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Student and Resident
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| RESIDENTS | |
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| Track Your Loans | |
| Grace | |
| Deferments | |
| Forbearance | |
| Repayment | |
| Consolidation | |
| Debt Mgmt Assistance | |
| Credit Questions | |
| Financial Planning | |
Long
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You may pre-pay all or part of your student loans at any time without penalty. If you send money during a grace or deferment period, it is credited to the principal amount owed. Note that any prepayment would decrease your outstanding balance when calculating eligibility for an Economic Hardship Deferment.
Federal Perkins and Stafford loans have a provision for cancellation in the event of death or total disability (if you have a temporary disability, your loans can be deferred). Should you die or become totally disabled, the unpaid balance and any accrued interest on your Federal Stafford and Federal Perkins loans will be canceled.
All Stafford loans have a variable interest rate. The variable interest rate is set each year on July 1.
If you have both Direct and Stafford loans, you can make separate payments on each, or ask that they be consolidated into one loan program. Unfortunately, you cannot ask that your Direct and Stafford loans be combined; if you want to make only one payment, you will have to request consolidation. You cannot combine these loans because of the private versus federal nature of the two loan programs. You can choose to have your loans consolidated into either the federal Direct Loan program or the federal Family Education loan program, whichever you wish.
Your loans are automatically put into what is called standard, or level, repayment. The total amount you owe, including estimated interest, is divided into equal monthly payment installments over a ten-year period (this does not include periods of deferment or forbearance). If you borrow an amount where the minimum monthly payment of $50.00 repays the loans in fewer than 10 years, your loan is paid off in a shorter time. Standard repayment is the minimum time frame, and you pay the least amount of interest to the lender or servicer by choosing this option.
Lenders and servicers must offer a repayment option called graduated repayment. Under this plan, you make lower monthly payments during the beginning of your career, when money is tight, and moderate payment increases during later years.
While graduated repayment might be necessary for some borrowers, you should read all the fine print. The interest you pay increases under this plan. For example, a borrower with an outstanding debt of $5,000 would pay $58.06 a month under the normal repayment plan, and end up paying $1,966.23 in interest during the ten-year repayment period. Under a graduated repayment plan, the monthly payments would be $33.59 for the first two years, with average increases of about $20 every two years for the next six years. During the final two years, the monthly repayment would be just over $100. Total interest paid: $2,510.96--over $500 in extra interest!
If you need long-term lower payments, you might consider an extended plan. It lets you stretch your repayment over a period of 12 to 30 years, depending on your loan amount. Your fixed monthly payment is usually lower than it would be under the standard plan, but you'll pay more interest because the repayment period is longer.
The federal government and many other lenders allow you to combine an extended plan with graduated payments, which will lower your payments even further -- and increase your overall costs even more.
If your loan payments are enormous or you've fallen on hard times, even the most flexible payment plan might not make ends meet. In many circumstances, it's possible to temporarily postpone making your loan payments or reduce the amount of your payments. These periods of relief are known as deferments (during which the government pays your interest) and forbearances (during which the amount you owe keeps going up because interest isn't paid).
Don't wait until you're already in default because of missed payments -- if you do, your options will be greatly reduced. At the first sign of trouble, call your loan holder and explain that it's impossible for you to make your monthly payments; you can explore your options for deferment or forbearance with the loan holder's represenative.
If your income is low or unstable, an "income-contingetn" or "income-sensitive repayment" plan may be right for you. As your income rises or falls, so do your monthly payments.
The amount of your payment is refigured every year, based on your annual income, household size, and loan amount. If you are married and file a joint federal tax return, under current rules your joint income is used to calculate the required monthly payment.