Helping Federal Student Loan Borrowers Manage Debt, Repay Loans

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We’ve been telling you that new data shows that a lower percentage of students are defaulting on federal loans.

That’s great news for students, taxpayers and our economy. But we know there is still more work to do. We want every student to leave college without feeling burdened by their debt.

In the past few years, we’ve undertaken several new initiatives to help borrowers manage their debt and repay their loans.

Our financial aid counseling tool is now available. There is also extensive financial aid information on StudentAid.gov, including details on flexible loan repayment plans, which allow borrowers to repay their loans based on their income.

Also, as you probably remember, back in June President Obama directed Secretary Duncan to allow all federal student loan borrowers to cap their monthly payment amounts at 10 percent of their monthly income. We’ve begun to put that directive into effect, with the goal of making the new plan available to borrowers next year.

And thanks to a wide variety of outreach efforts, more than 2.5 million Direct Loan borrowers are currently enrolled in an income-driven repayment plan.

We’ve also recently renegotiated terms of the federal student loan servicer contracts to help federal student loan borrowers better manage their debt. We’ve created additional incentives for companies that service federal student loans to improve counseling and outreach to ensure borrowers select the repayment plan best-suited to their financial circumstances, reduce payment delinquency, and help avoid default.

And we’re taking steps to address growing concerns about burdensome student loan debt by requiring career colleges to do a better job of preparing students for gainful employment.

It is important to remember there are options for those who have defaulted, as well. There are resources and several options for getting back on track at studentaid.gov.

If you need help repaying your federal student loans, you can also always contact your loan service provider to learn about repayment options.

Remember: there is no application fee to consolidate student loans. Do not pay for services that the U.S. Department of Education offers for free!

Dorothy Amatucci is a digital engagement strategist at the U.S. Department of Education.

4 Things You Should Do Before Repaying Your Student Loans

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One 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.

For those of you who graduated in the spring, you’re probably nearing the end of your grace period. Your loan servicer, a company that works on behalf of the U.S. Department of Education to process and manage student loan payments, has probably contacted you letting you know how the repayment process will work and when your first payment is due.

Here are four things you should do now, before you make that first student loan payment:

  1. Get Organized

Start by tracking down all of your student loans. Did you know that you can view all your federal student loans in one place?

Just log into StudentAid.gov/login using your Federal Student Aid PIN to view your loan balances, interest rate, loan servicer contact information, and more.

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

  1. 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, log in to StudentAid.gov. You may have more than one loan servicer, so it is important that you look at each loan individually.

  1. Estimate Your Monthly Payments Under Different Repayment Plans

Federal Student Aid has a great repayment calculator that allows you to compare our different repayment plan options side by side. Once you log in, the calculator 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 and can tell you the amount of loan forgiveness you’re expected to qualify for if you choose one of our income-driven repayment plans. Try it!

  1. Select the Repayment Plan That Works for You

One of the greatest benefits of federal student loans is the 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 digital engagement analyst at the Department of Education’s office of Federal Student Aid.

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.

Financial Aid Not Enough? Ideas on How to Fill the Gap

The reality of college costs is that many families find themselves struggling to pay the entire college bill, despite having already filed the Free Application for Federal Student Aid (FAFSA) and receiving federal, state, and institutional financial aid resources. If you find yourself in this position, here are some ideas to consider to help fill the gap between what your financial aid covers and what you owe the institution.

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Scholarships

For those heading to college this fall, most scholarship decisions for the academic year have already been made. However, we recommend you begin a routine of searching and applying for scholarships regularly. You should first consider scholarships local to where you graduated from high school or live; try community, religious, and fraternal organizations. You may also consider businesses in your community or those that employ your parent(s).

Then, look for scholarship resources available statewide, especially from organizations with which you may have been involved or companies in your state that are in the field for which you plan to study.

National scholarships can be very competitive, but don’t let that keep you from applying. Ask your financial aid office or academic unit about institutional or departmental scholarships (decisions may have been made for this year, but ask how to make sure you don’t miss deadlines for next year!). With scholarship opportunities, it’s always important to be careful of fraud. If you are concerned about the legitimacy of a scholarship, your school’s financial aid office might be able to help you make the determination.

Part-Time Work

You may have been awarded Federal Work-Study, which at most schools still requires you to find the work-study position yourself. This can help you cover some costs throughout the semester since these funds are paid as you earn them through working. If you were not awarded work-study funds, most schools have other part-time on-campus positions that can help you with some college costs. Working part-time on campus can be beneficial to your educational experience. Be cautious of working too many hours if you can avoid it. Ask your financial aid office or career services office how to apply for on-campus positions.

Federal Direct PLUS Loans

If you are a dependent student and still need assistance, your parent can apply for a Direct PLUS Loan. Your school may not have offered this opportunity, but if your financial aid does not exceed your cost of attendance and your school participates in the Direct Loan program, your parent would be able to apply. Some schools use the application on studentloans.gov and others have their own application. The PLUS loan application process does include a credit check. If your parent is not approved, he or she may still receive a Direct PLUS Loan by obtaining an endorser (cosigner). If a parent borrower is unable to secure a PLUS loan, the student may be eligible for additional unsubsidized student loans of up to $4,000 (and sometimes more).

Payment Plans

Your school’s billing office, sometimes referred to as the bursar’s office or cashier’s office, may have payment plans available to help you spread the remaining costs you owe the school over several payments throughout a semester. The payment plan can help you budget the payments rather than paying in one lump sum, possibly helping you avoid costly late fees.

Special Circumstances Reevaluation

Sometimes a family’s finances are not accurately reflected on the FAFSA because of changes that have occurred recently, such as job loss, divorce or separation, or other special circumstance. Schools are not required to consider special circumstances, but those that do have a process by which you can petition for a reevaluation of the information on the FAFSA. This process may require you to submit documentation, and the financial aid office will recalculate your eligibility, possibly resulting in a change of financial aid awards.

Emergency Advances or Institutional Loans

Sometimes you may have college-related costs, such as housing costs or other living expenses, before your financial aid is disbursed to you. Your school may offer an option to advance your financial aid early or offer a school-based loan program. Ask your financial aid office if this is an option and always make sure you are aware of the terms and conditions (such as interest rates or repayment terms) of your agreement.

Private or Alternative Loans

Some private institutions offer education loans that do not require the FAFSA. While we recommend federal aid first, we realize it does not always cover the cost, especially for pricier schools. These types of loans will almost always require a cosigner and usually have higher fees or interest rates depending on your credit. We encourage you to first ask your financial aid office if they have a list of lenders for you to consider, but not all schools maintain such a list. If not, you can search for lenders on your own, but compare products before making your choice: look at interest rates, fees, repayment terms, creditworthiness requirements, satisfactory academic progress requirements, etc.

Before making any final decisions on how to fill the gap between your aid and your costs, it is always recommended that you meet with a representative in your financial aid office to determine what campus resources might be available before going out on your own. It might also be possible that you still have the time to change some of your choices before the semester begins: Can you change the type of meal plan you chose? The type of housing? Check with campus officials to see if you still have time to select a different, more affordable option.

Justin Chase Brown is an Associate Director of Student Financial Aid at the University of Missouri.

 

Beware of Student Loan Debt Relief Offers and Credit Repair “Deals”

If you’re among the millions of current or former students with debt, you’ve probably been tempted to click on an ad that says, “Obama Wants to Forgive Your Student Loans!” or “Erase Default Statuses in 4 – 6 Weeks!” or some equally enticing student loan debt relief offer … available only if you click or call NOW!

Many the companies behind these offers have sophisticated marketing tactics to target unsuspecting students, borrowers, parents, military service members, and their families. As the Student Loan Ombudsman for the Office of Federal Student Aid at the U.S. Department of Education, I hear about these pitches a lot. My strong advice: Before you pay somebody to help you with your student loans, do your homework.

It’s tempting to just say: Don’t do it. Walk away. Call your loan servicer instead. But there’s more you should know.

In my office we help student loan customers with problems they may face in managing and repaying their student loans. One of the topics that has been trending recently is about companies that promise student loan cancellation, forgiveness, credit repair, or dramatically lowered payments.

Based on the experience of the Ombudsman Group and the Student Loan Ombudsman Caucus, here are some specific things you should know before signing up with any student loan debt relief company.

Student loan debt relief companies charge fees for services that you can get for free.

You can apply for loan consolidation through www.studentloans.gov. The application is free, and there are no extra fees. Before applying, do your research on www.studentaid.gov. On that site, you’ll find information on loan consolidation, requirements for loan forgiveness, repayment estimators to help you pick the right repayment plan to fit your income, loan servicer contacts, and other important information to help you manage your loan repayment. All for free! Recent research by a member of the Student Loan Ombudsman Caucus found some of these debt relief companies charging upfront consolidation fees as high as $999 or 1 percent of the loan balance (whichever is higher); “enrollment” or “subscription” fees up to $600; or monthly account “maintenance” fees as high as $50 per month. You already pay for these services through the monthly interest on your loans; why double-pay?

Keep your PIN to yourself

Student loan debt relief or credit repair companies may offer to manage your loan account, and to do so, they ask you to provide them with your federal student aid Personal Identification Number (PIN), or sign a Power of Attorney. Think about it: your PIN is the equivalent of your signature on any documents related to your student loan. If you give your PIN away, you give others the power to perform actions on your student loan on your behalf. Plus, regardless of who authorizes changes to your account, it’s your name on the promissory note. If that company fails to provide the appropriate updates to your loan servicer, you have to deal with the consequences.

Is Your Loan in Default?

If it is, you know that being in default on a student loan is bad news. Know this as well: you are a prime target for the marketing tactics of debt relief and credit repair companies. By being in default, you’ve already incurred added interest and you’re subject to collection costs. Don’t add on the additional fees charged by one of these companies to get your loan out of default.  Even if your loan is in default, loan consolidation is free. Getting on a loan rehabilitation plan is free. Find out how to get out of default.

Think you’ve been scammed?

If you’ve already signed a contract, seek advice to learn your options. Many state governments have an Office of Consumer Affairs or Consumer Protection either within or affiliated with, the Office of the State’s Attorney General. At the federal level, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) have the authority to act against companies that engage in deceptive or unfair practices. Click on the links to file your complaint with either of those agencies.

Contact your Loan Servicer

If you want to talk to someone, call your loan servicer or use your online account access to get more information.  They are your first source to get help with managing your loan repayment. The Department’s loan servicers are as concerned as I am at ensuring that you do not spend your hard-earned money to pay for something you can get for free. If you don’t know your servicer’s contact information, grab your PIN and log in to StudentAid.gov.

Joyce DeMoss is the Student Loan Ombudsman at Federal Student Aid. If you’ve tried to resolve your student loan issues without success, contact the Ombudsman. The Student Loan Ombudsman Caucus includes members at Direct Loan and FFELP program participating lenders, servicers, and guaranty agencies.

How to Make Student Loan Payments Based on Your Income

Maybe you’re just getting out of school and you got a letter from your student loan servicer about repayment, or maybe you read on a blog or in the newspaper about an income-driven repayment plan. Maybe you’re not really sure what they are, how they work, or what they could mean for you. Let me give you the fundamentals.

First, let me explain the naming. “Income-driven repayment” is an umbrella term for three different repayment plans available to those with federal student loans:

Notice how the names of all three plans reference “income” or “earnings”? Well, that’s because, under these plans, your payment amount is based on how much money you make. To really understand the differences between income-driven and “traditional” repayment plans, you must understand how your payment amount is calculated under each type of repayment plan.

How Monthly Payments Are Calculated

“Traditional” repayment plans are those such as the Standard and Extended Repayment plans. These traditionalists take three variables—the interest rate, principal balance, and repayment period—and determine the least amount of money that you can pay each month to pay the loan off by the end of the repayment period (usually 10-25 years, but sometimes as much as 30 years). This means that borrowing more, having a higher interest rate, or having a shorter repayment period will increase your monthly payment (and vice versa). Those three variables are all the traditional repayment plans care about—they don’t care if you can afford that payment, they just want your loan to be paid off within a specific time frame.

Income-driven repayment plans take these variables and stand them on their heads. These plans say, “you’ll pay what you can afford: a percentage of your ‘discretionary income’” (hint: that’s something less than your total income). Depending on the plan, that may be 10%, 15%, or something else. What you ultimately pay depends on the plan you choose and when you borrowed, but in all cases, it should be something you can afford. Sometimes, it can be as low as $0 per month.

Student Loan Forgiveness and the Income-Driven Repayment Plans

Because your payment under the income-driven repayment plans is not calculated to ensure that your loan is paid off within a specific time frame, the plans have another special feature: loan forgiveness. These plans do have a repayment period—20 or 25 years. However, it’s not the point at which your loan must be paid off; instead, it serves as a counter toward loan forgiveness. Under these plans, if your loan is not repaid in full at the end of your repayment period—20 or 25 years—then the remaining balance will be forgiven. Let me be clear: this is not to say that everyone who selects an income-driven repayment plan will receive forgiveness. You may end up paying your loan off in full before you’re eligible for some forgiveness. Because your payment is based on your income, your payment changes when your income rises (or falls). Your income is the “x” factor, and we don’t know what will happen to it in the future. Under these plans, then, you may pay your loan off in full, or not, but the income-driven repayment plans are happy either way.

What else affects whether you will receive loan forgiveness? Well, it’s those familiar variables of loan balance and interest rate. Remember, interest accrues each day on whatever your principal balance is. The income-driven repayment plans do not change this fact. So, even though your payment isn’t related to how much interest is accruing, that interest still accrues and must still be paid before you can pay down the principal balance on your loan. Ultimately, because your payment is less than it would be under another plan and may even be less than the amount of interest that accrues on your loan, then you will pay down your principal balance more slowly and increase the likelihood of receiving loan forgiveness. This also means that your loan will cost you more over time. Does this mean that you shouldn’t choose an income-driven repayment plan? Of course not! But, I wouldn’t be doing my job if I didn’t explain that there was some sort of cost to receiving this benefit.

Disclaimers

To be a good bureaucrat, I need to give you a few disclaimers before I wrap this up:

  • If you receive loan forgiveness under an Income-Driven Repayment Plan, it may be considered taxable income by the Internal Revenue Service.
  • The Income-Based and Pay As You Earn Repayment plans both have an eligibility criteria that tests to see whether you “need” to enter the plan—this test checks how much federal student loan debt you have relative to your income.
  • There are loan-based eligibility criteria that I didn’t even mention, but know that these plans are only available for federal student loans—loans made under the Direct Loan and Federal Family Education Loan Programs, to be specific.
  • If you are married, how you file your federal income tax return matters; sometimes it matters a lot.

How to Apply

In closing, let me give you some actionable steps that you can take:

  • Use the Repayment Estimator to model your eligibility and payment amount for an income-driven repayment plan.
  • If you have still questions, call your loan servicer and discuss whether one of these plans is a good fit for you.
  • Apply online at StudentLoans.gov. Because this stuff is complicated, check the box that allows your loan servicer to put you on the income-driven repayment plan with the lowest monthly payment amount. 

The English language was not marred through the use of acronyms in this blog post. Ian Foss has worked for the Department of Education since 2010, and, thanks to the Income-Based Repayment Plan, has been able to eat more than just ramen noodles since he finished school.

6 Things High School Grads Need to Do Before Leaving for College

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Getting ready for your last high school prom and counting down the days till graduation are all you can think about.  Yes, freedom and plans for a fun-filled summer are just around the corner.  Before you know it, you’ll be loading up your belongings in the family minivan and headed off to college.  You’re so ready, right?  Well, maybe not.  Here are some tips for things to do this summer before you head off to college.

Downsize, Get Organized & Learn How to Do Your Own Laundry

You’re not going to be able to take your whole closet and every cherished belonging with you to the dorm.  Start downsizing now and make a list of all the things you’ll need to take with you.  A clean and tidy space will make things a lot more manageable.  Most likely you’ll go home a time or two on break and you can swap out things that you don’t need for things that you do.  But, in between those trips home, you’ll need to learn how to do laundry.  Those whites can turn into some interesting colors and transform into a smaller size if you don’t know your way around a washer and dryer.

Understand Your Financial Situation

Each family’s situation is different – make sure you understand what your family may or may not be able to contribute.  You should’ve already applied for financial aid.  If not, you need to complete the Free Application For Federal Student Aid (FAFSA) ASAP!  Make sure you list on the application the school code of the college you plan to attend so your information is sent to that school.  If you still haven’t decided it’s best to list any school you think you may attend.  The financial aid office will then notify you of any financial aid you might be eligible for.  Know what each of those types of aid is and in what order you should accept them.  Visit StudentAid.gov for information on planning and paying for college.  Do you have enough money to pay for school?  Will you need to work part-time?  Make a budget and know what you can spend on certain things.

Get a Good Calendar and Prepare for a Whole New World of Time Management

One of the biggest challenges for a lot of you will be time management. When you head off to college, you won’t have somebody there to wake you up, make you breakfast and send you out the door in clean clothes with completed homework in hand.  Set yourself up early with a class schedule (make a course syllabus your new best friend) and a system that works for you.  You need to know deadlines for registration, papers, financial aid, coursework and everything in between.  Your chance of succeeding academically will rapidly evaporate if you don’t manage your time well.  You’re worth the investment – manage it well.

Craft a Good Resume and Learn How to Network

No, don’t wait until you’re approaching college graduation to write a cover letter and resume, you need one now.  Having a compelling and professional resume and cover letter is vital to applying for part-time jobs, internships, etc.   You might want to also consider changing your email address.  Employers probably won’t be impressed with an email address like justheretoparty@XXmail.com.  Work experience can be just as important as good grades when looking for jobs after college graduation.   Internships not only provide you with knowledgeable experiences in your field, but they also provide great networking opportunities.  Don’t settle in and nest, put yourself out there and go to as many networking events as possible.

Embrace Coupons and Master the Art of a Good Deal

Another difficult thing to learn is skipping those unnecessary splurges.  Yes, I know it’s all about YOLO but you need to embrace BOGO.  Coupons aren’t just for stay at home moms anymore.  Scoring deals whether in newspapers, magazines or with online sites like Groupon and Living Social it’s easier than ever.  But don’t get so caught up in the deals that you buy vouchers for and you don’t end up using.  That can cost rather than save you money.  Save those splurges for when you score a great “Buy One Get One” free or other greatly discounted offer.    Ask about student discounts and if available a studentadvantage card.  Start practicing this summer.  It’ll impress your friends and it’ll be a little more money in your pocket when you get to campus.  Another great way to save money is buying used textbooks rather than new.  Search sites like bigwords.com, Amazon, and TextbooksRUs to name a few.  If you buy new and then resell them back to the college bookstore check online sites first for what they’re worth.  College bookstore buy back rates are sometimes as low as 10% of what you paid for it new.  Lots of students are also now renting textbooks on sites like chegg.com.

Learn How to Keep You and Your Things Safe

Yes, you need to remember to lock your dorm room and place that lock on your laptop.  Losing your laptop can wreak havoc on your studies and a theft due to an unlocked door can also ruin your relationship with your roommate.  Start practicing being more aware of your surroundings and keeping yourself safe.  Program your school’s campus security number into your phone.  You never know when you might need it.  Safety also applies to protecting your social security number, PIN and passwords.  Your social security number is one of the main identifiers when checking on things like financial aid, grades, and registering for classes.  Make sure all your passwords and important numbers are not on a post-it-note on your desk.  Store them in a secure place.  Not protecting your identity and important information can have lasting long-term effects on your ability to get a job and apply for credit.

Congratulations on a job well done and making the decision to advance your education!

Susan Thares is the digital engagement lead for the U.S. Department of Education’s Office of Federal Student Aid. 

5 Ways to Pay Off Your Student Loans Faster

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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.

What You Should Know About Your Federal Student Loan Servicer

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You received a federal student loan and now it’s time to repay your loan. If you’re like most student loan borrowers, you may find the repayment process a little overwhelming. But you have an important resource—your student loan servicer—to help you navigate the repayment process.

What is a loan servicer?

A loan servicer handles the billing and other services on your federal student loans. The U.S. Department of Education assigns your loan to a servicer, and the servicer will assist you with repayment and any questions you may have about your federal student loan.

What’s so important about my loan servicer?

There are several reasons why your loan servicer is important, including the fact that you’ll make your loan payments to your servicer.

Your servicer will help you:

How do I find out who my loan servicer is?

To view information about all of your federal student loans including contact information for your loan servicer, log in to “My Federal Student Aid.” You’ll need your Federal Student Aid PIN, so make sure you have that handy. Once you’re logged in, select “Your Federal Student Loan Summary” to view your loan information. Note: If you have multiple federal student loans you may have more than one loan servicer, so be sure select each loan to see information specific to that loan.

Just remember that your loan servicer will help you throughout the loan repayment process, so make sure to keep in touch with them, especially if your financial circumstances change.

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

 

Don’t Fall Behind on Your Student Loan Payments

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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: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.

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