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Success in Repayment:
An Overview of Repayment Options


Success in repaying your student loans doesn’t just mean staying out of default.  It also means staying out of delinquency, keeping your account current.  A key part of keeping current is knowing the options that are available to you in repaying your loans, particularly when repayment becomes challenging.

The option that most people use in successfully repaying their student loans is making regular monthly payments!  Successful borrowers develop the habit of making their monthly payments on time.  We know what you’re thinking: That’s easier said than done.  True, but there are steps you can take that will help you develop that habit!  

bulletEnhance Your Employment. 
You may be working full-time, but are you being paid what you’re worth?  There are a number of excellent Internet sites that can help you Upgrade Your Employment.
bulletMake a Budget. 
If you have not recently made a monthly budget that includes your student loan payment, visit our Budget Help page.
bulletAutomate Your Payments.
We strongly recommend arranging to make your student loan payments by automatic monthly deductions from your checking account.  This removes the hassle of writing and mailing a check each month.  It also removes the temptation of using your funds for something else.  And, it may also make repayment cheaper for you! Many lenders and servicers offer interest rate deductions to borrowers who make their payments this way.  Your lender or servicer may also offer a rate reduction if you remain current for a specified period.  The surest way to remain current is to make automatic payments.

A deferment postpones payments on your student loan account if you meet certain specific conditions.  Deferments are most commonly granted to borrowers who:  

bulletHave returned to school;
bulletAre unemployed; or
bulletAre experiencing economic hardship

A deferment is considered an entitlement: that is, if you qualify, and submit a complete and timely request, your lender is required to grant it to you. 

If your loans are subsidized (i.e., you were not responsible for the interest on them while you were in school), the federal government will pay the interest accruing on your loan during your deferment.  Otherwise, you remain responsible for the interest, and can either pay it during the deferment, or have it added to your principal balance (capitalized) at the end of the deferment.

For descriptions of all the deferments available in the Federal Family Education Loan Program, and to access the forms you need to request them, click here for a list of deferments.

If you are experiencing financial difficulty, but do not qualify for a deferment, your lender or servicer may grant you a forbearance.  Under a forbearance, you can agree to either make reduced payments or no payments at all for a limited period.  In a period of forbearance, you remain responsible for the interest accruing on your account, even if your loans were subsidized while you were in school. 

Unlike deferments, most forbearances are not entitlements: your lender may choose when or whether to grant one.  Most lenders will require evidence of your commitment to repay your loans, and, therefore, may not grant a forbearance at the very beginning of a repayment period, or may not grant back-to-back forbearances.

There are, however, some forbearances that are entitlements.  These are available under certain circumstances to medical and dental interns and residents, to borrowers with exceptionally high education debt, to victims of natural disasters, and to military personnel who are suddenly called into action. Click here to learn more about these Mandatory Forbearances.

To request a forbearance, you need to contact your lender or servicer.  Click here to find a list of servicers.

Alternative Payment Plans.
The most common type of repayment plan is one in which the monthly payment amount remains the same until the loan is paid in full.  Your lender is also prepared to offer you two alternative repayment plans:

bulletGraduated Repayment. 
Under this plan, your payments will be lower at the beginning of the repayment schedule, and then increase as time goes on.  This plan is based on the reasonable assumption that your earnings, and thus your ability to make larger payments, will increase over time.
bulletIncome-Sensitive Repayment.
Under this plan, your lender adjusts your payment amount once a year to reflect your current income and expenses. 

Be aware that, under both graduated and income-sensitive repayment plans, you may wind up paying a larger amount of interest than through a conventional, or “level” repayment plan.

Through a Federal Consolidation Loan, you can combine all of your federal student loans into a single repayment schedule.  Consolidation is not limited to FFELP loans: you can include any federal education loan (e.g., Perkins, HEAL, Direct Loans).  You may also include your spouse’s loans.

A consolidation loan may be a good idea if:

bulletYou have a lot of education debt.
If the combined balance of your loans is greater than $7,500, you can extend your repayment period beyond the standard 10-year maximum.  If your combined balance is as high as $60,000, you can extend repayment to 30 years!
bulletYou have more than one servicer. 
You can have your single Consolidation Loan serviced by a company of your choice.  This makes it easier to: 
bulletMake payments;
bulletTrack the status of your loans; and
bulletUpdate changes in your status (e.g., change of address and phone).

To obtain a Federal Consolidation Loan, you must be out of school.  And you must first inquire with a holder of at least one of the loans you wish to consolidate.  If none of your current holders is willing or able to make a Consolidation Loan for you, you may contact another lender to make the loan.

These are some of the strategies you can use for success in repaying your student loans.  If you need to be convinced that staying current is a good idea, click here to view the Benefits of Staying Current, and the Consequences of Default.

Student Loan Counseling Service, Inc
(888) 633-4850