Repayment Guide

You can plan for your future lifestyle by knowing how to repay your student loans now. Repayment planning begins by deciding to borrow student loans. When you get the promissory note, spend some of your valuable time reading it, and the materials that come with it on your rights and responsibilities. The promissory note contains the terms and conditions for your student loan, and you don't want any surprises later on.



A good repayment record opens financial doors for you! Repaying your student loans can help you establish a good credit rating! You will demonstrate responsibility in handling a large amount of money, so when you go to buy a house or car, lenders will want to finance you at favorable rates. You will also avoid legal action from your guarantor, high collection fees, seizure of income tax refunds, wage garnishment, and exclusion from financial aid and other government assistance that could be critical to you in the future.



When YOU signed a promissory note (the Master Promissory Note (MPN) for Stafford Loans), you agreed to repay your loan in accordance with the terms of that note. The note is a binding legal document that states that you must repay your student loan in full.

YOUR SCHOOL can provide you with information about your lender, guarantor, servicer and your total loan indebtedness.

YOUR LENDER is the bank, credit union, or other financial institution that loaned you the money to go to school for the Federal Family Education Loan Program (FFELP), the federal government for the William D. Ford Federal Direct Student Loan Program, or the school for a Federal Perkins Loan. Alternative loans are also lent by banks or other financial institutions.

Educational Credit Management Corporation (ECMC) is the state GUARANTY AGENCY that insured your student loan for your lender and administers the FFELP for the U.S. Department of Education.

Many lenders contract with a SERVICER to manage their student loan accounts. The U.S. Department of Education uses servicers for Direct Loans. Many schools also have servicers for Perkins Loans. You will be provided with information about how to contact the servicer if this is your lender's preference.

SECONDARY MARKETS are organizations that buy loans from the lenders for FFELP to provide them with funds to make more loans to students. If your lender sells your loan to a secondary market, the secondary market then becomes the holder until your loan is paid in full. Your lender will notify you in writing if your loan is sold, and will provide you with the contact information of the new holder.



You have the right to:

• Be informed by your lender, servicer, or school of:
  • The name, address, telephone number and other contact information of the lender, servicer, or secondary market that holds your loan.
  • The amount of your total loan debt including principal, interest rate and any other applicable fees and charges.
• A maximum of ten years to repay your student loan unless you are granted a deferment, forbearance or choose a different repayment option other than standard repayment.
• Pay off your student loan early without being charged a penalty fee.
• Be notified in writing if your loan is sold or transferred to another lender. You must direct all your loan payments and correspondence to this new holder.
• Receive your repayment schedule from your lender or servicer. This document includes information regarding the total amount of your monthly principal and interest payment and the date that your loan payments begin. Your payments for FFELP or Direct Loans will not be less than $50 per month. For Perkins Loans, the amount is $40. Payment amounts may vary depending on the total dollar amount you have borrowed.
• Request a deferment from your lender or servicer. If you are determined to be eligible for and granted a deferment, you will be allowed to temporarily postpone your monthly loan payments for a specific period of time based on the date of your oldest loan.
• Apply to your lender for a forbearance if you are experiencing a financial hardship that makes it difficult to meet your monthly loan payments. A forbearance can allow you to delay, reduce or extend your monthly payments for a period of time determined by your lender.
• Receive information regarding the possible consolidation of multiple student loans.
• Receive information regarding the consequences and implication of defaulting on your student loan.

You are responsible for:

• Repaying your entire student loan according to the terms of your promissory note even if you do not complete your program of study, are unable to acquire a job after completing your program of study, or are dissatisfied with the education that you received.
• Making your monthly loan payments on time even if you don't receive a billing statement from the holder of your loan.
• Completing and submitting all requested forms and documents to your school, lender, guarantor and/or servicer.
• Notifying the holder of your loan or servicers of any changes to your:
  • Name
  • Address
  • Telephone number
  • Employment status
  • Ability to make your monthly loan payments
• Notifying the holder of your loan if you re-enrolled in college on at least a half-time basis.
• Maintaining copies of all your loan documents for your records.

Repayment of most subsidized and unsubsidized Stafford Loans, made under either FFELP or Direct Loans, begins six months after you have graduated, or are no longer enrolled at least half-time. This is a six-month grace period. For Perkins Loans, the grace period is nine months. The holder of your loan or servicer will mail you a repayment schedule (which may be in the form of a billing statement or coupon book), approximately 30 days before your first loan payment is due. It is very important that you keep the holder of your loan informed of your current address and contact information. The repayment schedule will reflect the total balance of your loan, your interest rate, amount and due dates of your monthly payments and the holder's address where you must send your payments. Carefully review all the information on your repayment schedule to make sure that it is correct. If the information is not accurate, or you do not receive this document, contact the holder of your loan immediately. The federal government pays (subsidizes) the interest on your Subsidized Stafford Loan while you are enrolled in college at least half-time and during your six month grace period. The interest on your Unsubsidized Stafford Loan is not paid by the federal government and begins to accrue once you receive your loan. You choose to either pay this interest quarterly or have it added (capitalized) to your loan principal when you sign the Master Promissory Note for the loan. The interest on a PLUS Loan begins to accrue on the date the loan is made. Repayment begins 60 days after the loan is delivered to the parent(s).



You can choose from among different repayment plans to help manage your student loan repayment and avoid default:

The Standard option is the least expensive in the long run. The minimum monthly payment is $50 per loan, that is, not prorated across all your loans. The maximum payoff time, though determined by the amount borrowed, is typically 10 years, and your payments are fixed. If you want to pay off your loan in the shortest time possible, the Standard option may be your best choice since you'll pay the least in interest. For example, at the maximum interest rate of 8.25% for a loan of $10,000 on a 10-year repayment schedule, your monthly payment would be approximately $123 with a total repayment amount of $14,718.

The Graduated schedule sets your monthly payments to go up over time, and you can tailor payments to your income, provided they cover at least the monthly interest charges. This plan may be a good choice if you are starting out in employment that has lower than average income but is expected to rise significantly over time. The graduated schedule may be advantageous if you are required to meet apprenticeship, internship, and/or field certification requirements after you graduate. You will pay more in total interest and overall repayment amount under the graduated option than you would under the standard option. For example, using the same maximum interest rate (8.25%), loan amount ($10,000), and repayment schedule (10 years), your monthly payment would begin at approximately $69 increasing periodically, but to no more than approximately $207. Your total repayment amount would be $19,175 compared to $14,718 under the standard option.

The Income-Sensitive schedule, for FFELP borrowers, bases your monthly payment on your yearly income. As your income rises or falls, so do your monthly payments. Your monthly payments must at least cover interest charges. This schedule can be helpful to you if you are in a very low and/or sporadic income situation. The schedule assumes a five percent rise in income every year, and your payments will be adjusted accordingly. Your lender may add up to five years of forbearances for an income-sensitive schedule. Again, using the same maximum interest rate, loan amount and 10 year repayment term as used for the standard and graduated schedules above, your monthly payments under the income-sensitive schedule would begin at approximately $83 and rise about five percent or more every year. Your total repayment amount would be approximately $17,785.

The Income-Contingent schedule, for Direct Loan borrowers is very similar to the income-sensitive schedule for FFELP borrowers. Any balance not paid after 25 years is forgiven, but you have to pay taxes on that amount. If the amount forgiven is very large, your tax burden can be in the hundreds or thousand of dollars.

Direct Loan borrowers, and FFELP borrowers with no outstanding loans before October 7, 1998, are eligible to receive an Extended payment schedule. Under this plan, borrowers with more than $30,000 in total debt may receive a standard or graduated repayment schedule for up to 25 or 30 years.

If you do not indicate a preference for a particular repayment schedule or plan at the time of your first monthly payment, the standard schedule will be applied to your loan. You can change your schedule once a year. Carefully review these options and choose the one that works best for you.



The consequences of defaulting on your student loan can severely damage your life plans. Your loan will be placed in default status if you fail to make your payments as scheduled. If you miss any monthly payment, you are immediately delinquent on your loan, and your life will be interrupted with letters offering help and information at first, but they turn demanding and get to be a hassle if you continue to miss payments. The callers are not being mean; they are required by federal regulations to contact you by letter and phone. You cannot afford to miss any payments without talking to your lender or servicer.

When we talk about your future lifestyle, we are not only recommending that you borrow well to begin with, but we are also encouraging you to be comfortable talking about student loans and admitting if you're in trouble or don't know something-there are many options to keep you in good standing on your loan, and many people who are there to help you. It just takes a telephone call to your lender or servicer.

Here are some of the unpleasant things for your lifestyle if you default:

• You will immediately owe up to 25% more because of collection charges slapped onto the amount you default on.
• You can be sued for the entire amount of your loan including unpaid interest and collection charges, and you will have to pay the court costs and attorneys fees!
• Your credit rating will be severely damaged, making it difficult to borrow money for a car or home, or to receive credit cards, or you will have to pay exorbitant interest rates to get them.
• Your federal and state income tax refunds may be intercepted to pay on your defaulted loans.
• You may endure the embarrassment of having your wages garnished with your employer.
• Your account may be referred to a collection agency with collectors who earn a living calling borrowers to get payments out of them.
• You will not be eligible to receive further federal financial aid unless you make satisfactory arrangements to repay the amount due on your defaulted loans.
• You may be ineligible for assistance from federal benefit programs (business and home loans, public assistance, etc.).
• You will be ineligible for deferments.
• You may not be able to renew a professional license that you hold.

If your lender, servicer, or guarantee agency calls about a delinquent loan, be patient and listen to them because they are trying to prevent default or resolve it with you.



Your lender, servicer, and CSLP want to help you in every way possible to avoid defaulting on your student loan. Notify the holder of your loan immediately if you find you are not able to make payments. Your lender or servicer wants to help you avoid default, and will work with you to solve repayment problems. Default on a student loan is truly unnecessary since the loan program has many provisions to help borrowers in difficult circumstances.

Here are some tips to help keep you out of default status:

• Make your payments on time.
• Set up your loan for direct withdrawals from your bank account. This not only saves you time and hassles in writing checks, but you often receive a .25% interest break just for doing so. Check with your lender or servicer for this option.
• Be aware of any repayment benefits that your lender or servicer may offer. Some lenders offer up to 2% interest reduction for a certain number of on-time monthly payments. You pay less if you fulfill the requirements.
• Notify the holder of your loan or servicer immediately if you change your address, name, or any contact information.
• Contact your lender to apply for a deferment or forbearance on your loan if you find that you are experiencing financial difficulties in meeting your loan payments.
• Consider changing your repayment schedule to another option that will work better with your financial situation.
• Look into the possibility of combining or consolidating your student loans into one new loan.
• Keep copies of all records and documents that you receive pertaining to your student loans. This is particularly helpful if you need to research information that you think might be inaccurate.

You may wish to consider student loan consolidation if you have multiple loans that you want to combine (all or some of them) into one new loan. Loan consolidation will allow you one monthly payment to one location instead of several. You can apply for consolidation during your grace period, or once you have entered repayment. Depending on your student loan indebtedness, you could have up to 30 years to repay your consolidated loan. Please keep in mind that if you extend your repayment period, you will pay more interest on this new loan. You will continue to have the choice of standard, graduated or income-sensitive or contingent repayment schedules. The types of loan programs that can be consolidated are the Federal Stafford Loan (subsidized and unsubsidized), the Federal Supplemental Loan for Student (FSLS), the Federal Perkins Loan, FISL, HEAL, HPSL, Nursing Student Loan, and the Federal Direct Student Loan. You will have up to 180 days after your consolidation is complete to include all eligible loans. If you are married and both you and your spouse have student loans, the loans that qualify can be consolidated and, as a couple, you will have only one monthly payment. However, this consolidated loan as a couple can only be cancelled if both you and your spouse die or become permanently disabled. Also, in order to qualify for a deferment, both spouses must meet the eligibility criteria. If you divorce, one spouse dies, or one spouse becomes permanently disabled, the loan will not be cancelled.

The interest rate on a consolidation loan is the weighted average of the loans being consolidated, rounded up to the nearest 1/8 of 1% or 8.25%, whichever is less.

Depending upon the loans you include in your consolidation, a deferment could be available if you (or your spouse if applicable), go back to school at least half time, are unemployed, or suffer from an economic hardship. To apply for a consolidation loan, you should contact the holder of your current loans or servicer. Both FFELP and Direct Loans have consolidation loan programs.



If you find yourself in a situation where you cannot make your loan payments, contact the holder of your loan or servicer to see if you can make some other payment arrangement. You may qualify for a deferment, which will allow you to temporarily postpone your monthly payments for a specified period of time. The federal government will pay the interest on a subsidized Stafford Loan and a Federal Perkins Loan during the deferment period. However, you are responsible for the interest payments for other loan programs such as the unsubsidized Stafford Loan. You can pay this interest every month, every quarter (every three months), or have it capitalized (added to your loan principal). Capitalizing the interest will result in your paying interest on that interest, thus increasing the total amount of your debt. Consider these options carefully and choose wisely. There are several deferments available to you if you are a Federal Stafford, PLUS or Consolidation Loan borrower. The types of deferments that you may qualify for are determined by the date of your oldest loan that has an outstanding balance.

New loans may be deferred if you are:

• Enrolled at least half-time at a postsecondary school
• Studying in an approved graduate fellowship program or in an approved rehabilitation training program
• Unable to find employment
• Having economic hardships

If you first borrowed a long time ago (before July 1, 1993) and still have an outstanding balance, you may be eligible for different deferments. Review your promissory not or contact your lender or servicer for eligibility information.



If you do not qualify for a deferment, and you are willing, yet unable to make your loan payments, you may still qualify for a forbearance. You must call the holder of your loan and request an application. You will be asked to clearly explain and provide documentation as to your financial situation and the reason why you are unable to make your loan payment. Lenders can grant a forbearance at their discretion and typically do so in cases of extreme financial hardship and extenuating circumstances. A forbearance can allow you to delay, reduce, or extend your payments for a specified period of time. However, unlike a deferment, the government does not pay the interest on your loans that are in forbearance-not even your subsidized loans. You are responsible for paying the interest on your loans either monthly, quarterly, or requesting that it be capitalized. You must also continue to make your monthly payments until the holder of your loan notifies you that you have been granted a forbearance-otherwise, your loan will go into default status.

Bankruptcy ... WON'T help you. Generally, student loans won't be excused if you file bankruptcy. Student loans must be paid.



The ombudsman is a government official dedicated to working with student loan borrowers to informally resolve loan disputes and problems. The ombudsman's customer service line is (877) 557-2575.



Being on a budget doesn't have to be all that painful. Your student loan payments are monthly, just like your rent or house payment, car payment, utilities, and insurance. Work with a budget that's simple and easy to remember, like the example below:







Of course, if you can find savings by sharing your apartment, riding the bus, taking your lunch to work, being careful with utilities and long distance, using basic cable, restricting cell phones, you'll have a more flexible cash cushion in your general fund. Then your student loan payment won't seem so big.

Some other money-saving tips for repaying your student loans are:

• Be aware of any repayment benefits that your lender may offer. Some lenders offer up to .25% interest rate reduction for automatic payments (payments that are automatically withdrawn from your checking account); up to 2% interest reduction for a certain number of on-time monthly payments (usually 48 months); or a credit back to you of a portion of the origination fee that was charged to you when you first received your loan. These repayment benefits can add up to significant savings in interest charges over the life of your loans.
• Be careful with your deferment and forbearance time limits. Budget these, as you would cash! If you need a deferment or forbearance, apply to the holder of your loan before your loans become delinquent - otherwise your loan could be placed in default status.
• Examine your repayment schedule from time-to-time to determine if changing it might save you money. For example, if you're in the early stages of a graduated schedule, and you think you can manage the scheduled payments of a standard plan, you may be able to save a considerable amount in interest if you switch.

If you have a loan guaranteed by Educational Credit Management Corporation (ECMC) you can contact their Repayment Services Center at (phone number) to speak with a repayment agent who will be happy to help you. Contact you school for a Perkins Loan and contact the Direct Loan servicer of the U.S. Department of Education for Direct Loans.