RepayingStudent Loans

Repaying Student Loans and Avoiding Default During Difficult Times

What Type of Loans Do You Have?

Federal

Direct

• Stafford (unsubsidized and subsidized)

• PLUS

FFEL (no longer offered after June ‘10)

• Stafford (unsubsidized and subsidized)

• PLUS

Perkins

Loan taken out from a

financial institution

Private

• Stafford: 6 months after graduation

• Perkins: 9 months after graduation

• PLUS: 60 days after funds disbursed

or 6 months after graduation

• Private: Talk to lender

When Do You Have to Start Repaying Your Loans?

• Could be loan originator but loans

sometimes sold on secondary

market or a servicer is used

• If behind, may be with collection

agency, state guarantee agency,

or Dept. of Education

Who Should You Pay?

If You Don't Know What Type You Have…

Visit the National

Student Loan

Database at

www.nslds.ed.gov

Call 800.433.3243 If a loan is not listed

in the NSLD, it is a

private loan

• Standard (default)- Fixed payments, 10 year maximum

• Graduated- Payments start off lower then

increase, sometimes combinedwith Extended

• Extended- Up to 25 years, must owe

at least $30,000

Repayment Plans forFFEL and Direct Loans

• Income-contingent (Direct only)

- Based on income, can be extended, forgiven after 25 years

• Income-sensitive (FFEL only)

- Based on income, 10 year maximum

• Income-based

- May be able to get lower payment than under other plans, can be extended, forgivenafter 25 years

Repayment Plans forFFEL and Direct Loans

• Pay as You Earn Plan (PAYE)

-Must be a new borrower as of Oct 2007

-Must demonstrate a partial hardship

-Payments $0-10% of discretionary income, never higher than standard plan

• Revised Pay as You Earn Plan (REPAYE)

-Extends number of eligible borrowers

-Spouse’s income included

-Expands interest subsidy after 3 years

Repayment Plans forFFEL and Direct Loans

Repayment Plans

No alternative

repayment plans for

Perkins, but school

can extend

repayment period

due to extenuating

circumstances

Remember, when you

have a lower payment,

you pay more interest

over the life of the loan

If affordable, pay extra –

no pre-payment penalty

• Combining of existing loansinto one new loan

- Can combine all, some,

or even one loan

• Do not have to be current to consolidate

• Cannot add private loans to federal consolidation loan

• Can add federal loans to private consolidation loan butnot advisable

Consolidation

• Can have federal student loans cancelled if:

- you die or experience permanent disability

- School falsely certified

- School closed

• Very Difficult to discharge in Bankruptcy

Cancellation /Forgiveness

12

Public Service Loan Forgiveness

- Forgives remaining balance of Direct Loans after 120 qualifying payments have been made under certain payment plans

- Available for those employed full time by a public service organization

Teacher Loan Forgiveness

- Forgiveness of up to $17,500 on qualifying loans for teaching for 5 years in qualifying schools

Cancellation /Forgiveness

• Deferment- Temporary suspension of payments

- Interest suspended on subsidized loans- Can get if enrolled in school, disabled,

unemployed, or in armed forces

• Forbearance- Temporary suspension of, or reductionin payments

- Interest still accrues- Can get if monthly payment high

or have unforeseen personal problem- Easier to get

If You Cannot Pay

• In default if more than

270 days past due

• Possible consequences

of default- Tax refund interception

- Wage garnishment

- Ineligibility for deferment,

alternative repayment plans,

grants, and new student loans

- Credit report damage

If You Cannot Pay

• No statute of limitations on collection

• For federal loans, have one-time right to get out of default with a reasonable and affordable repayment plan

- Loan rehabilitated after 9

on-time payments

- Default notation removed

from credit report

• Can also consolidate to get out of default

If You Cannot Pay

Resources

www.studentaid.ed.gov www.consumerfinance.gov

Federal Loans Private Loans

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