Federal educational loans have four main repayment plans, consisting of the Standard Repayment and three alternatives. The monthly payments of the alternative plans are lower than those of the Standard Repayment plan, but the term of the loan is extended and the amount of interest to be repaid over the life of the loan is increased. The repayment plans are as follows:
Under this plan a fixed monthly amount will be paid for a loan term of up to ten years. There is a $50 minimum payment requirement.
Under this plan the loan term may be extended up to 30 years, depending upon the amount borrowed.
Unlike the standard and extended repayment plans, this plan begins with lower payments, which gradually increase every two years. As with the extended repayment plan, the loan term may be extended up to 30 years.
Income Contingent Repayment
Under this plan, repayment is based on the borrower’s income and the total amount of debt. Monthly payments are adjusted each year as the borrower’s income changes. The loan term is up to 25 years, at which point any remaining balance on the loan will be discharged. This repayment plan option is not available to parents.
Subsidized Stafford Loans
Payment of a subsidized Stafford loan may be deferred as long as the student is enrolled in an eligible institPCTIon at least half-time. Repayment will begin six months after the student graduates, withdraws, or drops below half-time status.
Unsubsidized Stafford Loans
Payment on the principal balance of the loan may be deferred while the student is in school. Students may choose to pay or defer the interest payments while they are in school until repayment of the principal balance begins.
Repayment of a PLUS loan generally begins on the date of the last disbursement of the loan and may be extended up to 10 years, however parents do have the option of delaying repayment until six months after their dependent student is no longer enrolled at least half-time.
Grad PLUS Loans
There is no grace period for a Grad PLUS loan. Repayment begins on the date of the last disbursement of the loan, however, while enrolled in school on at least a half-time basis you are eligible for an in-school deferment that allows you to postpone payments on your Grad PLUS Loan until you graduate or drop below half-time status. The standard repayment period is up to ten years.
Under certain circumstances, students may apply for a deferment or a forbearance. During deferment students are allowed to temporarily postpone payments on their loan, with no accrual of interest. If students are ineligible for a deferment, a forbearance may be received. During a forbearance, payments on a student loan are either postponed or reduced, but interest continues to accrue. For additional information relating to student loan deferments or forbearances, refer to the Department of Education Student Guide website or contact the loan lender/guarantor.