Life can throw some unexpected curves at you. And when this happens, you often wind up with unwelcome expenses. In these hectic moments, it might seem impossible to think about your federal student loan payments, but that’s exactly what you should do.
If you are having trouble making your loan payments, you should remember that federal student loans offer many flexible repayment options. It might seem easier to ignore your student loans, but that won’t make them go away. In fact, defaulting on a federal student loan (not making payments for more than 270 days) can have serious consequences. If your loan defaults:
- your credit score will be negatively impacted, which could prevent you from qualifying for a car or home loan and may jeopardize your future employment opportunities;
- your loan may be placed with a collection agency, and you will be responsible for paying the collection fees; and
- your paycheck or federal income tax refund could be withheld to help repay your debt.
But, this doesn’t have to happen to you. When you’re struggling to make your student loan payments, you should contact your loan servicer. Your loan servicer can discuss your options for lowering or temporarily postponing your payments.
Here are some options you might want to consider:
- Switch your repayment plan: You may be able to change your repayment plan to one with lower monthly payments. Just beware that lowering your monthly payments may result in paying more over the life of the loan. You can compare your payments under each repayment plan using our Repayment Estimator.
- Ask for a deferment or forbearance:A deferment or forbearance allows you to temporarily postpone or reduce your federal student loan payments. You may qualify for a deferment or forbearance for a variety of reasons, including financial/economic hardship, unemployment or military service. It’s important to note that, in most cases, interest will continue to accrue on your loans when they are in a deferment or forbearance status (except for subsidized loans in deferment).
- Consolidate your loans: If you have multiple federal student loans, you may consider combining them into one loan. A Direct Consolidation Loan often results in a lower monthly payment, but does extend the amount of time you have to repay your loan which causes you to pay more over the life of the loan. Find out more about the pros and cons of loan consolidation.
For more information about options for successfully managing your loans, visit https://studentaid.ed.gov/repay-loans or contact your loan servicer.
Tara Marini is a communication analyst at the Department of Education’s office of Federal Student Aid.
If you have federal student loans, it’s important that you understand your loan repayment options. For example, did you know that you have the option to choose a repayment plan? That’s right. While your loan servicer (the company that handles the billing and other services on your federal education loan) will automatically place your loan on the Standard Repayment Plan, you CAN choose another plan.
The Department of Education offers several traditional and income-driven repayment plans with different payment options. So, make sure to take the time to understand these options and find the plan that works best for you.
Generally, our repayment plans offer three types of payments:
- Fixed Payments: Our Standard Repayment Plan and Extended Repayment Plan offer payments that remain the same amount for the life of the loan.
- Graduated Payments: Our Graduated Repayment Plan and Extended-Graduated Plan offer payments that start out low and gradually increase every two years.
- Income-Driven Payments: Our three income-driven repayment plans offer payments that are calculated based on your income.
Choosing a repayment plan can feel overwhelming. Don’t worry—there are several resources available to help you understand the repayments plans, determine your eligibility for each plan, and make the right decision for you.
- Watch our Repayment: What to Expect video to get a high-level overview of the repayment plans.
- Check out our Repayment Plans infographic for an easy-to-understand visual that will give you some key points to keep in mind as you are choosing a repayment plan.
- Read our Repay Your Federal Student Loans fact sheet for additional information on loan repayment and the repayment plans.
- Get detailed information about each repayment plan on our website.
- Use our online Repayment Estimator to find out which plans you may be eligible for and to estimate how much you would pay under each plan. (If you log-in, the Repayment Estimator will use your actual loan balance to estimate your eligibility and payment information.)
- Contact your loan servicer to discuss your options and choose a federal student loan repayment plan that’s best for you.
Remember, the repayment plans discussed here are for federal loans only. If you have private loans, check with your lender about available repayment options.
For more information on federal student loan repayment plans, visit Studentaid.ed.gov/repay-loans.
Tara Marini is a communication analyst at the Department of Education’s office of Federal
A Direct Consolidation Loan allows you to combine multiple federal education loans into one loan. Before making the decision to consolidate your loans, you’ll want to carefully consider whether loan consolidation is the best option for you. Keep in mind, once your loans are combined into a Direct Consolidation Loan, they cannot be removed.
Advantages of consolidating your student loans:
- Simplified Payments
You’ll have a single monthly payment and a single lender (the U.S. Department of Education) instead of multiple payments and multiple lenders.
- It’s free!
It’s free to apply to consolidate your federal student loans. If you are contacted by someone offering to consolidate your loans for a fee, you are not dealing with the U.S. Department of Education.
- Fixed Interest Rate
Direct Consolidation Loans have a fixed interest rate, meaning your interest rate won’t change year to year. The fixed interest rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1%.
- Lower Monthly Payments
You may get a longer time to repay your loans, often resulting in lower monthly payments.
Disadvantages of consolidating your student loans:
- Loss of Borrower Benefits
You may lose any borrower benefits, such as interest rate discounts, principal rebates, or some loan cancellation benefits, offered with the original loans.
- More Interest Paid Over Time
You will likely pay more money in interest over the life of the loan. The amount of time you have to repay your Direct Consolidation Loan can vary from 10-30 years depending on the amount of your Direct Consolidation Loan and the amount of your other student loan debt. The longer it takes to repay your loan, the more you will make in interest payments.
In weighing your options, be sure to compare your current monthly payments to what your monthly payments would be if you consolidated your loans. If you’re just interested in temporarily lowering your monthly payment, consolidation might not be the answer. Contact your loan servicer to consider alternative options such as deferment or forbearance.
To find out more information about loan consolidation, including eligibility requirements, visit https://studentaid.ed.gov/repay-loans/consolidation.
Tara Marini is a communication analyst at the Department of Education’s office of Federal Student Aid.
Federal student loans can be a great way to help pay for college or career school. While you shouldn’t be afraid to take out federal student loans, you should be smart about it. Before you take out a loan, it’s important to understand that a loan is a legal obligation that you will be responsible for repaying with interest.
Here are some tips to help you become a responsible borrower.
- Research starting salaries in your field. Ask your school for starting salaries of recent graduates in your field of study to get an idea of how much you are likely to earn after you graduate. You can use the U.S. Department of Labor’s Occupational Outlook Handbook to estimate salaries for different careers or use a career search tool to research careers and view the average annual salary for each career.
- Keep track of how much you’re borrowing. Don’t wait till right before you graduate to figure this out. Think about how the amount of your loans will affect your future finances, and how much you can afford to repay. Your student loan payments should be only a small percentage of your salary after you graduate (8% is a good rule of thumb!), so it’s important not to borrow more than you need. If you’ve already borrowed for your education, you can view all of your federal student loan information in one place. Go to nslds.ed.gov, select Financial Aid Review, and log in. You can also use our Repayment Estimator to calculate what your monthly payments might be based on your current loan balance.
- Understand the terms of your loan and keep copies of your loan documents. When you sign your promissory note, you are agreeing to repay the loan according to the terms of the note even if you don’t complete your education, can’t get a job after you complete the program, or didn’t like the education you received.
- Keep in touch with your loan servicer. Your loan servicer is the company that handles the billing and other services on your federal student loan on behalf of the U.S. Department of Education. When you begin paying back your loan, you will work directly with your loan servicer. Also, make sure you notify your loan servicer if you change your name, address, or Social Security number or when you graduate, withdraw from school, drop below half-time status, or transfer to another school. Staying in contact with your servicer will make it easier for you to successfully repay your student loans once you’ve left college.
- Stay ahead of your student loan payments. Once your loan enters repayment, you are required to make your scheduled loan payment as determined by your repayment plan. If you’ve done your homework, your scheduled monthly payment amount won’t be a surprise and you’ll be prepared to begin making payments. But, if you do find yourself having trouble making your scheduled loan payments, take advantage of our flexible repayment options. Contact your servicer immediately to discuss ways to keep your loan in good standing.
Remember, federal student loans are an investment in your future so invest wisely and borrow only what you need. Find out more about student loan repayment, including when repayment starts, how to make your payment, repayment plan options, and more!
Tara Marini is a communication analyst at the Department of Education’s office of Federal Student Aid