Loan Repayment, Forbearance, Deferments & Default
Many students have to borrow loans in order to help pay for their college education. For answers to your questions on when does repayment begin, how do I repay, and what if I don't have enough money to repay, we encourage you to watch the following videos developed by Federal Student Aid:
Borrowers are asked to select a repayment plan when it becomes time for them to repay their student loans. There are a number of repayment plans:
- Standard--Borrower pays a fixed amount each month until loans are paid in full. Monthly payment s will be at least $50, and enough to make sure the loan is paid off in 10 years.
- Extended--Borrower pays a fixed annual or graduated amount over a period not to exceed 25 years. Must have more than $30,000 in outstanding FFEL and/or $30,000 in outstanding Direct Loans to be on this program.
- Graduated--Payments start out low and increase every two years. Length of repayment is up to 10 years.
- Income Based Repayment (IBR) —Required monthly payment is capped at an amount that is intended to be affordable based on income and family size. Borrowers are eligible if monthly repayment amount under IBR would be less than under the Standard plan.
- Income Contingent (Direct Loans Only)—Monthly payments calculated annually based on your adjusted gross income, family size, and total loans.
- Income-Sensitive (FFEL only)—Monthly payment is based on annual income.
- Pay As You Earn Repayment (excludes Direct PLUS Loans for parents and Direct ConsolidationLoans that repaid PLUS loans for parents) – Monthly payment will be 10 percent of discretionary income. Your payment changes as your income changes. Length of repayment is up to 20 years.
For more information on repayment plans visit the Department of Education website. In addition, the Department of Education's Repayment Estimator Repayment Estimator will offer you personalized repayment options based on your loan indebtedness. You will need your Department of Education assigned PIN to access the Repayment Estimator.
Students having difficulty repaying their loans have many options available to them in the form of deferments and forbearances. A deferment is a temporary suspension of loan payments for specific situations such as reenrollment in school, unemployment, or economic hardship. You may also be eligible for a deferment based on qualifying active duty service in the U.S. Armed Forces or National Guard. Refer to the MPN for your loan or contact the Direct Loan Servicing Center for more information about specific qualifications for deferment based on military service. Generally, you will be required to submit a deferment request including documentation of your eligibility to your loan servicer for review.When you re-enroll at halftime status or greater, your loan servicer will be notified of your enrollment status and your loans will automatically be placed into deferment status.
You may request deferment forms directly from your loan servicer. To locate your loan servicer, please access your loan history at http://www.nslds.ed.gov. If you have private loans, you should contact your private loan servicer directly to inquire about deferment options. If you are currently in repayment status, you must continue making payments on your loans until you request for deferment is granted.
In-school deferment forms for undergraduates should be submitted to the Department of Enrollment Services, located in Mellencamp Hall, room 274. Graduate students should submit all forms to Graduate School, located in Mitchell Hall, room 261. If you are attending elsewhere, you will want to submit the form to the registration office at that school.
You may qualify for loan forbearance if deferment is not an option for you. Forbearance is when a lender allows a borrower to temporarily postpone repaying the loan principal. However the interest does continue to accrue on the loans. The borrower must continue paying the interest charges during the forbearance period. Forbearances are granted at a lender's discretion; usually in extreme financial hardship or other unusual circumstances when a borrower does not qualify for a deferment. You cannot receive a deferment or forbearance if your loan is in default.It is very important to always contact your lender/servicer to find out what options are available to you. The links below can be used to access websites and forms for the more popular loan holders:
Great Lakes Forms page
Direct Loan Servicing Center Deferment Forms
ECSI (Uwm 3rd party Servicer of Perkins and Nursing Loans)
If you fail to make your loan payments you will be considered to be in default status. Defaulting on your student loans can impact you negatively in a variety of ways.Consequences of loan default include:
I.Loss of eligibility for additional federal student aid, deferment, forbearance and repayment plans
II.Damage to your credit rating which could affect your ability to purchase a car, or house in the future
III.Your tax refunds maybe withheld and applied towards your defaulted student debt
IV.Your wages maybe garnished, which means your employer will withhold a portion of your paycheck to repay your loan obligations
It is important to know and understand what default and the consequences of default mean, and what to do if your loan is in default. For more information on loan default, select this link (http://studentaid.ed.gov/repay-loans/default).