Federal Direct Stafford Loan Repayment
Students are entitled to receive a repayment schedule prior to the payment due date. Upon completion of loan repayment, students will receive a letter of acknowledgment from the U.S. Department of Education.
When it comes time to start repaying your student loan(s), you can select a repayment plan that is right for your financial situation. Generally, you will have from 10 to 25 years to repay your loan, depending on which repayment plan you choose. View, Repayment Plans, for a list of repayment options.
Forbearance and Deferment Options
If you are temporarily unable to meet your repayment obligation, you may be granted a forbearance, which lets you postpone or reduce your payments for an agreed upon period of time. You will still be responsible for any interest that accrues during the forbearance period, but you may be able to pay it later. A deferment is a temporary suspension of loan payments for specific situations such as re-enrollment in school, unemployment, or economic hardship. In most cases, you need to submit a deferment request to the Direct Loan Servicing Center. A deferment can take 30 days or more to process, so file as soon as possible. You must keep making your payments until you receive notice that your deferment has been approved. For more information on forbearance and deferment, visit www.studentaid.gov.
Direct Loan Repayment Incentives/Rebates
The Budget Control Act of 2011 eliminates the authority of the Department of Education to offer any repayment incentives to Direct Loan borrowers to encourage on-time repayment of loans, including any reduction in the interest rate or origination fee. As a result, the up-front interest rebate that was provided to DL borrowers at the time of loan disbursement will not be offered on any Direct Loan with a first disbursement date that is on or after July 1, 2012. The only authorized interest rate reductions are for those borrowers who agree to have their payments automatically electronically debited.
If you don't repay your loan. . .
Delinquencies, or a monthly payment more than 30 days late, are reported to credit bureaus. This can hurt your chances for obtaining loans in the future, for cars, a home, etc. Also you may lose eligibility for further financial aid, deferments and forbearances until the delinquency is cleared up. Default occurs when there is no payment made for 270 days. In the event you go into default on your loan, be aware of the following penalties:
- A bad credit report
- Assignment of loan to a collection agency
- Full balance of loan is due (no more monthly payment privileges)
- Loss of eligibility for future financial aid (this includes grants)
- Withholding of state and federal income tax refunds and California lottery winnings
- Late fees and collection costs may be applied toward the amount you owe
- Your wages may be garnished (a portion withheld for repayment)
Tips to make your repayment easier
- Get organized. Make a single student loan file for all your loan documents, information and payment records. You may want to keep this Tip Sheet in your file as a reference.
- Read your mail. Important notices about your loan, will come by mail. Open and read these notices immediately, and respond or file them, as appropriate.
- Notify the U.S. Department of Education and your loan servicer(s) if you change your name or address. You should also contact your loan servicer(s) if you decide to return to school at least half time.
- Know who services your loan. The Department of Education contracts with servicing agents to collect payments and otherwise administer student loans. It is up to you to keep track of your servicing agent(s).
- Contact your loan servicer(s) if you are having problems making your payment on time to inquire about payment options.
- Write your loan account number on all loan-related correspondence and checks. Keep copies of all correspondence.
- Expect a letter of acknowledgment from the U.S. Department of Education upon making the final payment on your loan(s).
- Take notes of your phone conversations with the loan holder or servicer, i.e., whom you spoke with, what was discussed, etc. Keep this information in your loan file.