Entering Repayment

When students graduate, withdraw from school, or drop below half-time enrollment status, they have six months before the first payment is due on their subsidized and unsubsidized loans. This is called a grace period. This time can allow students to get financially settled, select a repayment plan and determine the amount of income needed to put toward student loans each month.

The payment period begins the day after the grace period ends. A first payment will be due within 45 days after your repayment period begins. If students have subsidized loans, they will not be charged interest during the grace period. If students have unsubsidized loans, they will be responsible for the interest that accrues during the grace period. Borrowers may pay this interest as it accrues during the grace period, or can allow it to accrue and be capitalized (added to the principal balance of the loan) when the loan enters repayment.

Parent PLUS loans do not have a grace period. The repayment period for a PLUS loan begins on the day after the final loan disbursement is made. However, a parent may defer repayment of a PLUS loan while their child is enrolled in school on at least at half time basis and, for PLUS loans with a first disbursement date on or after July 1, 2008, for an additional six months after they graduate, withdraw, or drop below half-time enrollment status. A parent's first payment will be due within 45 days after their deferment ends. Learn more about grace periods.

Prepayment

Borrowers may prepay all or part of their loan(s) at any time without penalty. They also have the option of requesting a shorter repayment schedule. After a student has begun repaying loans, any extra amount that they pay in addition to a regular required monthly payment will reduce the outstanding principal balance, as long as accrued interest and any outstanding late charges are paid.

Loan Summary Information

The National Student Loan Data System (NSLDS) is The Department of Education's central database that stores information on all loans and grants made through the department's federal student aid programs. The information displayed includes all federal student loans as reported to NSLDS. Students must contact their specific loan servicer for more detailed information regarding loan(s).

Interest Rates and Payment of Interest

Interest is a charge for using borrowed money. Every borrower has to pay interest no matter what type of loan he or she has; education loans are no different.

Subsidized loans

The federal government pays the interest on subsidized loans while students are enrolled in school on at least a half time basis, during the grace period, and during other specified periods.

Unsubsidized loans and PLUS loans

Students who borrow an unsubsidized loan or a PLUS loan are responsible for paying the interest during all periods, starting from the date of the first loan disbursement. Borrowers can choose to either pay the interest as it accrues (for example, while they are in school or during the grace period), or let it accrue and be added to the principal balance of the loan. This is called "capitalization."

Although credit history is not taken into account when students receive federal subsidized and unsubsidized student loans, credit history will be affected if borrowers do not repay federal student loans under the repayment plan agreed to when they enter repayment.

Repayment Incentives

A repayment incentive is a benefit that is offered to encourage students to repay loans on time. Under a repayment incentive program, the interest rate charged on a student's loans may be reduced. Some repayment incentive programs require that borrowers make a certain number of payments on time to keep the benefits of the repayment incentive.

The Direct Loan Program currently offers only one repayment incentive program:

  • Interest Rate Reduction for Automatic Withdrawal Payment.

Repayment Plans

When it comes time to start repaying student loans, borrowers can select a repayment plan that's right for their financial situation. Generally, students have from 10 to 25 years to repay a loan, depending on which repayment plan they choose. The repayment plan options are generally the same in the Direct Loan and FFEL programs, except that the Income-contingent Repayment plan is available only in the Direct Loan Program, and the Income-sensitive Repayment plan is available only in the FFEL Program. The following repayment plans are available to Direct Loan and FFEL Program subsidized, unsubsidized and PLUS loan borrowers:

  • Standard Repayment Plan
  • Graduated Repayment Plan
  • Extended Repayment Plan
  • Income-Based Repayment (IBR)
  • Income-Sensitive Repayment Plan (for FFEL Program loans only)
  • Income-Contingent Repayment Plan (for Direct Subsidized and Unsubsidized Loans and Direct PLUS Loans for Graduate and Professional Students)

Key Facts About Repaying Your Loans

If students don't choose a repayment plan or do not provide additional documentation that is required for certain repayment plans, the loan holder or loan servicer will place a borrower's loans on the Standard Repayment Plan.

Students can switch repayment plans later if a different plan would work better for a current financial situation. Under the FFEL Program, students can change repayment plans once a year. Under the Direct Loan Program, a borrower can change plans any time as long as the maximum repayment period under the new plan is longer than the time your Direct Loans have already been in repayment. If students want to change repayment plans, they must contact the loan holder or loan servicer.

Except for periods of economic hardship deferment under the Income Based Repayment Plan, periods of deferment or forbearance do not count toward the maximum length of time borrowers have to repay your loans.

  • Students must make payments on their loans even if they do not receive a bill or repayment notice.
  • Billing statements (or coupon books) are sent to borrowers as a convenience. Borrowers are obligated to make payments even if they don't receive any reminders. Contact your lender or loan servicer to discuss setting up automatic payments.
  • Students must also make monthly payments for the full amount required by the repayment plan. Partial payments do not fulfill an obligation to repay student loan on time.
  • If borrowers are making late or partial payments, they can contact the loan holder or loan servicer immediately for help.
  • If students are having trouble making scheduled monthly payments, there are options to help. Borrowers may be able to lower monthly payments by changing to a different repayment plan or may be able to temporarily postpone payments through deferment or forbearance.
  • If students apply for a deferment or forbearance, they must continue to make payments until they have been notified that the request has been approved.

Deferment and Forbearance Information

Under certain circumstances borrowers can receive a deferment or forbearance that allows them to temporarily postpone making loan repayments. Except for periods of economic hardship deferment under the Income-Based Repayment Plan, periods of deferment or forbearance do not count toward the maximum length of time students have to repay their loans.

Applying for a deferment or forbearance is not automatic. Borrowers must contact the loan holder or loan servicer.