgiven?

The federal government will forgive all or a portion of a federal education loan under certain circumstances. In order to qualify, you must be active in the military, performing volunteer work, practice medicine in certain communities, teach in high need areas, or meet other criteria specified by the federal Department of Education. To learn more about the different types of federal loan forgiveness, visit studentaid.ed.gov.

What happens if I default on my student loan?

Defaulting on your student loans has many serious consequences. If you are having trouble making payments, remember to call your student loan lender or servicer to learn about your deferment and forbearance options. If you default on a federal student loan, you may:

Be ineligible for federal student aid in the future.
Lose your deferment and forbearance options.
Have to pay your entire loan balance immediately.
Pay additional costs if your account is turned over to a collection agency.
Hurt your credit and therefore your ability to borrow in the future, rent an apartment, or even get a job.
Have your federal tax return withheld so that it can be applied to your defaulted loan balance.
Have your wages garnished.

Repaying student loans