Most Federal student loan borrowers who graduated in the spring of 2009 are getting close to the end of their loans’ grace period for Federal Stafford and Perkins Loans (or in-school deferments (for Grad PLUS loans), after which time their student loans will enter repayment. A grace period is the period of time after a borrower graduates, leaves school, or stops attending school at least half time, during which you do not have to make principal payments on your loans.
Your student loan is a debt you owe for your education, and you should treat your loan as you would any other kind of debt. As with any debt, you are responsible for repaying your loan – in full – even if you did not:
· do not complete your education,
· do not complete your program within the regular completion time for that program,
· are not employed upon completion of your studies, or
· feel that the education you received did not meet your expectations.
You do have a choice of repayment plans. Federal Stafford and Grad PLUS Loans have their own unique repayment terms:
o Standard:
§ Minimum monthly payment is $50, but may be higher depending on balance
§ Maximum repayment period of 10 years
§ Estimate payment under the standard repayment plan.
o Graduated:
§ Begins with lower payment amounts that increase over time
§ More interest will accrue over the life of the loan because the principal balance decreases at a slower rate.
o Income-sensitive or income-contingent:
§ An adjusted payment amount based on gross income
§ Payment will be the greater of your monthly interest amount or 4 percent of your gross monthly income
§ Eligibility and payment amount verified annually
§ More interest will accrue over the life of the loan because the principal balance decreases at a slower rate.
o Income-based:
§ Available for payments made on or after July 1, 2009
§ An adjusted payment amount based on income and family size
§ Payment will not be more than 15 percent of the amount by which your adjusted gross income exceeds 150 percent of the poverty line for your family size.
§ If the monthly payment amount is not enough to pay accrued interest on a subsidized Federal Stafford Loan, the Department of Education will pay the remaining interest for a period of three years.
§ Eligibility re-evaluated annually
§ More interest may accrue over the life of the loan because the principal balance decreases at a slower rate.
§ Any outstanding loan balance after 25 years will be forgiven
· Very few borrowers will have a remaining balance after 25 years.
· The amount that is forgiven may be taxable.
§ Estimate payment under the income based repayment plan.
o Extended:
§ Available to new borrowers on or after October 7, 1998, who have a minimum balance of $30,000 in loans
§ Payment amounts can be either fixed annually or graduated.
§ Maximum repayment term is 25 years
§ More interest may accrue over the life of the loan because the principal balance decreases at a slower rate.
Contact your student loan holder if you have not received any information about your student loans entering repayment. You are responsible for making a payment, even if you haven’t received notice.