The 5 “Qs” of Public Service 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.

10.31 How to Determine if You Qualify for Public Service Loan Forgiveness

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.

How to Choose the Best Federal Student Loan Repayment Plan

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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.

  • 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.)
  • Get detailed information about each repayment plan on our website.
  • 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.
  • 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 Student Aid.

How to Make Student Loan Payments Based on Your Income

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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:

  • The Income-Based Repayment Plan
  • The Pay As You Earn Repayment Plan
  • The Income-Contingent Repayment Plan

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.

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

forgiveness

Have you heard or read about student loan forgiveness? Are you wondering what it is or if it is really possible? Perhaps you already know a little about it and you want to find out if you qualify. Well, you’ve come to the right place. We’ll provide answers these questions and tell you where you can 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. To benefit from PSLF, you should enroll in a repayment plan that bases your monthly payment on your income. Learn more about income driven repayment plans. 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 (including repayment plans that are based on your income) if you find yourself in a situation where you’re having trouble making your loan payments. Be 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.

Where To Find Help With Your Federal Student Loans

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You received a federal student loan and now it’s time to repay it. 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?

loan servicer handles the billing and other services on your federal student loans. The U.S. Department of Education (ED) assigns your loan to a servicer, and the servicer assists 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 get contact information for my loan servicer?

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, be sure to select each loan to see information specific to that loan.

Remember that your loan servicer will help you throughout the loan repayment process, so 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.

Avoid These 4 Mistakes I Made With My Student Loans

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It’s been tough for me to come to terms with, but, unfortunately for me, I am not in college anymore. In fact, this spring marked three years since I graduated from college and went into repayment on 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 when I was graduating and getting ready to start repaying my student loans:

1. I 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 the 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 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 I’d borrowed in federal student loans, I would have been much better off. You can view all your federal student loans in one place by going to StudentAid.gov/login.

2. 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 was 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’re getting ready to graduate or have graduated recently 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, email, and phone changes.

4. 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. Federal Student Aid has an awesome repayment estimator that allows you to pull in your federal student loan information and compare what your monthly payments would be under the different repayment plans that are offered. That way, you can choose the right repayment plan, know how much you can expect to pay monthly, and budget accordingly … unlike me.

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

Nicole Callahan is a digital engagement strategist at the Department of Education’s office of Federal Student Aid.

6 Things You MUST Know About Repaying Your Student Loans

When it comes to repaying your federal student loans, there’s a lot to consider. By taking the time to understand the details of repayment, you can save yourself time and money.

REMEMBER: You never have to pay for help with your federal student loans. If you have any questions at all, contact your servicer. They provide FREE help.

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 will even have a grace period. 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?

You will make your federal student loan payments to your loan servicer*, not the U.S. Department of Education (ED) directly. ED uses several loan servicers to handle the billing and other services on federal student loans. Your loan servicer can work with you to choose a repayment plan and can answer any questions you have about your federal student loans. It’s important to maintain contact with your loan servicer and keep your servicer informed of any changes to your mailing address, e-mail, or phone number so they know where to send correspondence and how to contact you. 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, you must contact your loan servicer.

How do I make my student loan payments?

There are several ways you can submit payments to your loan servicer, including options to submit your payment online through your loan servicer’s website.

TIP: Your servicer may offer the option to have your payments automatically withdrawn from your bank account each month. You may want to consider this option so you don’t forget to make your payments.

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. If switching repayment plans isn’t a good option for you, ask your loan servicer about your options for loan consolidation or a deferment or forbearance.

Note: Several third-party companies offer student loan assistance for a fee. Most of these services can be obtained for free from your loan servicer.

What happens if I don’t make my payments?

Not making your student loan payments can result in default, which negatively impacts your credit score. This may affect your ability to borrow for things like buying a car or purchasing a home. Your tax refunds may also be withheld and applied to your outstanding student loan debt. There is never a reason to default. The Department of Education offers several options to ensure that you can successfully manage your student loans. If you’re feeling overwhelmed or having difficulty making payments, contact your loan servicer for help.

*If you are repaying federal student loans made by a private lender (before July 1, 2010), you may be required to make payments directly to that lender.

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

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.

leftover-money-grants-loans

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.