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Federal Stafford Loan Repayment

Important information for borrowers

Dean Wilson

on 6 June 2016

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Transcript of Federal Stafford Loan Repayment

Stafford Loans
Federal Stafford Loan Repayment
All Federal Stafford Loan
borrowers are required to
complete the Master
Promissory Note (MPN).
Some of the Fine Print:
National Student Loan Data System (NSLDS)
Viewing Your Loans and Finding your Loan Servicer on NSLDS
Repayment Plans
Cancelling all or part of your loan
Loan Default
Trouble Making Payments?
You are required to repay the loan.
Even if you do not complete the education that was paid for by the loan.
Even if you are dissatisfied with the education that you received.
Even if you are not able to obtain employment in the field of study provided by your school.
The repayment period begins the day after your grace period ends (6 months after you cease to be enrolled at least half time).
Billing information is sent to you as a convenience.
You are obligated to make your loan payments even if you do not receive a notice or bill.
You were required to read the entire Master Promissory Note prior to signing it.
Even if you were told not to read it.
Even if you were told that reading it was not required.
Your unpaid loan balance can become due immediately.
If you receive loan money, but do not enroll at least half time at the school that determined your eligibility for the loan.
If you use the loan money for anything other than educational expenses.
If you make a false statement that causes you to receive a loan that you are not eligible for.
NSLDS provides a centralized, integrated view of your Federal Stafford Loans, and federal grants from every college that you have attended.
Loan Payment Calculators



Income Based

Income Contingent
With the standard plan,
You'll pay a fixed amount each month until your loans are paid in full. Your monthly payments will be at least $50.
You'll have up to 10 years to repay your loans.
Highest monthly payment.
Least amount of interest paid.
Under the extended plan,
You'll pay a fixed annual or graduated repayment amount over a period not to exceed 25 years.
You must have more than $30,000 in outstanding loans to qualify.
Your fixed monthly payment is lower than it would be under the Standard Plan.
You'll ultimately pay more for your loan because of the interest that accumulates during the longer repayment period.
With the graduated plan,
Your payments start out low and increase every two years.
The length of your repayment period will be up to ten years.
If you expect your income to increase steadily over time, this plan may be right for you.
Your monthly payment will never be less than the amount of interest that accrues between payments.
Although your monthly payment will gradually increase, no single payment under this plan will be more than three times greater than any other payment.
Under income based repayment,
The required monthly payment is based on income and family size.
You are eligible if the monthly repayment would be less than the monthly amount of standard repayment plan.
If you repay for 25 years and meet other requirements you may have any remaining balance of your loan(s) cancelled.
If you work in public service the remaining balance after ten years could be cancelled.
With income contingent repayment,
Monthly payments will be calculated each year on the basis of your adjusted gross income (AGI, plus your spouse's income if you're married), family size, and the total amount of your Direct Loans.
Under the ICR plan you will pay each month the lesser of:
The amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or
20 percent of your monthly discretionary income.
Any unpaid portion of your loans will be discharged after 25 years (time spent in deferment or forbearance does not count).
You may have to pay taxes on the discharged amount.
Consolidating Your Loans
You may want to consider loan consolidation if:
You make payments to more than one loan servicer each month.
It is easier to manage a single loan.
You have variable interest rates on your Federal Stafford Loans.
Consolidation loans have fixed interest for the life of the loan.
Rates are based on the weighted average of interest rates of loans being consolidated.
You have exhausted your deferment options.
Consolidation may renew your deferment benefits.
You need to avoid or resolve default.

NOTE: You will lose your six month grace period if you consolidate your loans.
If you do not make a payments on your loan(s) according to the terms of your promissory note, you will go into
Consequences of Default
National credit bureaus can be notified of your default, which will harm your credit rating, making it nearly impossible to finance a car or a house.
You will be ineligible for additional federal student aid if you decide to return to school.
Your wages can be garnished.
State and federal income tax refunds can be withheld.
You will have to pay late fees and collection costs on top of what you already owe
You can be sued.
Default Resolution
Pay your delinquent loans in full.
Rehabilitate your loans.
Make nine consecutive, on time, monthly payments.
Loan consolidation.
Periods of deferment and/or forbearance can help.

A deferment is a postponement of payment on a loan, during which interest does not accrue if the loan is subsidized.

You may qualify for a deferment if:

Enrolled at least half time in an eligible post-secondary school, studying full time in a graduate fellowship program, or in an approved disability rehabilitation program.
Unemployed or meet the rules for economic hardship (limited to 3 years).
Participating in qualifying active duty service in the U.S. Armed Forces or National Guard.

If you can't make your scheduled loan payments, but don't qualify for a deferment, we may be able to give you a forbearance.

A forbearance allows you to temporarily stop making payments on your loan, temporarily make smaller payments, or extend the time for making payments.

Some common reasons for getting a forbearance:
financial hardship
serving in a medical or dental internship or residency.

See your copy of the Borrower's Rights and Responsibilities Statement for more examples. You can get more information by contacting your loan servicer.
Teacher service:
If you are a new borrower and are a full-time teacher in a low-income elementary or secondary school for 5 consecutive years, you may be able to have as much as $17,500 of your subsidized or unsubsidized loans cancelled. This provision is not available for borrowers of PLUS Loans.
Public service:
If you are employed in certain public service jobs and have made 120 payments on your Direct Loans (after Oct. 1, 2007), the remaining balance that you owe may be forgiven. Only payments made under certain repayment plans may be counted toward the required 120 payments. You must not be in default on the loans that are forgiven.
School-related discharges.
In certain cases, you may be able to have all or a part of your loan cancelled because:

Your school closed before you completed your program.
Your school forged your signature on your promissory note or falsely certified that you were eligible to get the loan.
Your loan was falsely certified because of identity theft (additional requirements apply).
You withdrew from school but the school didn't pay a refund that it owed under its written policy or our regulations. Check with the school to see how refund policies apply to federal aid at the school.

In general, you must repay your loan even if you don't graduate, can't find work in your field of study, or are dissatisfied with the education program.
Disability, bankruptcy, or death.
Your loan may be discharged if you are determined to be totally and permanently disabled and you meet certain requirements during a 3-year conditional discharge period. To apply for this discharge, you must provide a physician's statement that you became totally and permanently disabled after the loan was made.

Your loan may be cancelled if it is discharged in bankruptcy. This is not an automatic process—you must prove to the bankruptcy court that repaying the loan would cause undue hardship.

For a student who dies, the loan will be cancelled if a family member or other representative provides an original or a copy of the original or certified copy of the death certificate to the Direct Loan Servicing Center.
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