Direct Stafford Loans offer a six-month grace period immediately following graduation or when a borrower drops below half-time enrollment. During this time the borrower is not required to begin repayment. This period allows the borrower to find a job and establish a budget before repayment begins.
There are four repayment plans:
The Standard Repayment Plan requires you to pay a fixed amount each month—at least $50—for up to ten years. The length of your repayment period will depend on your loan amount.
The Extended Repayment Plan allows you to repay your loan over a period that is generally 12 to 30 years, depending on your loan amount. Your monthly payment might be lower than it would be if you repaid the same total loan amount under the Standard Repayment Plan, but you will repay a higher total amount of interest over the life of your loan because the repayment period is longer. The minimum monthly payment is $50.
Under the Graduated Repayment Plan, your payments will be lower at first and then increase, usually every two years. The length of your repayment period will generally range from 12 to 30 years, depending on your loan amount. Your initial monthly payments will be equal to either the interest that accumulates on your loan between payments or half the payment you would make each month using the Standard Repayment Plan, whichever is greater. However, your monthly payments will never increase to more than 1.5 times what you would pay under the Standard Repayment Plan. You will repay a higher total amount of interest, though, because the repayment period is longer than it is under the Standard Repayment Plan.
The Income Contingent Repayment Plan bases your monthly payment on your yearly income, family size, interest rate, and loan amount. As your income rises or falls, so do your payments. After 25 years, any remaining balance on the loan will be forgiven, but you will have to pay taxes on the amount forgiven. This repayment plan does not apply to Direct PLUS Loans.
If you find yourself in a situation where you cannot make your loan payments, contact the holder of your loan to see if you can make some other payment arrangement. You may qualify for a deferment, which will allow you to postpone your monthly payments for a specified period of time.
The federal government will pay the interest on a Subsidized Stafford Loan during the deferment period. However, you are responsible for the interest payments for other loan programs such as the unsubsidized Stafford Loan. You can pay this interest every month, every quarter (every three months), or have it capitalized (added to your loan principle). Capitalizing the interest will result in your paying interest on that interest, thus increasing the total amount of your debt. Consider these options carefully and choose wisely.
There are several deferments available if you are a Federal Stafford or PLUS Loan borrower. The types of deferments that you may qualify for are determined by the date of your oldest loan that has an outstanding balance. Deferment conditions are:
1. At least half-time study at a postsecondary school,
2. Study in an approved graduate fellowship program or in an approved rehabilitation training program for the disabled,
3. Inability to find full-time employment (up to three years), and
4. Economic hardship (up to three years); many Peace Corps and VISTA volunteers will qualify for a deferment based on economic hardship.
If you do not qualify for a deferment, and you are willing yet unable to make your loan payments, you may still qualify for forbearance. You must call the holder of your loan and request an application. You will be asked to clearly explain and provide documentation as to your financial situation and the reason why you are unable to make your loan payment.
Lenders can grant forbearance at their discretion and typically do so only in cases of extreme financial hardship and extenuating circumstances. Forbearance can allow you to delay, reduce, or extend your payment for a specified period of time. However, unlike a deferment, the government does not pay the interest on your loans that are in forbearance—not even on your subsidized loans. You are responsible for paying the interest on your loans either monthly, quarterly, or requesting that it be capitalized.
You must also continue to make your monthly payments until the holder of your loan notifies you that you have been granted forbearance—otherwise, your loan will go into default status.
Bankruptcy won’t help you. Generally, student loans won’t be excused if you file bankruptcy. Student loans must be repaid.
|Cancellation Conditions||Amount Forgiven||Notes|
|Borrower’s total and permanent disability1 or death||100%||For a PLUS Loan, includes death but not disability of the student for whom the parents borrowed.|
|Full-time teacher for five consecutive years in a designated elementary or secondary school serving students from low-income families||Up to $5,000 of the aggregate loan amount that is outstanding after completion of the fifth year of teaching.
A borrower might qualify for loan forgiveness under the Direct and FFEL Consolidation Loan programs. If so, only the portion of the consolidation loan used to repay Direct Stafford Loans or FFEL Stafford Loans qualifies.
|For Direct and FFEL Stafford Loans received on or after October 1, 1998, by a borrower with no outstanding loan balance as of that date. At least one of the five consecutive years of teaching must occur after the 1997-98 academic year. (To find out whether your school is considered a low-income school, visit www.studentaid.ed.gov. Click on “Repaying,” then click on “Cancellation and Deferment Options for Teachers.” Or, call 1.800.4.FED.AID [1.800.433.3243].)|
|Bankruptcy (in rare cases)||100%||Cancellation is possible only if the bankruptcy court rules that repayment would cause undue hardship.|
|Closed school (before student could complete program of study) or false loan certification||100%||For loans received on or after January 1, 1986|
|School does not make required return of loan funds to the lender||Up to the amount that the school was required to return||For loans received on or after January 1, 1986|
|Child care provider (demonstration project only —limited funds). AA or BA in early childhood education required. Must have worked for two consecutive years in eligible child care facility serving low-income community.||100%||For Direct and FFEL Stafford Loans received on or after October 1, 1998, by a borrower with no outstanding loan balance as of that date. For more information, call 1.888.562.7002. Also, visit www.studentaid.ed.gov. Click on “Repaying,” then go to “Discharge/Cancellation.”|
Consolidation loans allow a borrower to combine different types of federal student loans to simplify repayment. You can find out more information about a Direct Consolidation Loan by contacting the Direct Loan Servicing Center's Consolidation Department at 1.800.557.7394.