Student loan repayment: A quick guide to your options

Repaying student debt is one of the most daunting financial tasks many of us will ever face. On top of the magnitude of the debt, feeling like you donít know your options for repayment can add to your frustration. To try to relieve at least a bit of the stress, below is a straightforward guide to the options you have for repaying your student loans.

Types of loans

  • Public (sometimes called federal loans) - The government is either the lender or guarantor of the funds
  • Private - A non-governmental financial institution provides the loans

Major federal student loan programs

  • William D. Ford Federal Direct Loan Program - Offers Stafford and PLUS loans
  • Federal Family Education Loan (FFEL) Program (no longer offered after June 2010) - Offered both Stafford and PLUS loans
  • Federal Perkins Loan Program

When do you need to start paying?

  • Stafford loans - 6 months after graduation
  • Perkins loans - 9 months after graduation
  • PLUS loans - 60 days after funds disbursed or 6 months after graduation if you receive a deferment
  • Private loans -Confirm with your lender

Repayment Plans

For FFEL and Direct loans

  • Standard - Fixed payments for 10 years
  • Graduated - Payments start off lower than increase, 10 years but can be combined with extended
  • Extended - Fixed payments for up to 25 years
  • Income-contingent (Direct only) - Based on income, can be extended, forgiven after 10 or 25 years
  • Income-sensitive (FFEL only) - Based on income, 10 years
  • Income-based - May be able to get lower payment than under other plans, can be extended, forgiven after 10 or 25 years

For Perkins loans - There are no alternative repayment plans for Perkins loans, but your school can extend the repayment period due to extenuating circumstances.


  • You can combine all, some, or even one loan.
  • You do not have to be current on payments to consolidate.
  • You cannot add private loans to a federal consolidation loan.
  • You can add federal loans to a private consolidation loan but you may lose certain rights afforded to those with federal loans.

Loans can be cancelled or reduced if:

  • You become permanently disabled
  • Your school closes or is determined to be falsely certified
  • You volunteer with a designated public service organization, join the National Guard or accept a specific type of teaching position

What to do if you can't pay

      Seek a deferment with your lender
    • Temporary suspension of payments
    • Interest suspended on subsidized loans
    • Can be obtained if enrolled in school, disabled, unemployed, or in armed forces
      Seek forbearance
    • Temporary suspension of or reduction in payments
    • Interest still accrues
    • Can get if monthly payment high or have unforeseen personal problems
    • Easier to get

Possible consequences of default (over 270 days past due)

  • Tax refund interception
  • Wage garnishment
  • Ineligibility for deferment, alternative repayment plans, grants, and new student loans
  • Credit report damage
  • Collection activity, for which there is no statute of limitations

Getting out of default

  • For federal loans, you have a one-time right to get out of default with a reasonable and affordable repayment plan

    • Loan rehabilitated after 9 on-time payments
    • Default notation removed from credit report
  • You can also consolidate to get out of default
  • Usually student loans cannot be discharged in bankruptcy

For help

  • Federal Student Aid Information Center/Student Aid on the Web
    Provides information on federal student loans
  • Direct Loan Servicing Center
    Allows borrowers with Direct loans to make payments online and manage their account
  • Department of Educationís Default Resolution Group
    Provides information on defaulted student loans
  • Federal Direct Consolidation Loans Information Center
    Provides information on the Direct consolidation loan program