Many students utilize student loans to help defray the cost of college. Knowing which loans you have, when you have to pay them, and how much to pay are the keys to managing your loans.
Which loans do you have?
There are three main categories of federal student loans:
- Federal Direct Student Loans
- Federal Family Education Loan Program (FFEL/Stafford Loans)
- Federal Perkins Loans
You can view your federal student loan history by signing into NSLDS, the National Student Loan Data System. This site will show you the types, amounts, and current statuses of your federal student loans and give you contact information for agency servicing those loans.
1. Federal Direct Student Loans
- Federal student loans borrowed from 2010-11 forward are Federal Direct Loans.
- There is no lender; funds come directly from the federal government.
- May be subsidized or unsubsidized based on your level of financial need.
- Unsubsidized Direct Loans accrue interest during enrollment, grace, and repayment periods
2. Federal Family Education Loan (FFEL/Stafford Loans)
- Federal Stafford Student Loans prior to the 2010-11 school year were under this program.
- The funding came via a lender you chose at the time you applied for your loans.
- Loans may have been subsidized or unsubsidized, based on your level of financial need.
- Unsubsidized Stafford loans accrue interest during enrollment, grace, and repayment periods.
It is possible to have loans under both the FFEL and Direct Loan programs, depending on the time frame of your enrollment. These will remain separate loans, with separate payment plans, unless you consolidate them into one loan.
3. Federal Perkins Loans
- The school is the lender, with funding authorized by the federal government.
- Perkins loans from Concordia University Chicago are serviced by University Accounting Service (UAS).
- If you had Perkins loans at more than one school, the payment and servicing is separate for each school.
- All Perkins loan functions (payments, deferments, and forbearance) are handled separately from your FFEL or Direct Loans, unless you consolidate them.
When do you need to repay your loans?
Federal student loans are usually deferred while you maintain at least half-time enrollment.
Once you graduate, withdraw, or drop below half-time enrollment, the clock starts ticking on your grace period before you will enter repayment.
For Federal Stafford (FFEL) and Direct Student Loans, the grace period is six months; for Federal Perkins Loans, it is nine months.
How much do you need to pay?
Student borrowers can choose from several repayment plans. The total repayment time ranges from 10 to 25 years, depending on how much you have borrower and which repayment plan you choose.
To help you calculate your estimated payment under the Standard, Extended, and Graduated plans, click here.
Explanations of the different repayment plans can be found on Student Aid on the Web.
You may also be interested in Financial Awareness Counseling, provided by the Department of Education. This tool helps calculate repayment, set a budget, and track your spending.
When you take out an educational loan, you sign a promissory note, which is a legally binding contract acknowledging your responsibility to repay that loan.
If you are late or miss a scheduled payment, your account can become delinquent. This status can be reported to credit bureaus. The servicer of your loan(s) will likely begin contacting you by phone, letter, and/or email to resolve the delinquent status.
Loans that are delinquent by 270 or more days may go into default. A defaulted loan can cause major financial damage, such as:
Your loan can be turned over to a collection agency.
You could be liable for all costs related to collecting payment on your loan, including collection and legal fees.
You may be sued.
The government can intercept your federal and state income tax refunds, or part of your Social Security benefits.
The defaulted loan will remain on your credit history for seven years, limiting your access to other forms of credit (auto loans, mortgages, credit cards, and even insurance) and possibly impacting your employment opportunities.
You are ineligible to receive additional financial aid (if you return to school) and most other federal benefits, until the default has been resolved.
You may not be able to renew a professional license you hold.
You will be prohibited from enlisting in the US Armed Forces.
Subsidized interest benefits on your loan will cease.
You will be ineligible for deferments.
What these borrowers experienced.
Those are some pretty frightening consequences.
The good news is that you CAN avoid default! Here’s how:
Know how much you owe, and check the status of your loans.
Has your deferment form been processed? Where should you send your payment? All of these questions can be answered by signing into the National Student Loan Data System (NSLDS). The Financial Aid Overview screen lists your existing federal loans. Click into each one to see further details, such as the phone number and mailing address for the loan servicing agency.
Make sure your contact information is up-to-date with your loan servicer.
Having an outdated mailing address or phone number is a common cause of student loan delinquencies, because your servicer can’t reach you in a timely manner. If you move or change your phone number, you must notify your loan servicer within 30 days.
- Contact your loan servicer if you need to change your due date, have problems making payments, or your financial situation has changed.
There are safeguards built into the federal loan programs to protect you AND your credit rating:
Temporary suspension of payments for certain situations, such as reenrollment in school, unemployment, or economic hardship
Not automatically granted! You must apply --and keep making payments until you have confirmed the deferment has been approved.
Find more information about deferment from the U.S. Department of Education.
Temporary suspension of payments when you do not meet the criteria for deferments
Keep making payments until you have confirmed the forbearance is approved.
Find more information about forbearance from the U.S. Department of Education.
Income-Driven Repayment Plans
If you qualify, your monthly payment is calculated based on your income and household size. Depending on the circumstances, your monthly payment may even become $0.
You will need to reapply and update your information yearly, as the payment amount is recalculated based on your taxes. Find more information from the U.S. Department of Education.
Loan Forgiveness, Discharge, and Cancellation
A portion -- or all-- of your loan debt may be forgiven if you meet certain criteria for teaching, public service, military service, or other criteria.
The government also allows for the discharge or cancellation of student loans in situations of identity theft, disability, or the death of a student.
Will you be taxed on forgiven loan amounts? It depends on the type of forgiveness. This chart helps to clarify possible tax liability.
More information is available from the U.S. Department of Education.
Consolidating means your existing federal loans are combined into one, brand-new loan, which pays off the original loans. This option can have pros and cons, so make an informed decision about whether or not to consolidate by knowing your full loan history and weighing your options. Only federal loans can be consolidated together.
You can also find essential tools for managing your student loans at Studentloans.gov.
A Note Regarding Alternative/Private Loans:
The options noted above pertain to federal educational loans. Alternative, or private, loans are different. They are not held or insured by the government, and are therefore not subject to the same rules, nor protected with the same safeguards, as the federal loan programs.
It is still vital to keep your contact information up-to-date with your alternative loan servicer. If you are unsure which lender you used, obtain a copy of your credit report. Also, if you are having problems repaying your alternative loan, contact your lender immediately to see what arrangements are available.