CWR College Funding BrainTrust
Please Tell Me I Have Loan Repayment Options
By Tara Goodfellow, MBA
Student Loan Expert
Yes, you do.
When you graduated in May, six months seemed forever in the future, didn't it? Now, it's November and if you have student loans, your payment will more than likely be due soon. Your six month grace period based upon your last date of attendance is about to expire. You should have received a coupon book in the mail from your lender. Or, perhaps you've signed up to have funds debited from your account. If you have not made arrangements, contact your lender. It is your responsibility to make sure your payments are on time. When you contact your lender, find out if there are any borrower incentives based upon either ACH/debit of funds and/or making a certain number of on time, consecutive payments. These aren't as popular as they once were, but it can't hurt to ask.
Do you know how long you're scheduled to make payments? Do you know what your monthly payment amount is? What about how much you'll be paying in interest? Any options if you return to school at least half time? Is assistance available if you're suffering from an economic hardship?
Well, unless you've made other arrangements, you're set up for standard repayment. This method takes the total amount due divided over 10 years of 12 monthly payments. There is a $50.00 minimum monthly payment. Of course, this can be higher based upon total amount borrowed. For example, $30,000 over 120 months will mean payments in excess of $50.00 a month in order to pay it off within the 10 year timeframe. Can you afford this? If not, please don't ignore your student loans and not pay. Let's go through some options:
POTENTIAL REPAYMENT OPTIONS
Extended Repayment:
Repayment length is between 12-20 years. Keep in mind this will lower your monthly payment, BUT you'll pay more overall since you're extended the time which means adding interest for an additional two-10 years!
Graduated Repayment:
This is a step-like repayment option. Payments will "step up" or increase every two years for a 12-20 year terms depending upon your total amount borrowed. The minimum monthly payment is at least the interest amount or $25.00 whichever is greater.
Income Contingent:
Payments are adjusted annually based upon your adjusted gross income.
Repayment term is up to 25 years. This is only available if your loans are through Direct Lending. Currently, what is not paid off at the end of 25 years will be written off, but is taxable.
Income Sensitive:
Whereas Direct Lending offers Income Contingent repayment FFELP lenders (such as Sallie Mae) offer Income Sensitive repayment. The loan term is 10 years, not up to 25, but your monthly payment is determined based upon a percentage of your monthly income.
Income Based Repayment:
Effective July 1, 2009, this program is available to both Direct Lending and FFELP borrowers. What's the difference? It caps the repayment amount at a lower ratio of spendable income.
Let's say you owe $12,000 at a 6.8% interest rate
Repayment Term | Standard | Extended | Graduated |
Years | 10 | 15 | 15 |
Monthly Payment | $138.10 | $106.52 | $69.05 - $191.16 |
Total Payments | $16,571.57 | $19,173.97 | $21,010.12 |
Total Interest | $4,571.57 | $7,173.97 | $9,010.12 |
Other Options?
Well, those are your main payment plan options. However, should you run into certain temporary circumstances, you may be able to obtain a forbearance or become eligible for a deferment. This allows you to postpone payments for a designated amount of time.
Deferment:
For your Stafford loans, interest is deferred. Be sure to contact your lender for specific information, but you may be entitled to a deferment for the following reasons:
Enroll in school - at least half time status
Full time enrollment at a fellowship program
Economic hardship
Active duty/qualifying National Guard
Unemployment
Forbearance:
Interest accrues during a forbearance. During a forbearance, you and your lender agree upon one of the following situation:
Temporary postponement of payments
Extended time to make payments
Accept payments that are smaller than repayment schedule
requirements (again, temporarily)
In many instances, a forbearance is at the discretion of your lender/servicer. However, there are some instances where it is mandatory, such as Teacher Loan Forgiveness Program, medical/dental residency, etc.
In summary, if you are struggling to make your student loan payment, please contact your lender! Going into default is a lose-lose situation. Nobody wants to see your loan land in default, so in many cases, your lender/servicer is willing to work with you.
About The Author: Mrs. Goodfellow owns Athena Educational Consultants (AEC), Inc. based out of North Carolina. She launched AEC after 10 years of experience guiding students and parents through the information maze that makes educational choices more difficult than they need be. Her years of experience in different educational settings provide the skills to advise students and parents about the opportunities open to them that best match their interests and needs. Most recently, she worked as a Southeastern Account Executive in student lending where she visited close to 100 colleges and universities meeting with financial aid departments and students. She's presented to thousands of students on topics from Identity Theft to Financial Aid 101. Prior to her employment at Chase, she was the Director of Administrative and Financial Services at The Art Institute of Charlotte where she managed four departments including financial aid.
About Athena Educational Consultants (AEC), Inc.: AEC provides expert, quality service related to finding and applying to the best schools based upon the client's individual values, strengths and goals. Visit Athena's website at www.consultathena.com. Get the latest updates including daily "Featured Colleges" by following on twitter (consultathena), and becoming a fan on Facebook (Athena Educational Consultants, Inc.)
Contact Information:
Athena Educational Consultants, Inc.
4023 Cameron Creek Drive
Matthews, NC 28105
704-641-4000