Guide to Repaying Stafford Student Loans
REPAYING YOUR STUDENT LOAN is an important responsibility. To assist you in managing repayment, this guide provides helpful information about your rights and responsibilities as a borrower and the repayment options that are available. In addition to reviewing the repayment process, the guide also provides tips for successful repayment.
IMPORTANT NOTE
When your enrollment status falls below half-time or just before you graduate
(whichever comes first), you must participate in an exit counseling interview
which is required by the federal government. During the interview, your rights
and responsibilities will be explained and you will also have the opportunity
to update important information in your loan records, such as your address,
telephone number, future employer and repayment plans.
Guide to Repayment Topics
Borrower Rights and Responsibilities
Repayment Process
Repayment Schedules
Federal Consolidation Loans
Borrower Tips
Other Repayment Options (including Deferment and Forbearance)
Loan Cancellation/Forgiveness
Loan Default
Additional Customer Service
You may prepay your loan at any time or make payment in full without penalty.
You also have the right to request a forbearance or deferment during your repayment period. Deferments are entitlements, and most forbearances are granted at the lender’s option.
You must make timely monthly payments on your loan.
You must repay the total amount of your loan, in addition to accrued interest, even if you do not complete your education or find a job in your field or you are dissatisfied with your education.
You must notify the financial aid office of your school immediately if you reduce your enrollment status to less than half-time, withdraw or fail to re-enroll at the end of a term, or change your local or permanent address during enrollment.
Federal law also requires you to notify your loan holder if any of the following events occur before your loan is repaid:
Refer to your promissory note for a complete list of your rights and responsibilities.
After you graduate or drop to less than half-time enrollment, you will receive a six-month grace period before you must begin repaying your loan.
Before the grace period expires, you will receive a repayment schedule as well as detailed information about your outstanding balance, interest rates, fees and available repayment options. Contact your loan holder if you do not receive this information.
REPAYMENT SCHEDULES
You will begin making monthly payments on your student loan after the grace
period expires. The repayment amount and period are determined by the loan
amount and schedule of repayment. There are four repayment schedules for
you to consider. If you are interested in any of these options, contact your
loan holder to obtain the required forms.
Standard Repayment Schedule
This plan is the quickest and most financially effective way to pay off your student loan while minimizing interest costs.
The loan is repaid in a maximum of 120 equal monthly payments (10-years) unless you receive a deferment or forbearance.
Graduated Repayment Schedule
This plan is ideal if you have limited income today but expect to have higher earnings in the future. However, total interest costs over the life of the loan are typically higher.
The monthly payments, which must be sufficient to cover the interest each month, begin low and increase gradually as your income increases.
Income-Sensitive Repayment Schedule
This plan allows your monthly payments to be adjusted to fit your current annual income, but each payment must be large enough to cover accruing interest.
This repayment plan is appropriate if your income fluctuates, you have substantial loan balances or you need smaller monthly payments in order to meet other financial obligations. However, your total interest costs are typically higher over the life of the loan.
The plan must be renewed each year, and your monthly payments can be adjusted annually for up to five years. The payments are adjusted based on income, loan balance, interest rate and maximum repayment term.
If you use the income-sensitive repayment plan for the maximum five years, you will still have the opportunity to repay your loans under one of the other repayment plans.
Extended Repayment Schedule
This plan is limited to “new borrowers” on or after October 7, 1998, with an outstanding balance of principal and interest in Federal Family Education Loan Program loans totaling more than $30,000.
You may choose either the standard or graduated repayment schedule over a period not to exceed 25 years.
Use the following chart to get an idea of the monthly payment amounts for the standard repayment schedule. These charts illustrate the required $50 minimum monthly payment, the current interest rates of 6.0, 6.8 and 8.5 percent, and the 10-year repayment period.
Loan Amount |
Minimum Monthly Payment |
Total Interest Paid |
Total Amount Paid |
|---|---|---|---|
$1,000 |
$50 |
$50 |
$1,050 |
$5,000 |
$56 |
$1,661 |
$6,661 |
$7,500 |
$83 |
$2,492 |
$9,992 |
$12,000 |
$133 |
$3,989 |
$15,989 |
$20,000 |
$222 |
$6,645 |
$26,645 |
$40,000 |
$444 |
$13,290 |
$53,290 |
Loan Amount |
Minimum Monthly Payment |
Total Interest Paid |
Total Amount Paid |
|---|---|---|---|
$1,000 |
$50 |
$64 |
$1,064 |
$5,000 |
$58 |
$1,905 |
$6,905 |
$7,500 |
$86 |
$2,857 |
$10,357 |
$12,000 |
$138 |
$4,572 |
$16,572 |
$20,000 |
$230 |
$7,619 |
$27,619 |
$40,000 |
$460 |
$15,239 |
$55,239 |
Loan Amount |
Minimum Monthly Payment |
Total Interest Paid |
Total Amount Paid |
|---|---|---|---|
$1,000 |
$50 |
$100 |
$1,100 |
$5,000 |
$62 |
$2,439 |
$7,439 |
$7,500 |
$93 |
$3,659 |
$11,159 |
$12,000 |
$149 |
$5,854 |
$17,854 |
$20,000 |
$248 |
$9,757 |
$29,757 |
$40,000 |
$496 |
$19,513 |
$59,513 |
Note: Federal Stafford and PLUS loans disbursed prior to July 1, 2006, have variable interest rates that will change annually, but will not exceed 8.25% for Federal Stafford and 9.00% for PLUS. However, loans first disbursed on or after July 1, 2006, have fixed interest rates - 6.80% for Federal Stafford loans and 8.50% for Federal PLUS loans.
Important note: Due to market conditions, many lenders are not currently offering consolidation loans. If you are considering student loan consolidation,
please contact your existing lender(s) for more information about
consolidation or repayment alternatives to consolidation.
This program allows you to combine all of your federal education loans into a single, more manageable loan, allowing you to make one monthly payment and extending your repayment period up to 30 years depending on the loan amount. You may also be able to secure a lower fixed interest rate for the life of the loan.
If you choose to consolidate your loans, you will still have the option of choosing from the standard, graduated, income-sensitive or, if applicable, an extended repayment schedule.
Consolidation loans are not for everyone. Consider the advantages and disadvantages, and determine if the repayment of a consolidation loan is best for you.
If you wish to apply and would like more information about consolidation, contact your current loan holder.
BORROWER TIPS
A student loan is the first experience with credit management for many
students. It is important to establish and maintain a good credit history.
To protect
your credit history, you must take proactive steps to successfully repay
your student loan.
1. Develop a monthly budget. To help you establish a realistic budget, review the following chart that indicates the percentage of your income that should be allocated for each area.
Remember – repaying your student loan is not optional. Your monthly student loan payments are just as important as any fixed monthly expense.
| Expense | % | Expense | % | |
|---|---|---|---|---|
| Housing | 30% | Clothing | 4% | |
| Car (Total) | 15% | Credit Card | 4% | |
| Food | 10% | Entertainment | 4% | |
| Savings | 10% | Medical | 4% | |
| Student Loans | 8% | Insurance | 3% | |
| Utilities | 5% | Miscellaneous | 3% |
2. Get organized. Locate your student loan documents and maintain a filing system. It is important to carefully read all of your student loan-related correspondence.
3. Keep your student loan holder informed. Contact your loan holder immediately if you change your name, address or telephone number.
4. Call your loan holder if you are having problems making your loan payments. Your loan holder will be able to explain your repayment options, as well as forbearance and deferment eligibility.
5. Keep a phone log. Document the date of each conversation with your loan holder, the name of the customer service representative who assisted you and a brief description of the conversation.
6. Keep copies of correspondence. Make a copy of any forbearance or deferment form for your records before mailing or faxing the form to your loan holder.
Check to see if your lender offers the ability to automatically debit your payment amount from your checking or savings account; it could lead to a lower interest rate.
There is no penalty if you prepay part or all of your loan at any time. If possible, consider making payments during your grace period to reduce the total amount of your loan, as it will save you interest over the life of the loan.
If possible pay more than the established monthly payment; any additional amount you pay will reduce your outstanding principal balance, resulting in earlier payoff and lower interest costs over the life of the loan.
If something happens that temporarily affects your ability to make payments, contact your loan holder immediately. You may be eligible for deferment or forbearance.
Additionally, the Oklahoma Guaranteed Student Loan Program’s (OGSLP) Default Prevention department can help you develop a successful repayment strategy and provide you with detailed default prevention counseling.
For more information about OGSLP’s Default Prevention department,
call 405.234.4352 or 800.358.5460, email us at defaultprevention@ogslp.org or visit www.ogslp.org/borrowers.
Deferment
You may postpone repayment if you provide your loan holder with a request for
a deferment with evidence that verifies your eligibility. Upon request, the
loan holder will provide you with a deferment application that lists deferment
categories and eligibility requirements.
The types of deferments available depend on when you received your first loan.
Borrowers whose outstanding FFEL Program loans were made on or after July 1,
1993, and who, when their first FFEL Program loan was made on or after July
1, 1993, had no outstanding FFEL Program loans made before July 1, 1993,
are eligible for deferment if they are:
attending an eligible school at least half-time;
pursuing a graduate fellowship program or rehabilitation training program for individuals with disabilities approved by the U.S. Department of Education;
conscientiously seeking but unable to find full-time employment; or
suffering economic hardship for reasons in accordance with federal regulations.
Note: Borrowers who are unable to find full-time employment or suffer economic hardship may be eligible for deferment for up to three years.
A loan first disbursed on or after July 1, 2001, is eligible for deferment if the borrower is serving on active duty during war or in a national emergency or military operation, including National Guard duty.
Borrowers with an outstanding balance on a FFEL Program loan that was made before July 1, 1993, or who had a balance on a loan that was made before July 1, 1993, at the time a loan was disbursed on or after July 1, 1993, are eligible for deferment if they are:
enrolled full-time in a graduate fellowship program or rehabilitation program for disabled individuals;
attending an eligible school at least half-time;
serving in the U.S. Armed Forces on active duty status, as an officer in the Commissioned Corps of the U.S. Public Health Service or as an active duty member of the National Oceanic and Atmospheric Administration Corps;
serving as a full-time volunteer under the Peace Corps Act or in an ACTION Program or another comparable program determined eligible for deferment by the U.S. Department of Education;
temporarily disabled or caring for a dependent who becomes temporarily disabled;
conscientiously seeking but unable to find full-time employment in the United States;
serving in an internship required to begin professional practice or leading to a post-graduate degree or certificate;
taking parental leave to care for a newborn or newly adopted child;
teaching full-time in an area suffering from a teacher shortage as defined by the U.S. Department of Education; or
mothers who have preschool-age children and are entering or re-entering the workforce at a salary that is not more than $1 above the federal minimum wage.
Forbearance
If you are unable to make your scheduled payments but intend to repay your
loan, your loan holder may allow you to reduce the amount of your payment
or to temporarily stop making payments. However, during a period of forbearance,
interest charges will continue to accrue.
You may request forbearance to:
make no payments for a short period;
extend the time for making payments; or
make smaller payments than are scheduled for a period.
Note: Interest charges that are capitalized will add unpaid interest to your principal balance, increasing both the total amount to be repaid and the monthly payment.
Your loan holder is generally not required to grant a forbearance and may require you to provide reasons for the request in addition to other information.
However, your loan holder is required to grant you a forbearance under certain conditions, such as:
you are serving in a medical or dental internship or participating in a residency program;
you receive a national service education award under the National and Community Service Trust Act of 1993 for serving in a national service position;
your annual debt burden for FFEL Program loans equals or exceeds 20 percent of your disposable income; or
you are considered an eligible borrower for the Teacher Loan Forgiveness Program and your cancellation amount will satisfy the anticipated outstanding loan balance at the time of the expected cancellation.
Bankruptcy does not automatically cancel your student loan debt.
All or a portion of your student loan debt may be repaid if you are eligible for the Teacher Loan Forgiveness Program. You must be a “new borrower” on or after October 1, 1998, and must teach for five consecutive complete years and meet other requirements.
Your student loan debt may be conditionally discharged and later canceled if you become permanently disabled. The appropriate documentation verifying the permanent and total disability must be certified by your doctor and accepted by your loan holder. The loan holder may not approve a request for the conditional discharge/cancellation for permanent and total disability for a condition that existed before you applied for the loan. If your loans are conditionally discharged, your loans will be permanently assigned to the U.S. Department of Education for a period that will last up to three years before your debt is completely canceled.
In some circumstances, loans may be canceled if you were unable to complete a course of study because the institution closed or if your loan eligibility was falsely certified. A portion of your loan may also be canceled if the school fails to pay a refund that was due on your loan.
Your student loan debt, as well as any PLUS loans that your parents took out on your behalf, will be canceled if documentation of your death is submitted to your loan holder.
LOAN DEFAULT
If you fail to repay your student loan for a specified period of time,
generally 270 days, your loan will default, and the outstanding balance
becomes immediately
due and payable. A defaulted student loan cannot only negatively affect
your credit rating and ability to borrow in the future, but can also result
in:
loss of federal and state income tax refunds;
legal action;
assessment of collection charges, including attorney fees;
loss of professional license;
loss of eligibility for deferments; and
wage garnishment.
ADDITIONAL CUSTOMER SERVICE
If you are having problems managing your student loan payment, you may contact
the Oklahoma Guaranteed Student Loan Program’s (OGSLP) Default Prevention
department for assistance in developing a successful repayment strategy.
For more information about OGSLP’s Default Prevention department, call 405.234.4352 or 800.358.5460, email us at defaultprevention@ogslp.org, visit our Web site at www.ogslp.org or write:
Default Prevention Department
OGSLP
PO Box 3000
Oklahoma City, OK 73101-3000
If you have problems with your student loan during the repayment period that cannot be resolved by working with your loan holder or guarantor, the U.S. Department of Education’s Ombudsman Office can help.
For more information, visit the Federal Student Aid’s (FSA) Student Loan Ombudsman Office Web site at www.ombudsman.ed.gov, call toll-free 877.557.2575 or write:
FSA Ombudsman
U.S. Department of Education
830 First Street N.E.
Washington, D.C. 20202-5144
You may also contact the Ombudsman Office at 202.377.3800, via email at fsaombudsmanoffice@ed.gov or by fax at 202.275.0549.