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Once you graduate or are attending school less than half time, you will have a six-month grace period after which you will need to begin repaying your loan. Your loan servicer will provide you with information during this grace period as to when your first payment is due. Payments are generally monthly.
10. How do I repay my loan?
There are a number of different repayment plans available. The institution that services your loan will help you understand which one might be best for you depending on your circumstances. You'll have either 10 or 25 years to repay your loan depending on the repayment plan you choose. The three most popular of these plans are:
• Standard Repayment Plan
• Graduated Repayment Plan
• Extended Repayment Plan
If you choose the Standard Repayment Plan, you will have 10 years to pay back the loan.
The payments will be a fixed amount of at least $50 per month. If you choose this plan, you will pay less interest then with either of the other two plans. Loans that are eligible for a Standard Repayment Plan are both Direct Subsidized and Unsubsidized Loans, Subsidized and Unsubsidized Federal Stafford loans and all PLUS loans.
A Graduated Repayment Plan is where the payments are lower to begin with but then increase – usually every two years. The same types of loans are eligible for a Graduated Repayment Plan as a Standard Repayment Plan. The term of the loan will probably be 10 years.
If you choose the Extended Repayment Plan, your payments may be either fixed or graduated. Your monthly payment will likely be lower than that of a 10-year Standard Repayment Plan. If you had a Direct Federal Loan you must have an outstanding balance of more than $30,000 to be eligible for an Extended Repayment Plan. The term of the loan will be up to 25 years and the loans that are eligible would be the same as those for the Standard Repayment Plan.
11. Are there other options for paying back my federal loan?
In addition to the three plans described above, there are four Income-based Repayment Plans. They are the Income-based Repayment Plan, Pay As You Earn Repayment Plan, Income-contingent Repayment Plan and the Income-sensitive Repayment Plan. (Note: For more information on these four plans, go to this page.)
12. What if I have a problem repaying my loan?
If you find you're having a problem repaying your loan, contact your loan servicer immediately. It will help you understand the options available to keep your loan in good standing. For example, you might be better off changing to a different repayment plan to reduce your monthly payments or you might be able to request either a deferment or forbearance.
13. What happens if I default on my federal loan?
You are considered to be in default on a federal student loan the day after you miss a payment. After 90 days, your default will be reported to the three credit bureaus and your credit score will probably be lowered dramatically. Your entire unpaid balance and any interest charges will be immediately due and payable and you will lose your eligibility for forbearance, deferment or for changing repayment plans. In addition, you'll lose your eligibility for any more federal student aid and your account will be assigned to a collection agency. The government may withhold your federal and state taxes through what's called a tax offset. And finally, your debt will increase due to additional interest, late fees, collection fees, court costs, attorney's fees and any other costs associated with collecting the money from you.