When you borrow money for your education, you sign a promissory note legally obligating you to repay the loan according to stated terms and conditions. When the time comes for repayment, usually after your education is complete, meeting your student loan obligation promptly helps you earn a good credit rating, which follows you throughout your life.
Estimate your loan payments with the financial aid calculator.
After you graduate, leave school, or drop below half-time enrollment (fewer than 6 credits), there is a period of time before you have to begin repayment called a grace period. This grace period is six months for a Federal Direct Student Loan and nine months for Federal Perkins Loans. (If you are a parent, you do not have a grace period — repayment generally must begin within 60 days after the loan is fully disbursed.).
Your Student Loans
It is important to gather all information pertaining to your student loans. You should be aware of how much you have borrowed, when your grace period ends, the amount of your payment and when it is due. The U.S. Department of Education’s National Student Loan Data System (NSLDS) contains the status of your loans, balance amounts, and the agency that services your student loans, to which you will send payments.
Federal Direct Student loan borrowers have online access to Direct Loan account information 24 hours a day, 7 days a week at Direct Loans.
Perkins Loans information are serviced by ECSI.
Certain programs will forgive part all or of your loan debts, provided you fulfill certain work-related requirements. For more information on a specific forgiveness program, please click on the links below.
- Federal Teacher Loan Forgiveness Program
- PHEAA Loan Forgiveness Programs
- Pennsylvania Nursing
- Early Childhood Education Professional
- Quality Early Education
- Agriculture Education
If having trouble making payments, contact your loan servicer immediately. They have several options that may help. You may qualify for a deferment or forbearance. Several repayment plans may lower your monthly payment.
If you fail to repay your loans, you will suffer serious consequences:
- you may not be able to obtain more credit, (i.e. to buy a car or house)
- you may be turned down for a credit card
- you will forfeit your tax refunds
- your employer can be ordered to garnish your pay (i.e. withhold what you owe from your paycheck)
- you will be sued and will owe collection fees and attorney fees, in addition to repaying your loan
Remember, you must repay your student loans, even if you:
- don't graduate or otherwise complete your education
- can't find a job after graduation
- aren't satisfied with the education you received
This is an approved temporary suspension of loan payments based on certain events or criteria. A deferment enables borrowers, under certain conditions, to postpone loan repayment for specified periods of time. You must apply for a deferment through your loan servicer. If you have a subsidized Direct Loan or Perkins Loan you will not accrue interest during a deferment. If you have an unsubsidized Direct Loan, you are responsible for the interest during the deferment. You can make interest payments or choose to have the interest capitalized. You must continue to make payments on the loan until you are notified that the deferment has been approved.
This is a temporary postponement or reduction of payments for a period of time because you are experiencing financial difficulty. You can receive forbearance if you are not eligible for a deferment. Unlike deferment, however, interest accrues, and you are responsible for repaying it. A forbearance is granted in increments of one year. You must apply for forbearance with your loan servicer. You must continue to make loan payments until you have been notified that the forbearance has been granted.
Student loan repayment schedules fall into one of three categories:
- Level – the monthly installment amount remains the same throughout repayment; small changes in the monthly installment amount may occur for loans with a variable interest rate if the annual interest rate increases.
- Graduated – the monthly installment amount varies during repayment. Typically a graduated repayment schedule allows borrowers to elect a period of smaller payments during the beginning of the repayment period. Some graduated payment programs base the monthly installment amount on interest for a limited period of time only; others may allow a payment that is smaller than a level payment but still pays some principal and interest. Some programs base the monthly installment on a percentage of the borrower’s income for a limited period of time. Contact your loan servicer to determine what type is best for you.
- Income Sensitive – the monthly payment amount will be established based on your monthly gross income and student loan debt. To apply for an Income-Sensitive Repayment Schedule for the next 12 months, contact your loan servicer. You may be required to submit documentation of your monthly income from all sources.
Loan consolidation is a debt management tool that allows you to pay off multiple student loans with one new consolidation loan. Loan consolidation allows you to extend your repayment period from 10 years up to 30 years depending on the amount of money you have borrowed. It is also an option for a married couple to consolidate their loans.
To be eligible for loan consolidation you must meet the following criteria:
- must be out of school
- must be in repayment or grace period
- PLUS loan borrowers can consolidate at any time once the loan is fully disbursed
- must have only one application pending
- Federal Direct Subsidized or Unsubsidized Loans
- Federal Direct PLUS Loans
- Federal Perkins Loans
- Federal Supplemental Loans for Students (SLS)
- Federal Insured Student Loans (FISL)
- Health Professions Student Loans
- Nursing School Loan
- Health Education Assistance Loans
- Consolidation Loans*
*Existing Consolidation Loans are only eligible if you have at least one other eligible loan.
- private or alternative loans are not eligible for consolidation
- other types of personal debt, including credit cards and car loans cannot be included in a consolidation loan
Advantages of Consolidation
Loan consolidation offers a fixed interest rate calculated as a weighted average of your individual loan interest rates rounded up to the next higher 1/8 of a percent. Direct Loan interest rates are variable and change every July 1. If you consolidate during your grace period you will also be eligible for an interest rate reduction of .6%. Multiple payments will also be condensed into one payment to one servicer. In addition, your monthly payments will be smaller because the repayment term is extended.
Disadvantages of Consolidation
One of the major disadvantages to consolidation is a longer repayment term which will increase the amount of interest you pay over the life of the loan. You may also lose some deferments and Direct Loan benefits. Some deferments that are available with a Direct Loan do not carry over to a consolidation loan. Be sure to check your eligibility for loan forgiveness programs, as you may lose these options when consolidating. It is best to discuss all of these points with the loan servicer or lender with whom you are consolidating.
Spousal Consolidation is something to consider carefully, as each party is jointly and severally liable to repay the loan. Both parties must qualify for a deferment. In the event of a divorce, the court may order a spouse to be responsible for more of the loan than was originally intended.
Consolidation Repayment Plans
- Equal/Level – Principal and interest are applied evenly over the life of the loan. The amount of interest that accrues is dependent on the current loan balance.
- Income Sensitive – Payments are based on your monthly income and range from 4% to 20% of your gross monthly income.
- Graduated – Under the graduated repayment options, your initial monthly installments will be significantly lower than the monthly payment required by the standard repayment plan, but will increase at specified intervals. The Grad Choice 2 plan allows you to make interest-only payments for the first two years; at the beginning of the third year, the payment amount becomes fixed for the life of the loan. Under the Grad Choice 5 plan, you may make interest-only payments for the first five years; your monthly payment will increase at the beginning of the sixth year, to standard payments of principal and interest; your monthly payment also becomes fixed for the remainder of the payback period.
- Extended – If your underlying loan balance is $30,000 or more, the repayment term can be extended to 25 years.