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This section gives you basic information on loan repayment. For more information, go online to www.FederalStudentAid.ed.gov.
- Federal Perkins Loans—The grace period is nine months. However, if you’re attending less than Half-time, check with your financial aid office to determine your grace period. During the grace period, you don’t have to pay any principal, and you won’t be charged interest.
- Direct or FFEL Stafford Loans—The grace period is six months.
- Subsidized loan—During the grace period, you don’t have to pay any principal, and you won’t be charged interest.
- Unsubsidized loan—You don’t have to pay any principal, but you will be charged interest. Remember, you can either pay the interest as you go along or it will be Capitalized (i.e., added to the principal loan balance) later.
Your lender will send you information about repayment, and you’ll be notified of the date repayment begins. However, you’re responsible for beginning repayment on time, even if you don’t receive this information. Failing to make payments on your loan can lead to Default. Default occurs when you fail to meet the terms and conditions of the Promissory Note, such as not making timely payments on the loan.
- Federal Perkins Loans—Up to 10 years.
- Direct and FFEL Stafford Loans—Your repayment period varies from 10 to 25 years, depending on which repayment plan you choose. See more on repayment options later in this section.
You’ll get more information about repayment choices before you leave school (exit counseling), and later, during your grace period, from your loan holder.
Generally, within 60 days after the loan is fully disbursed (paid out). There is no grace period for these loans. This means interest starts to accrue as soon as the first disbursement is made. Your parents and graduate and professional degree students must begin repaying both principal and interest while in school. However, a graduate and professional degree student PLUS Loan borrower is eligible for an in school deferment while he or she is enrolled at least Half-time.
Direct or FFEL Stafford Loan—Usually, you’ll make monthly payments. Your repayment amount will depend on:
- the size of your debt,
- the length of your repayment period, and
- the repayment plan you choose.
Direct Stafford Loan:
- You’ll make payments to us through our Direct Loan Servicing Center. Direct Loan borrowers can view and pay their bills online using their PIN at: www.dl.ed.gov
FFEL Stafford Loan:
- •You’ll repay the private lender that made you the loan.
Federal Perkins Loans:
- You’ll make monthly payments to the school that loaned you the money.
- You’ll have up to 10 years to repay your loan.
- Federal Perkins Loans do not have different repayment plans.
The chart on page 30 shows typical monthly payments and total interest charges for three different 5 percent Perkins Loan amounts over a 10-year period.
Yes. Repayment plans offered for Direct Stafford Loans are generally the same as those offered for FFEL Stafford Loans. However, the Direct Loan program offers an income contingent repayment plan and the FFEL program offers an income-sensitive repayment plan.
The repayment periods for Stafford Loans vary from 10 to 25 years. When it comes time to repay, you can pick a repayment plan that’s best-suited to your financial situation. The following repayment plans will be available to Direct and FFEL Stafford Loan borrowers who started repaying their loans on or after July 1, 2006:
- A standard plan with a fixed annual repayment amount paid over a fixed period of time not to exceed 10 years.
- A graduated plan paid over a fixed period of time not to exceed 10 years. With this plan, your payments start with a relatively low amount and then increase, generally every two years. For FFEL, the borrower must have more than $30,000 in outstanding FFEL loans.
- An extended plan (for new borrowers on or after October 7, 1998, with more than $30,000 in outstanding Direct Loan debt accumulated on or after that date) with a fixed annual or graduated repayment amount to be paid over a period not to exceed 25 years. For FFEL Loans, the borrower must have more than $30,000 in outstanding loans.
- A plan that bases the monthly payment amount on how much money you make, how much you owe and family size. For Direct Stafford Loans, this plan is called the Income Contingent Repayment Plan (Direct PLUS Loans may not be repaid under the Income-Contingent Repayment Plan). For FFEL Stafford Loans and FFEL PLUS Loans, this plan is called the Income-Sensitive Repayment Plan. The terms under Income Contingent and Income-Sensitive Repayments Plans vary. Visit www.dl.ed.gov for more information for Direct Loan Income Contingent Repayment Plans or your lender for more information on FFEL Income-Sensitive Repayment Plans.
- For Direct Loans, the U.S. Department of Education may offer alternative repayment plans to a borrower who demonstrates that other available repayment plans are not adequate and cannot accommodate the borrower’s exceptional circumstances.
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Key Facts About Repaying
Direct and FFEL Stafford Loans
- If you don’t choose a repayment plan when you first begin repayment, you’ll be placed under the Standard Repayment Plan.
- You can change plans to suit your financial circumstances.
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For a Perkins Loan, your school is the lender. Your school or its agent will provide you with the exact repayment amounts. The chart below is just an example of what a Perkins Loan repayment plan might be.
| Total Loan Amount
| Number of
Payments
| Approximate
Monthly Payment
| Total Interest Charges
| Total Repaid
|
| $4,000 |
120 |
$42.43 |
$1,091.01 |
$5,091.01 |
| $5,000 |
120 |
$53.03 |
$1,364.03 |
$6,364.03 |
| $15,000 |
120 |
$159.10 |
$4,091.73 |
$19,091.73 |
You’ll get more information about repayment choices before you leave school and, later, from the holder of your loan. You can also get more detail about repayment plans from our Web site, www.FederalStudentAid.ed.gov. The following chart shows repayment plans for both programs. This chart also shows estimated monthly payments for various loan amounts under each plan.
Your parents and graduate and professional degree students have nearly all the repayment options that Direct and FFEL Stafford Loan borrowers have. The exception is that the Direct Loan Income Contingent Repayment Plan is not an option for Direct PLUS Loan borrowers.
Yes. Tax benefits are available for certain higher education expenses, including a deduction for student loan interest for certain borrowers. This benefit applies to all loans used to pay for postsecondary education costs, including PLUS Loans. The Internal Revenue Service (IRS) Publication 970, Tax Benefits for Higher Education, explains these credits and other tax benefits. You can get more information online at www.irs.gov or by calling the IRS at 1-800-829-1040. TTY callers can call 1-800-829-4059.
The results in the chart on the next page assume that the student is making regular monthly payments on any unsubsidized loans and is not capitalizing the interest while in school. If the interest is Capitalized, (added to the outstanding principal balance) the cumulative payments and total interest charges will be higher than shown in the chart.
| Estimated Monthly Payments and Total Amounts Repaid Under Different Repayment Plans
|
For Direct Loans Only: Income
Contingentc (Income = $25,000) |
| Initial Debt When You Enter Repayment |
Standard
Not to exceed 10 years |
Extendeda |
Graduatedb
Not to exceed 10 years |
Single |
Married/HOHd |
| |
Per Month |
Total Repaid |
Per Month |
Total Repaid |
Per Month |
Total Repaid |
Per Month |
Total Repaid |
Per Month |
Total Repaid |
| $3,500 |
$50 |
$4,471 |
Not Available |
Not Available |
$25 |
$5,157 |
$27 |
$6,092 |
$25 |
$6,405 |
| $5,000 |
$58 |
$6,905 |
Not Available |
Not Available |
$40 |
$7,278 |
$38 |
$8,703 |
$36 |
$9,150 |
| $7,500 |
$83 |
$10,357 |
Not Available |
Not Available |
$59 |
$10,919 |
$57 |
$13,055 |
$54 |
$13,725 |
| $10,500 |
$121 |
$14,500 |
Not Available |
Not Available |
$83 |
$15,283 |
$80 |
$18,277 |
$76 |
$19,215 |
| $15,000 |
$173 |
$20,714 |
Not Available |
Not Available |
$119 |
$21,834 |
$114 |
$26,110 |
$108 |
$27,451 |
| $40,000 |
$460 |
$55,239 |
$227 |
$83,289 |
$316 |
$58,229 |
$253 |
$72,717 |
$197 |
$84,352 |
Payments are calculated using the fixed interest rate of 6.8 percent for student borrowers for loans made on or after July 1, 2006.
aFor a FFEL borrower, the requirement is that the borrower (1) must have had no outstanding balance on a FFEL Program loan as of October 7, 1998, or on the date the borrower obtained a FFEL Program loan on or after that date, and (2) must have more than $30,000 in outstanding FFEL Program loans. For a Direct Loan borrower, the requirement is that the borrower (1) must have had no outstanding balance on a Direct Loan Program loan as of October 7, 1998, or on the date the borrower obtained a Direct Loan Program loan on or after that date, and (2) must have more than $30,000 in outstanding Direct Loan Program loans. The amounts were rounded to the nearest dollar and were calculated based on a 25-year repayment plan.
bThis is an estimated monthly repayment amount for the first two years of the term and total loan payment. The monthly repayment amount will generally increase every two years, based on this plan.
cAssumes a 5 percent annual growth (Census Bureau) and amounts were calculated using the formula requirements in effect during 2006.
dHOH is Head of Household. Assumes a family size of two.
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