Repaying Loans
Repaying Loans: Repayment of your student loans is generally a straightforward procedure. However, there are a number of basic details to be aware of that will help ensure the process goes smoothly. More detailed information can be found through the Federal Student Aid Information Center and through your particular lender.
You must begin repaying your student loans after your grace period has expired. Your grace period is the period of time after you graduate, leave school, or drop below half-time status. The grace period is different for different types of loans. Federal Perkins Loans have a grace period of 9 months for students attending at least half-time. Direct Stafford Loans and Federal Family Education Loans (FFEL) have a grace period of six months.
If the loan is subsidized, you won't be charged interest during the grace period. If the loan is unsubsidized, you will be charged interest but you won't have to pay it until after the grace period. PLUS Loans do not have grace periods and your parents are responsible for beginning repayment 60 days after the initial disbursement of the funds. Active duty military personnel have longer grace periods. You are responsible for beginning repayment on time, whether you receive notice from your lender or not.
Repayment amounts and schedules vary greatly from loan to loan and from situation to situation. In general, payments are due on a monthly basis. The monthly amount is determined by the total amount of your loan and the length of the repayment period. FFEL and Direct Stafford Loans have different payment plans to choose from. Federal Perkins Loans have only one type of repayment plan.
For Perkins Loans, your payments will go to the school who loaned you the funds. You will have a maximum of 10 years in which to repay the loan. For Direct Stafford Loans, your payments go to the Direct Loan Servicing Center at U.S. Department of Education. For FFEL Stafford Loans, you will make payments to your private lender or the servicing agent of that lender. Repayment periods for Stafford Loans can be anywhere from 10 to 30 years. Stafford Loans have 3 different repayment plans to choose from:
- Standard Plan - 10 years with a minimum monthly payment of $50
- Extended Plan - a longer period of repayment
- Graduated Plan - monthly payments that start out low and increase as the repayment period progresses
- Income-Sensitive Plan - bases your monthly payments on your current salary
When paying back their PLUS Loans, your parents have almost all the same options for repayment as you do. However, they do not have the Direct Loan Income-Sensitive Repayment Plan option. It is also important to note that for both student borrowers and PLUS Loan borrowers, certain tax deductions are available, including a deduction for student loan interest. The maximum deduction is $2,500 per year. For more information, see IRS Publication 970 entitled "Tax Benefits for Higher Education".
