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Debt Management Tips - Repaying Your Educational Loans

It is important to understand the variety of loan repayment options available to you. In some cases, these options can improve your ability to repay your education loans if you are having difficulty. This can be accomplished by either delaying repayment, selecting a graduated repayment plan, or extending the repayment period.

Check with your financial aid counselor, lender or loan servicer for more information on your options. Listed below are some of the repayment options:

Standard Repayment

This option requires you to pay a set amount monthly (a minimum of $50 per month is required) for a maximum of 10 years. The amount you pay depends on your interest rate, number of payments and total principal balance.

Income-Sensitive

This plan allows for an adjustment annually for up to 10 years according to your annual income and the amount of your loan. If this plan requires more than 10 years to complete your payments, your lender can put your loan in forbearance to lengthen your repayment time up to five additional years.

Graduated Repayment

You begin your repayment with smaller monthly payments, which will gradually increase every two years. The repayment period varies from 12-30 years depending on the total amount you owe when you entered repayment.

Extended Repayment

This is an option for first-time borrowers who borrowed on or after October 7, 1998. If you have accumulated debt in excess of $30,000, you may take up to 25 years to repay your loans using either a Standard or Graduated Repayment Plan.

Deferment

The type of deferment for which you may be eligible depends on the type of loan and the date on which you received your first loan. Loans may be deferred if you:

  • re-enroll in school at least half-time
  • are unemployed
  • experience economic hardship
  • engage in a graduate fellowship program
  • are involved in rehabilitation training

Forbearance

Forbearance allows you to temporarily postpone your payments, extend the period of time allowed to make your payments, or allow you to temporarily make smaller payments. It is granted at the discretion of your lender or servicer. You must apply for a forbearance, and you are responsible for the interest that accrues during the forbearance period regardless of your loan type.

Common situations for which a discretionary forbearance may be granted include:

  • personal problems (such as economic hardship) that are affecting your ability to make scheduled payments
  • unemployment (if you've already used the maximum time allowed for that deferment)
  • poor health or disability when you may not qualify for disability deferment criteria
  • request for a change of payment amount or payment due date on a loan that requires the lender to bring your loan current

Depending on your situation, there are other types of non-discretionary forbearance that are available and may be granted, sometimes even without having to apply or sign an agreement. Some of these situations include but are not limited to:

  • medical or dental internship/residency
  • debt exceeds monthly income
  • Department of Defense loan repayment program
  • bankruptcy filing
  • serving in a national service position such as Americorps
  • natural disasters
  • local or national emergency
  • closed school
  • military mobilization
  • teacher loan forgiveness program

Forgiveness

Cancellation of all or part of your responsibility to repay your loan. This is granted to those who provide teaching services in designated areas (i.e. low income, critical shortage areas), and for certain U.S. military and government services. Please contact your lender and/or your state's Department of Education for details concerning their loan forgiveness program.

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