Money Management: Loan Repayment
Exit Counseling packet
At the end of your time at Lewis & Clark, we will prepare a required exit packet for you which will include: a history of all of the loans you borrowed during your time at Lewis & Clark, and information about how to complete an Exit Counseling session.
Part 1: The Loan Borrowing History
Your loan borrowing history will be organized by academic year, and will list the type(s) of loan(s) you borrowed, the amount you borrowed, the lender who originated the loan (Department of Education), and contact information for some loan servicer(s). Important things to note:
The amount borrowed may not be the same as the total amount you now owe on the loan.
- Some student loans begin accruing interest as soon as the loan funds are disbursed to you. Your servicer(s) keeps track of exactly how much interest you owe, in addition to the original loan balance, but the school does not have that information.
- Any payments you made on the loan(s) may have reduced your loan balance; but school records are not updated with that type of information.
The lender who originated your loan may have sold or assigned your loan to the Department of Education.
- Especially during the 2008-09 and 2009-10 academic year, many lenders sold their federal student loans to the U.S. Department of Education.
- Lenders, including the U.S. Department of Education, often contract with third-party servicers. Basically, the lenders are hiring this separate agency to manage their loan records for them. Servicers will often send out billing statements, collect payments, and provide customer service to borrowers. In other words, you may end up working more closely with the servicer of your loan, rather than the entity to which you actually owe money. If your lender is using a servicer, they will notify you, so be sure to read all correspondence from them.
If you were an undergraduate student here at Lewis & Clark, your loan borrowing history will not include any Federal PLUS Loans that your parents may have borrowed.
- That’s because those PLUS Loans are in your parent’s name, not yours.
- Graduate and law students, you had the option to borrow PLUS Loans in your own names, so that type of debt will be listed on your Loan Borrowing History.
Part 2: The Exit Counseling Session
Exit counseling provides important information to prepare you to repay your federal student loans. If you received a Direct Subsidized, Unsubsidized or PLUS loan, you are required to complete Exit Counseling at StudentLoans.gov each time you drop below half-time enrollment, leave or withdraw from school, or graduate. When you sign a Direct Loan Master Promissory Note, for your federal student loan, you agree to complete Exit Counseling at the appropriate time.
What to do if you can’t pay your student loan
Unfortunate things sometimes happen. But when they do, you do have some options that will allow you to keep your student loan repayment under control.
- Allows you to postpone payments on federal student loans.
- No interest will accrue on any portion of your loans which are subsidized.
- Contact your servicer for more information.
- Situations that may qualify:
- You’re trying to find full-time work, but are still unemployed or underemployed.
- You’re working full-time, but don’t earn enough to afford your loan payments.
- You will be enrolling at least half-time in a grad program.
- You plan on joining the Peace Corps.
- Allows you to postpone or make smaller payments on federal student loans and some private loans for a limited amount of time.
- Interest continues to accrue on all loans.
- Contact your servicer for more information.
- More flexible than deferments, so they may be used if you are experiencing short-term hardship and don’t qualify for a deferment.
Standard: This is the usual repayment schedule. Unless you request differently, your loans will automatically be assigned to the Standard repayment schedule.
- 10 years (or less, depending on your loan balance)
- Flat monthly payment amount, determined by your lender, to ensure the loan is paid in full within 10 years
Graduated: This option may make most sense for those who expect to have relatively quick increases in income.
- 10 years
- Smaller payments at first, which will incrementally increase (typically every two years)
Income-Based, Income-Contingent, Income-Sensitive, or PAYE: Four different payment plans that allow monthly payments to be based on your income and family size. This option may be attractive to those with high federal student loan debt levels and relatively low income.
- Repayment occurs over 10 to 25 years
- Monthly payment amount is recalculated every 12 months
- If after 25 years of repayment, your loans are still not paid in full, the remainder of what you owe may be forgiven.
Extended Repayment: Increases the length of your repayment period to decrease amount of monthly payments.
- Repayment occurs over 12 to 30 years, depending on total federal student loan balance
- Total federal student loan debt must be more than $30,000 (may require you to consolidate federal loans through Direct Lending program if your balance is split between FFEL and DL programs)
You’re smart, savvy, and earning that paycheck! Now, how best to tackle those student loans and save some money…
Evaluate your debt.
Figure out which type of debt is the most expensive on a per dollar basis. This is not necessarily the loan with the largest balance. Typically, this will be the debt with the highest interest rate. Remember to assess all the types of debt that you have, including credit cards, car loans, etc.
Compare earnings on investments to cost of debt.
Take a look at your investment accounts. If they are not designated for any other specific purpose, consider using those funds to help pay down your debt. If the interest or dividend rates you’re earning on those assets are lower than the interest rates you’re paying on your loans, it’s likely that you would save more money in the long run if you pay off your higher-rate debt now.
Make payments sooner, rather than later.
The earlier you pay off debt, especially loans with higher interest rates, the more money you’ll save. Since interest is calculated on a daily basis, the timing of your payments can make a significant difference. Your servicer is required to apply any payments you make toward interest accrual first. Any remaining amount would then be applied to the principal amount of your loan.
Consider paying off unsubsidized loans first.
If you plan to return to school and will qualify for in-school deferment, consider focusing on paying off your unsubsidized loans first—even if they have lower interest rates (this might be the case for loans originated prior to 2006). During deferments, subsidized loans do not accrue any interest, but unsubsidized loans do, making them more expensive during those periods.
Keep enough in savings in case of emergency.
If you are able to make extra payments on your debt, remember that it’s also a good idea to have an emergency reserve in your savings account. There are a lot of opinions about how much you should keep in case of emergency, but it mostly depends on your comfort level. (If your income disappeared, how long could you survive on your savings? Do you need to focus on building up your emergency reserve before you start making extra payments on your debt?)
Too many loans in too many places? Consolidating may be the best solution.
Okay, so you finally got a handle on how many student loans you have, which lenders/servicers you’ll be dealing with, the interest rate for each one, and how much you’ll be expected to pay each month. Or, maybe you don’t have a handle on it. And maybe it’s just overwhelming either way. It’s okay. Really… That’s what consolidation is for.
What is consolidation?
The Federal Direct Consolidation Loan allows you to borrow one big federal student loan to pay off all of your small federal student loans. The U.S. Department of Education offers a Federal Consolidation Loan through their Direct Lending Program.
Which loans can be consolidated?
Only federal student loans can be consolidated through the Federal Consolidation Loan. If you have a private loan, unfortunately, it cannot be included.
How is the interest rate determined?
The interest rate is determined by taking the weighted average of the interest rates of the loans you are consolidating, rounded up to the nearest 1/8th of a percent, and capped at 8.25%. Interest rates on Federal Consolidation Loans are fixed, meaning they will not change during the life of the loan.
What are the benefits of consolidating?
You’ll be simplifying your repayment experience—just one student loan, one servicer, and one monthly bill to keep track of. Consolidation will also allow you to extend your repayment term, depending on your loan balance.
Are there any down-sides to consolidating?
It’s possible that you’ll be forfeiting some borrower benefits, which could potentially reduce the total cost of your loan. You’ll need to check with your current lender/servicer(s) to find out whether or not there are any borrower benefits associated with your loan(s). Also, by rounding up your interest rate to the nearest 1/8th percent, you may end up paying slightly more in interest on a Consolidation Loan. And, if you chose to extend your repayment beyond the standard 10 years, you could end up paying back more for the loan.
Is there anything else I should know?
- There are no fees for Federal Consolidation Loans. If you’re told otherwise, double-check the lender your working with—it may be a scam.
- The U.S. Department of Education’s Federal Consolidation Loan website is http://studentloans.gov. There aren’t many other lenders offering Federal Consolidation Loans — the Department of Education is the only choice.
- If your federal loans have already entered repayment, keep making your required monthly payments until your loan records show they have been paid in full by the Federal Consolidation Loan.
- Finally, steer clear of non-federal consolidation loans! If you borrow a private consolidation loan to pay off your federal student loans, you’re forfeiting all of the benefits that federal student loans offer (fixed rates, deferments, etc.).
Loan forgiveness programs
How to have some of your federal student loan debt canceled! (For some teachers and others working in the public service sector.)
Federal Stafford Loan Cancellation for Teachers:
- You must have received a Stafford Loan through the Federal Family Education Loan (FFEL) Program and/or the William D. Ford Federal Direct Loan (Direct Loan) Program.
- You must be a new borrower. You are considered a new borrower if you did not have an outstanding balance on an FFEL or Direct Loan on Oct. 1, 1998, or on the date you obtained an FFEL or Direct Loan after Oct. 1, 1998.
- You must have been employed for at least five consecutive, complete school years as a full-time teacher in an elementary or secondary school designated as a low-income school. To find out whether your school is considered a low-income school, check the Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits (Low-Income School Directory).
- You are not in default on the loan for which you are requesting forgiveness (unless you have made satisfactory repayment arrangements with the holder of the loan).
- You have not received a benefit for the same teaching service through the AmeriCorps Program.
- At least one of your five years of qualifying teaching service must be after the 1997-98 academic year.
- You received the loan for which you are requesting forgiveness before the end of your fifth year of qualifying teaching.
Full text of eligibility requirements and additional information (including Perkins Loan) can be found on the Teacher Loan Forgiveness Programs website.
Public Service Loan Forgiveness:
- Only non-defaulted loans made under the William D. Ford Direct Loan Program are eligible for loan forgiveness. (Includes Direct Consolidation Loans.)
- You must have made 120 payments (120 months—10 years—of payments) on loans under certain repayment plans while employed full time by certain public service employers.
Be sure to visit StudentAid.ed.gov for the full text of eligibility requirements and more information about the Public Service Loan Forgiveness Program.