A Promising Pilot to Help Student Borrowers

Cross-posted from the White House OSTP Blog.

Investing in postsecondary education is among the smartest choices Americans can make. College completion opens doors and expands economic opportunity, leading to lower rates of unemployment and higher earnings over the course of a career. But tuition rates have risen significantly in recent decades, and obtaining a college degree increasingly depends on students’ ability to take out loans and manage repayment after leaving school. While most borrowers are able to repay their student loans, many struggle, and some fall behind.

That’s why last month the President and his Administration announced a series of executive actions to help reduce the burden faced by student loan borrowers and make postsecondary education more affordable and accessible to American families. A centerpiece of this action plan is to improve the effectiveness of communications to borrowers about flexible repayment options the U.S. Department of Education offers to help ensure they stay on track with their payments. This includes income-driven repayment plans – Income-Based Repayment, Pay As You Earn, and Income-Contingent Repayment – that link monthly payments to borrower incomes.

We know borrowers are busy and that decisions about student loan plans can be complex and challenging. That’s why the Office of Federal Student Aid at the Department of Education has teamed up with the White House Social and Behavioral Sciences Team, a group of experts who focus on effective, innovative strategies for helping government programs and communications better serve citizens.

In November 2013, Federal Student Aid, in collaboration with the White House Social and Behavioral Sciences Team, launched an e-mail campaign to increase awareness of Income-Driven Repayment and help borrowers make more informed decisions about loan repayment options given their circumstances. The campaign sent emails to borrowers who had fallen behind on their payments, had higher-than-average debts, had grace periods coming to an end, had deferred or entered forbearance because of financial hardship or unemployment, or some combination of the above. In total, the campaign sent emails to over three million borrowers last year and 221,000 submitted applications.

The team embedded a rigorous, randomized-control pilot into the broader campaign, which measured the impact of e-mails designed based on insights from the behavioral sciences on action among borrowers in delinquency for 90-180 days. These e-mails indicated income-driven repayment eligibility criteria, the benefits associated with taking action and the costs associated with inaction, and the relevant web-links and servicer contact information. Behavioral science research demonstrates that timely, clear and low-cost informational messages of this kind can help citizens better understand their options, make more informed decisions, and follow through on their intentions.

Results of the pilot are promising. Sending e-mails to borrowers in delinquency for 90-180 days resulted in a statistically significant, four-fold increase in completed income-driven repayment applications. This effect translates into roughly 6,000 additional completed applications in just the first month after sending among the 841,442 borrowers in the pilot.

We are working together to use insights from this trial to inform future communications and develop even more effective ways of reaching borrowers to help them stay on track.

Maya Shankar is Senior Advisor for the Social and Behavioral Sciences at the White House Office of Science and Technology Policy.

Ajita Talwalker Menon is the Senior Policy Advisor for Higher Education at the White House Domestic Policy Council.

5 Ways to Pay Off Your Student Loans Faster

PayOffYourStudentLoansFaster

The first thing people say when they find out where I work: “Can you delete my student loans for me?”

If only I had that power. Just like many of you, I am a student loan borrower. Each month, my federal student loan servicer, withdraws my $381.35 student loan payment from my bank account and I still cringe every time. (Do you know how many pairs of shoes I could buy with that money?) Point is, I understand what you’re going through.

That said, there are manageable ways to pay off your student loans faster than you had planned and save yourself money by doing so!

Here are some ideas:

  1. Pay Right Away Even though you’re usually not required to, consider making student loan payments during your grace period or while you’re still in school. If you’re short on cash, consider at least paying enough each month to cover the amount of interest you’re accruing. That way your interest doesn’t capitalize and get added to your principal balance. Not doing this was one of the biggest mistakes I made with my student loans.
  2. Sign up for Automatic Debit If you sign up for automatic debit, your student loan servicer will automatically deduct your student loan payment from your bank account each month. Not only does this help ensure that you make payments on time, but you may also be able to get an interest rate deduction for enrolling. Contact your loan servicer to see if your loan is eligible for this benefit.
  3. Pay More than Your Minimum Payment Even if it’s $5 a month!  Paying a little extra each month can reduce the interest you pay and reduce your total cost of your loan over time. If you want to ensure that your loan is paid off faster, make sure you tell your loan servicer that the extra amount you’re paying is not intended to be put toward future payments. If given the option, ask your servicer if the additional payment amount can be allocated to your higher interest loans first.
  4. Use Your Tax Refund One easy way to pay off your loan faster is to dedicate your tax refund to paying off some of your student loan debt. Part of the reason you may have gotten a refund in the first place is because you get a tax deduction for paying student loan interest. Might as well be smart about the way you spend it.
  5. Seek Out Forgiveness and Repayment Options There are a number of situations under which you can have your federal student loan balance forgiven. There are forgiveness and repayment programs for teachers, public servants, members of the United States Armed Forces, and more. Most of these programs have very specific eligibility requirements, but if you think you might qualify, you should definitely do some research. Also, research whether your employer offers repayment assistance for employees with student loans. There are many who do!

Nicole Callahan is a Digital Engagement Strategist at The U.S. Department of Education’s office of Federal Student Aid. She is scheduled to finish repaying her student loans in 2021, but is hoping that by taking her own advice, she will finish much faster.

 

Student Loan Forgiveness (and Other Ways the Government Can Help You Repay Your Loans)

Maybe you’ve heard or read about student loan forgiveness and you’re wondering what it is or if it is really possible? Or maybe you know a little about it and you want to find out if you qualify. Well, you’ve come to the right place. We’ll answer these questions and tell you where to go to learn more.

What is loan forgiveness?

Loan forgiveness is the cancellation of all or some portion of your federal student loan balance. Yes, that’s right—cancellation of your loan balance.  If your loan is forgiven, you are no longer required to repay that loan.

Is it really possible to have your student loans forgiven?

Yes! However, there are very specific eligibility requirements for each situation in which you can apply for loan forgiveness. If you think you may qualify, it’s definitely worth investigating.

How do I get my loans forgiven?

There are a number of situations under which you can have your federal student loan balance forgiven, and we’ve provided a few in this post. You will, however, want to research your options at StudentAid.gov/repay and contact your loan servicer for any questions you may have about student loan forgiveness.

A couple examples of situations in which your federal student loans may be forgiven include:

  • Teacher Loan Forgiveness: If you teach full-time for five complete and consecutive academic years in certain elementary and secondary schools and educational service agencies that serve low-income families, and meet other qualifications, you may be eligible for forgiveness of up to a combined total of $17,500 on certain federal student loans. For details about this program, see Teacher Loan Forgiveness.
  • Public Service Loan Forgiveness (PSLF): If you work full-time in certain public service jobs you may qualify for forgiveness of the remaining balance of your Direct Loans after you’ve made 120 qualifying payments on those loans—that’s usually about 10 years of payments. Serving in the Peace Corps or AmeriCorps is considered qualifying employment. For loan repayment and borrower eligibility requirements, see Public Service Loan Forgiveness.

There are additional situations that allow you to apply for cancellation of your federal student loans. For example, if you are totally and permanently disabled, a member of the U.S. armed forces (serving in area of hostilities), a member of the Peace Corps, or a law enforcement or corrections officer, you may be eligible for cancellation of a portion of your federal student loan. Learn more about how you may qualify for loan forgiveness and contact your loan servicer with questions.

Are there other ways in which I can get help repaying my loans?

There are additional government programs that provide student loan repayment assistance for individuals who provide certain types of service. A couple examples include:

  • Military Service: In acknowledgement of your service to our country, there are special benefits and repayment options for your student loans available from the U.S. Department of Education and the U.S. Department of Defense. Learn about federal student loan benefits for members of the U.S. Armed Forces.
  • AmeriCorps: The Segal AmeriCorps Education Award is a post-service benefit received by participants who complete a term of national service in an approved AmeriCorps program—AmeriCorps VISTA, AmeriCorps NCCC, or AmeriCorps State and National. An AmeriCorps member serving in a full-time term of national service is required to complete the service within 12 months. Upon successful completion of the service, members are eligible to receive a Segal AmeriCorps Education Award which can be used to pay educational costs at eligible postsecondary institutions, as well as to repay qualified student loans.

Remember, there are resources available to help you repay your loans. In addition to loan forgiveness and other benefit programs, you also have other options if you find yourself in a situation where you’re having trouble making your loan payments. Make sure to discuss your options with your loan servicer.

Lisa Rhodes is a writer at the Department of Education’s office of Federal Student Aid.

Choosing a Federal Student Loan Repayment Plan

Choosing a Federal Student Loan Repayment PlanIf 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 

The Five “Qs” of Public Service Loan Forgiveness

loan_forgiveness

#StudentLoanForgiveness. It’s a hashtag now, so you’ll all pay attention, right? Everyone wants their student loans forgiven. The perception is that very few qualify for any forgiveness programs. But did you know that there is one broad, employment-based forgiveness program for federal student loans? Most people don’t, or misunderstand how it works. Let me break down some key points of the Public Service Loan Forgiveness Program to help you figure out if you could qualify.

Can you check the all the boxes?

[ 1 ] Work in “Qualifying Employment”

First, you need to work in “qualifying” employment; that is, you must work in “public service.” But what does that mean? Everyone seems to have a different definition. Ours is based on who employs you, not what you do for your employer. The following types of employers qualify:

  • Governmental organizations – Federal, state, local, Tribal
  • Not-for-profit organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code
  • A not-for-profit organization that provides some specific public services, such as public education, law enforcement, public health, or legal services

The following types of employers do not qualify:

  • Labor unions
  • Partisan political organizations
  • For-profit organizations

[ 2 ] “Qualifying Employment Status”

If you work at one of these types of organizations—great! That’s the most difficult criteria to meet. Next, you need to work there in a “qualifying” employment status, which means that you must be a full-time employee of the organization. Full time, for our purposes, generally means that you meet your employer’s definition of full time or work at least 30 hours per week, whichever is greater.

[ 3 ] Have a “Qualifying Loan”

A “qualifying” loan is a Direct Loan. It’s that simple. Of course, it’s the government, so nothing is actually that simple. You see, there are (or were) three big federal student loan programs:

  • The Direct Loan Program, which is now the biggest program,
  • The Federal Family Education Loan (FFEL) Program, which is what many students borrowed from until mid-2010, and
  • The Federal Perkins Loan Program, which is a relatively small program.

You may have loans from just one of these programs, or you may have borrowed from all three. If you’re not sure which loan program you borrowed from, I can’t blame you—I had 20 separate loans by the time that I finished graduate school! You can use the National Student Loan Data System to determine which program you borrowed from. Here’s a tip from me to you:  basically, if you see “Direct” in the loan type name, it’s a Direct Loan. Otherwise, it’s not.

Don’t have a Direct Loan? Don’t despair! You can consolidate your other federal student loans into a Direct Consolidation Loan and qualify that way. Not having a Direct Loan is the biggest reason that borrowers who are seeking Public Service Loan Forgiveness aren’t on the right track, so be sure that all of your loans that you want forgiven are Direct Loans before you proceed to the next step. If you do need to consolidate, be sure to check the box in the application that says that you’re consolidating for the purposes of loan forgiveness. It will make your life easier, I promise.

[ 4 ] Have a “Qualifying Repayment Plan”

Next, you need a “qualifying” repayment plan. All of the “income-driven repayment plans” are qualifying plans for Public Service Loan Forgiveness. So is the 10-year Standard Repayment Plan, but if you’re on that repayment plan, you should switch to an income-driven repayment plan straight away, or you will have a drastically lower loan balance left to be forgiven after you meet all of the criteria.

If you’re consolidating your loans, you can apply for an income-driven repayment plan in the consolidation application, but if you don’t, you will be placed on the Standard Repayment Plan for Direct Consolidation Loans, which is almost never a qualifying repayment plan for Public Service Loan Forgiveness. If you already have Direct Loans, you can submit an income-driven repayment plan application on StudentLoans.gov.

[ 5 ] Make 120 “Qualifying Payments”

Lastly, you need to make “qualifying” payments—120 of them. A qualifying payment is exactly what you would expect it to be. You get a bill. It has an “amount due” and it has a “due date”. Make the payment in that amount by the due date (or up to 15 days after), and the payment is a “qualifying payment”. If you make a payment when you’re not required to—say, because, you’re in a deferment or you paid your student loan early—then that doesn’t count. But if you reliably make your payment every month for 10 years, you should be okay. The best way to ensure that your payments qualify is to sign up for automatic payments with your loan servicer.

Note that these payments do not need to be consecutive. So, if you had made 10 qualifying payments, and then stop for a period of time (say, you go on a deferment), then start making qualifying payments again, you don’t start over; instead, you pick up where you left off.

And, I’m sorry to have to mention a seemingly arbitrary date, but a payment only qualifies if it was made after October 1, 2007, so nobody can qualify for Public Service Loan Forgiveness until 2017 at the earliest.

Ok, so do I qualify?

Now that you have the details, let me explain how all of the criteria work together. For any payment to count toward Public Service Loan Forgiveness, you need to meet all of the criteria when you make each payment. Stated differently, you need to be working for a qualifying employer on a full-time basis when you make a qualifying payment under a qualifying repayment plan on a Direct Loan. When you break these criteria down separately, it seems simpler. It’s when you try to pack it into one sentence that it seems overwhelming.

As much as I’d like to think that all of you now have a perfect understanding of this program and how it works, I know all of you are thinking—“okay, but do I qualify?” Here’s how you find out. Download this form. Fill it out. Have your employer certify it. Send it to FedLoan Servicing (one of our federal student loan servicers), queue up How I Met Your Mother on Netflix, and wait for an answer. FedLoan Servicing will do the following:

  • Check whether you have any qualifying loans.
  • If you have qualifying loans, validate that your employment qualifies. If none of your loans qualify, they’ll tell you so.
  • If your employment qualifies, they will send you a letter confirming that your employment qualifies. Then, any of your federally held loans that are not serviced by FedLoan Servicing will be transferred to them so that we can keep better track of your loans and payments for Public Service Loan Forgiveness. If your employment doesn’t qualify, they’ll tell you so.
  • After your loans are transferred, they will match up the dates of employment on the form that you submitted to the payments you made during that time and determine how many qualifying payments you made. You’ll receive a letter with a count of qualifying payments and an anticipated forgiveness date (which assumes that all your future payments also qualify).

It’s after you get this payment count back that you’ll know whether you’re on the right track. So, it really is a good idea to submit this form early and often. We recommend that you submit the form once per year or when you change jobs. The beauty of submitting these forms early and on an ongoing basis is that it means that you won’t have to submit 10 years’ worth of them when you ultimately want to apply for forgiveness. It also means that when you apply for forgiveness, that you’ll be able to do so with confidence that you qualify for it.

One more piece of good news: Public Service Loan Forgiveness is not considered income by the IRS. That means that it’s tax-free.

Ian Foss has worked as a program specialist for the Department of Education since 2010. He’s scheduled to be eligible for Public Service Loan Forgiveness on October 6, 2021, if all goes according to plan.

TurboTax Users to Have New Tools to Learn About Student Loan Repayment Options

Sometimes life throws us curveballs. Maybe that curveball means losing a job, or having a hard time finding one after college. Some borrowers may have a growing family or just struggle to pay a high monthly bill. These circumstances may make it difficult for some to afford their monthly federal student loan payments. If you’ve found yourself in a similar situation, you may be eligible for a repayment plan that bases your monthly payment on your income.

Income based repayment graphicBorrowers interested in these income-driven repayment plans can visit studentaid.gov to learn more, and for those that use TurboTax Online tax preparation software, a new collaboration among the U.S. Department of Education, the Treasury Department and Intuit Inc. (the company behind TurboTax) will make it easier to learn about their repayment choices.

This tax-filing season, a banner will be featured on the TurboTax software that lets users know they have options for repaying federal student loans. The banner will link to ED’s online Repayment Estimator, where users will be able to determine if they could lower their monthly student loan payments through an income-driven repayment plan. From there, users can apply for the plan that makes the most sense for them.

This new collaboration is just one step the Obama Administration is taking to make college more affordable and to tackle rising college costs. Read more about today’s announcement on our website.

Cameron Brenchley is director of digital strategy at the U.S. Department of Education

4 Things to Do Before You Make Your First Student Loan Payment

Loan Payment ScheduleOne perk of having a federal student loan instead of a private student loan is that you are not required to start making payments right away. In fact, many federal student loans have a grace period*, or a set amount of time after you graduate, leave school, or drop below half-time enrollment before you must begin repaying your student loans. For most student loans, the grace period is 6 months but in some instances, the grace period could be longer. The grace period gives you time to get financially settled and to select your repayment plan.

If you graduated within the last few months, your grace period may almost be over and you will probably be contacted by your loan servicer, letting you know how the repayment process will work.

Here are four things you should do now, before your first student loan payment is due:

1. Get Organized

Start by tracking down all of your student loans. Did you know that there is a website that allows you to view all your federal student loans in one place?

You can log into http://www.nslds.ed.gov/ using your Federal Student Aid PIN to view your loan balances, information about your loan servicer(s), and more.

Note: Don’t forget to check your personal records to see if you have private student loans. 

2. Contact Your Loan Servicer

Your loan servicer is the company that will be collecting payments on your federal student loan on behalf of the U.S. Department of Education. They are also there to provide support. Your loan servicer can help you choose a repayment plan, understand loan consolidation, and complete other tasks related to your federal student loan, so it’s important to maintain contact with your loan servicer. If your circumstances change at any time during your repayment period, your loan servicer will be able to help.

To find out who your loan servicer is, visit nslds.ed.gov. You may have more than one loan servicer, so it is important that you look at each loan individually.

3. Estimate Your Monthly Payments Under Different Repayment Plans

Federal Student Aid recently launched a Repayment Estimator that allows you to compare our different repayment plans side by side. Once you log in, the repayment estimator pulls in information about your federal student loans, such as your loan balance and your interest rates, and allows you to estimate what your monthly payment would be under each of our different repayment plans. It also allows you to compare the total amount you will pay for your loan over time depending on the repayment option you choose. Try it!

4. Select The Repayment Plan That Works For You

Some of the greatest benefits of federal student loans are their flexible repayment options. Take advantage of them! Although you may select or be assigned a repayment plan when you first begin repaying your student loan, you can change repayment plans at any time. There are options to tie your monthly payments to your income and even ways you can have your loans forgiven if you are a teacher or employed in certain public service jobs. Once you have determined which repayment plan is right for you, you must contact your loan servicer to officially change your repayment plan.

* Not all federal student loans have a grace period. Note that for many loans, interest will accrue during your grace period.

Nicole Callahan is a new media analyst at the Department of Education’s office of Federal Student Aid.

4 Common Student Loan Mistakes

It’s been hard to come to terms with, but I need to face the facts: I’m not in college anymore. In fact, this January marks two years since I started repaying my student loans. I know, not the most exciting thing in the world, but important. So while I don’t claim to be a student loan expert, I have learned a lot of lessons along the way, mostly through trial and error. In hopes that you won’t make the same mistakes I did, here are some things I wish I had known before I started repaying my student loans:

  1. Girl with CalculatorI should have kept track of what I was borrowing.

Let’s be real. When you take out student loans to help pay for college, it’s easy to forget that that money will eventually have to be paid back … with interest. The money just doesn’t seem real when you’re in college, and I didn’t do a good job of keeping track of what I was borrowing and how it was building up. When it was time to start repaying my loans, I was quite overwhelmed. I had different types of loans and different interest rates. When I did eventually see my total loan balance, I was pretty shocked.

You can avoid this problem. Had I known there was a super easy way to keep track of how much you’ve borrowed in federal student loans, I would have been much better off. Just go to nslds.ed.gov, select “Financial Aid Review,” log in, and you can view all of your federal student loans in one place! How did I miss that?

  1. I should have made interest payments while I was still in school.

If you’re anything like me, you probably consumed your fair share of instant noodles while trying to survive on a college student’s budget. Trust me, I get it. But one thing I really regret when it comes to my student loans is not paying interest while I was in school or during my grace period. Like I said, I was far from rich, but when I was in college, I did have a work-study job and waited tables on the side. I probably could have spared a few dollars each month to pay down some student loan interest. Remember, student loans are borrowed money that you have to repay with interest and more importantly, that interest may capitalize, or be added to your total balance. My advice: Even though you don’t have to, do yourself a favor and consider paying at least some of your student loan interest while you’re in school. It will save you money in the long run.

     3. I should have kept my loan servicer in the loop

If you’ve recently graduated and haven’t heard from your loan servicer, make sure you check that your loan servicer has up-to-date contact info for you. When I graduated and moved into my first big-girl apartment, I forgot to change my address with my loan servicer. I found out that all of my student loan correspondence was going to my mom’s address. I hadn’t even thought to update my loan servicer with my new contact information. Don’t make the same mistake I did. Keep your servicer informed of address, e-mail, and phone changes.

  1. I should have figured out what my monthly loan payments were going to be BEFORE I went into repayment.

By the time my grace period was over, I had a decent idea of how much I had borrowed in total, but I had no idea what my monthly payments would be. I thought I was fine. I had started my new job and been paying rent and other bills for about six months. Then my grace period ended, and I got my first bill from my loan servicer. It was definitely an expense I hadn’t fully taken into account.

Don’t make the same mistake. Luckily for you, Federal Student Aid recently launched a repayment estimator that allows you to pull your federal student loan information in order to compare your monthly payments under different repayment plans side by side. That way, you know what to expect and can budget accordingly … unlike me.

I’ll be the first to admit that this whole process can seem a little overwhelming, especially when you’re new at it. But just remember, your loan servicer is there to help you. If you have questions or need advice, don’t hesitate to contact them.

Nicole Callahan is a new media analyst at the Department of Education’s office of Federal Student Aid.

5 Things You Need To Know About Your Student Loans

info-person at computerIf you’re anything like me, you probably neglected to read all the fine print when you first took out your student loans. Now it’s time to start repaying them, and you have no idea where to begin…

Lucky for people like us, many federal student loans have a grace period, which is a set period of time after you graduate, leave school, or drop below half-time enrollment before you must begin repaying your student loans. The grace period gives you time to get financially settled and to select your repayment plan. For those of you who have graduated within the last six months, chances are that time is almost up.

So to get you started, here are five things you should know about your student loans:

  1. Loan Types

You may have federal loans, private loans, state loans, loans from your school, or some combination. Different loan types can have very different terms and conditions, so be sure you know what types of loans you’ve got.

To see all of your federal student loan information in one place, you can visit www.nslds.ed.gov. Once you log in, you can access a list of your federal student loans, including the loan type and information for your loan servicer.  A loan servicer is the company that will handle the billing and payments on your federal student loans.

For all other types of loans, consult your records. If you have questions about the type of a loan, you can try contacting the financial aid office at the school you were attending when you took out the loan.

  1. Loan Balance

Once you’ve tracked down all of your loans, you’ll want to find out what your total loan balance is. This will help you determine a plan for repayment.

For your federal student loans, www.nslds.ed.gov will display your loan balance. For private and other student loans, you’ll want to check with your lender.

  1. Loan Interest

Remember, a student loan is just like any other loan—it’s borrowed money that will have to be repaid with interest. As interest accrues, it may be added to the total balance of your loan if left unpaid. As a recent graduate, you may want to consider making student loan interest payments during your grace period to save money on the total cost of your loan.

  1. Repayment Options

Depending on the types of loans you have, you will have different repayment options.

Federal student loans offer great benefits, including flexible repayment options. Some options include tying your monthly payment to your income, extending your payments over a longer period of time, or combining multiple loans into one.

Want to compare what your monthly payment would be under each of our repayment plans? Try our Repayment Estimator! Once you figure out which repayment option is right for you, contact your loan servicer to enroll in that plan.

For non-federal loans, you’ll want to check with your lender to see what types of repayment options are offered.

  1. Repayment Terms and Benefits

Familiarize yourself with the repayment terms of all your loans. Here are some things to keep an eye out for:

Ok, that’s a lot to take in, but hey, if you could survive the final exams, the all-nighters and even a crazy roommate or two, figuring out a plan for repaying your student loans should be a walk in the park. If any point you have questions or need advice, don’t hesitate to contact your loan servicer. That’s what they’re there for.

Nicole Callahan is a new media analyst at the Department of Education’s office of Federal Student Aid.

Which Student Loan Repayment Plan Should You Choose?

If you graduated from college within the last six months, you have probably been contacted by one of the U.S. Department of Education’s loan servicers, reminding you that it’s almost time to begin repaying your student loans.

Your loan servicer will automatically enroll you in our Standard Repayment Plan unless you tell them otherwise. Under a Standard Plan, your payments will be fixed over a 10-year period of time.

But, this isn’t your only option. Did you know that the Department offers several different repayment plans? You can read more about that below or you can  try our repayment estimator to find out which repayment plan is best for you. Just log in, and the tool will pull your federal student loan information and allow you to compare our different repayment plans side by side:

Here are the details on each repayment plan we offer:

Repayment Estimator Graphic

Standard Repayment Plan

The most basic type of repayment plan is the Standard Repayment Plan. This is the default plan for most types of student loans. It breaks down your loan balance into monthly payments of at least $50 for up to ten years. In general, this is the plan that will cost you the least amount of money in interest payments.

Graduated Repayment Plan

Under the Graduated Repayment Plan, monthly payments start out low and increase every two years during the 10-year repayment period. This plan is best for borrowers whose income may start out low but is expected to increase. One downside is you will pay more in interest than you would under the Standard Repayment Plan.

Extended Repayment Plan

The Extended Repayment Plan allows borrowers with more than $30,000 in debt to extend the repayment period from ten years to up to twenty-five years. Payments under the Extended Repayment Plan can be either standard or graduated. This plan is best for borrowers whose loan burden is too large to bear the standard monthly payments over the course of just ten years.

Income-Based Repayment Plan

The Income-Based Repayment (IBR) Plan allows borrowers with a demonstrated financial hardship to limit their monthly loan payments to 15 percent of their discretionary income (that is, the difference between their adjusted gross income and 150 percent of the poverty guideline for their individual situation). Under this plan, if the balance of the loan has not yet been paid off after 25 years of payments, it can be forgiven. Under IBR, borrowers will pay more in interest over the life of the loan. This plan is best for borrowers who are struggling to afford their monthly payments under other repayment plans.

Pay As You Earn

The Pay As You Earn Repayment Plan allows new borrowers with a demonstrated financial hardship to limit their monthly loan payments to 10 percent of their discretionary income. Under this plan, if the balance of the loan has not yet been paid off after 20 years of payments, it can be forgiven. However, borrowers will pay more in interest over the life of the loan than under the Standard Repayment Plan. 

Income-Contingent Repayment Plan

Under the Income-Contingent Repayment Plan, a borrower’s monthly payment amount is calculated based on annual income and family size as well as his total loan amount. If a loan balance remains after 25 years of payments, it may be forgiven. Unlike the IBR and Pay As You Earn Repayment Plans, borrowers need not be facing financial hardship to qualify for this plan. However, a borrower will likely pay more in interest than in other repayment plans. This plan is best for borrowers who are not facing demonstrated financial hardship, but whose financial situation is insufficient to bear the monthly payments under other repayment plans.

Remember that these are for federal loans only. If at any point, you need advice or have questions about your federal student loans, don’t hesitate to contact your loan servicer. If you have private loans as well, be sure to check with your lender to see what repayment options they have available.

For more information on student loans and federal financial aid, visit StudentAid.gov.

4 Things You Need to Know About Repaying Your Student Loans


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When it comes to repaying your federal student loans, there’s a lot to consider. But, by taking the time to understand the details of repayment, you can save yourself time and money. This should help you get started.

When do I begin repaying my federal student loans?

You don’t have to begin repaying most federal student loans until after you leave college or drop below half-time enrollment. Many federal student loans have a grace period. The grace period is a set period of time after you graduate, leave school, or drop below half-time enrollment before you must begin repaying your loan. The grace period gives you time to get financially settled and to select your repayment plan. Note that for most loans, interest will accrue during your grace period.

Your loan servicer or lender will provide you with a loan repayment schedule that states when your first payment is due, the number and frequency of payments, and the amount of each payment.

Whom do I pay?

The U.S. Department of Education uses several loan servicers to handle the billing and other services on federal student loans. Your loan servicer will work with you to choose a repayment plan and will assist you with other tasks related to your federal student loans. It is important to maintain contact with your loan servicer and keep your servicer informed of any changes to your address, e-mail, or phone number.

How much do I need to pay?

Your bill will tell you how much to pay. Your payment (usually made monthly) depends on

    • the type of loan you received,
    • how much money you borrowed,
    • the interest rate on your loan, and
    • the repayment plan you choose.

You can use our repayment estimator to estimate your monthly payments under different repayment plans to determine which option is right for you. Just remember, if you would like to switch repayment plans, then you must contact your loan servicer.

What should I do if I’m having trouble making my student loan payments?

Contact your loan servicer as soon as possible. You may be able to change your repayment plan to one that will allow you to have a longer repayment period or to one that is based on your income. Also, ask your loan servicer about your options for a deferment or forbearance or loan consolidation.

Still have questions?

If you need assistance with your federal student loan, it is best to contact your loan servicer. They can help you choose or change your repayment plan, and learn about other options to make your monthly payments more affordable. If you have any questions, don’t hesitate to contact your loan servicer.

Need Advice About Your Student Loans? Your Loan Servicer Can Help!

pay your loan servicerLet’s face it, repaying your student loans can be quite overwhelming, especially if you’re new at it. I may have spent my senior year of college interning at Federal Student Aid, but when my first student loan bill came in the mail, I’ll admit, I had no idea where to begin.

One of my first questions was, “Who do I pay?” I knew I had only federal student loans, but I kept getting letters and e-mails from Sallie Mae.* Why was that? If you asked yourself a similar question, this may help.

*Sallie Mae is my federal student loan servicer, but may not be yours. Here is a complete list of the federal student loan servicers.

Why am I receiving federal student loan bills from a company rather than the U.S. Department of Education?

Those bills you get in the mail are coming from one of the U.S. Department of Education’s federal student loan servicers. These loan servicers are companies that work on behalf of the Department of Education to help you understand your student loans and to facilitate payments.

Note: Even though you make your monthly payments to your loan servicer, your loans are still federal student loans and are owned by the Department of Education.

What can a loan servicer help me with?

Loan servicers do more than just collect payments from you. Your loan servicer is there to ensure that you, as a federal student loan borrower, get the customer service and repayment support you need to successfully repay your student loan.

Your loan servicer can help you:

How do I find out how many loans I have and who my loan servicer is?

To view information about all of the federal student loans you have received and to find contact information for your loan servicer, visit www.nslds.ed.gov and select “Financial Aid Review.” You will then be prompted to log in using your Federal Student Aid PIN, so make sure you have that handy.

Note: If you have multiple federal student loans, you may have more than one loan servicer, so make sure you click through each loan individually for information specific to that loan.

If you also have private student loans, I recommend getting a free copy of your credit report from www.annualcreditreport.com to identify them.

Not sure what kind of loans you have? It’s best to look at nslds.ed.gov and get a free credit report too. Then you’ll know about all of your loans right away.

Moral of the story: Your loan servicer is here to help.  

Trust me, as a recent college graduate, I know how difficult it can be to make these payments every month. Truthfully, I still get anxious every time that payment comes out of my bank account. But that’s all the more reason to stay in touch with your loan servicer. Whether you’re having trouble making your payments or you just want advice about which repayment option is best for you, they can help.

Nicole Callahan is a new media analyst at the Department of Education’s office of Federal Student Aid.