Federal Student Loan Counseling

REPAYMENT OPTIONS

To make it easier to repay your loan, investigate all the repayment options that your lender or servicer offers. These options include:

Standard Repayment

Monthly payments remain the same throughout repayment. Small changes in your monthly payment amount may occur for loans with variable interest rates. Minimum monthly payments start at $50. Your payments may be higher depending on how much you borrowed.

Graduated Repayment

You may begin to repay the loan with small monthly payments that increase over time. This option assumes that your income will grow enough to cover the increasing loan payments. You will pay a greater amount of interest than you would under the standard schedule because your initial payments go mainly toward interest, not the principal balance.

Income-Sensitive Repayment

Your payments are based on a percentage of your gross monthly income. Your monthly payments must be sufficient to cover the interest that accrues each month. You lender/loan servicer will collect and review your income documentation annually and adjust your payment if you qualify.

Extended Repayment

This schedule is limited to borrowers who are considered "new borrowers" on or after October 7, 1998 and who have an outstanding balance of principal and interest in Federal Family Education Loan Program (FFELP) loans totaling more than $30,000. The lender/loan servicer may schedule standard or graduated installments over a period not to exceed 25 years.

Income-Based Repayment (effective July 1, 2009)

If you have a defined partial financial hardship, your payments are limited to no more than 15% of the amount by which your adjusted gross income (either individually or with your spouse, as applicable) exceeds 150% of the poverty line income applicable to your family size. Your monthly payment amount may be adjusted annually. The maximum repayment period under this plan may exceed 10 years. If you meet certain requirements, you may qualify for cancellation of your loan if there is an outstanding balance after a period not to exceed 25 years.

Loan Consolidation

To consolidate your loans and for more information, go to www.loanconsolidation.ed.gov.

If you have more than one loan, you may be able to consolidate these loans into one loan.
Consolidation simplifies the repayment process because you make only one payment each month.
The interest rate on a consolidated loan may be at a higher interest rate. Loan consolidation will extend your repayment up to 30 years.

Loan Consolidation Disadvantages

Longer repayment period.
When using a repayment period that is longer than the generally 10-year repayment period, the amount of interest that you pay over the life of the loan is greater.
If you include a Federal Perkins loan in the Consolidation loan, you will lose the interest-free periods for the Perkins loan during, for example, at least half-time enrollment in an eligible school, the 9-month initial grace period, authorized deferments, and a six-month post-deferment grace period.
If you include a Federal Perkins loan in the Consolidation loan, you will no longer be eligible for cancellation of all or part of your Federal Perkins Loan based on years of qualifying public service.

Lenders offering consolidation loans:

Tax Benefits

Tax benefits are available for certain higher education expenses, including a deduction for student loan interest that you paid. The student loan interest deduction applies to loans used to pay for qualified postsecondary education costs. (The loans cannot be from a related person or made under a qualified employer plan.) Internal Revenue Service (IRS) Publication 970, Tax Benefits for Higher Education, explains the student loan interest deduction and the other tax benefits. You can get more information online at www.irs.gov or by calling the IRS at 1-800-829-1040.

QUIZ QUESTION:

I must repay a Stafford Loan and/or a Grad PLUS Loan with all accrued interest and deducted fees.
True False

In order to complete your loan counseling session, it is important that you read all of the provided information. You will then need to complete the form at the end of the six information pages provided.

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