Southwestern College

Repayment plans

The Direct Loan Program offers loan repayment plans designed to meet the needs of most borrowers. Direct Loans are funded by the U.S. Department of Education through your school and are managed by a loan servicer, under the supervision of the Department. The Direct Loan Program allows you to choose your repayment plan and to switch your plan if your needs change.

To find out more about repayment options before receiving a Direct Loan, borrowers may contact their school's financial aid office or the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243). If you currently have a Direct Loan and would like the exact payment amount on your loan, you can find it out by contacting your loan servicer.

Parent Direct PLUS Loan borrowers may only choose from the standard, extended, or graduated options, but student Direct PLUS Loan borrowers may also choose the income contingent repayment plan or the income-based repayment plan.

Standard Repayment

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, and you'll have up to 10 years to repay your loans.

The standard plan is good for you if you can handle higher monthly payments because you'll repay your loans more quickly. Your monthly payment under the standard plan may be higher than it would be under the other plans because your loans will be repaid in the shortest time. For the same reason—the 10-year limit on repayment—you may pay the least interest.

Extended Repayment

To be eligible for the extended plan, you must have more than $30,000 in Direct Loan debt and you must not have an outstanding balance on a Direct Loan as of October 7, 1998. Under the extended plan you have 25 years for repayment and two payment options: fixed or graduated. Fixed payments are the same amount each month, as with the standard plan, while graduated payments start low and increase every two years, as with the graduated plan below.

This is a good plan if you will need to make smaller monthly payments. Because the repayment period will be 25 years, your monthly payments will be less than with the standard plan. However, you may pay more in interest because you're taking longer to repay the loans. Remember that the longer your loans are in repayment, the more interest you will pay.

Graduated Repayment

With this 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.

Income Contingent Repayment

(not available for parent PLUS Loans)

This plan gives you the flexibility to meet your Direct Loan obligations without causing undue financial hardship. Each year, your monthly payments will be calculated 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:

  1. 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
  2. 20% of your monthly discretionary income*.

If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized.

The maximum repayment period is 25 years. If you haven't fully repaid your loans after 25 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged. You may, however, have to pay taxes on the amount that is discharged.

Income-based Repayment

Under this plan the required monthly payment will be based on your income during any period when you have a partial financial hardship. Your monthly payment may be adjusted annually. The maximum repayment period under this plan may exceed 10 years. If you meet certain requirements over a specified period of time, you may qualify for cancellation of any outstanding balance of your loans.

Pay As You Earn Repayment

This plan usually has the lowest monthly payment of the repayment plans that are based on your income. Your payment amount may increase or decrease each year based on your income and family size. To qualify for pay as you earn, you must have a partial financial hardship. You have a partial financial hardship if the monthly amount you would be required to pay on your eligible federal student loans under a 10-year standard repayment plan is higher than the monthly amount under pay as you earn. Once you’ve qualified for pay as you earn, you may continue to make payments under the plan even if you no longer have a partial financial hardship. For this purpose, your eligible student loans include Direct Loans as well as certain types of Federal Family Education Loan (FFEL) Program loans. Although your FFE loans cannot be repaid under pay as you earn, the following types are counted in determining whether you have a partial financial hardship:

  • Subsidized and Unsubsidized Federal Stafford Loans
  • Federal PLUS Loans made to graduate or professional students
  • Federal Consolidation Loans that did not repay any PLUS loans for parents

You also must be a new borrower as of Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. You are a new borrower if you had no outstanding balance on a Direct Loan or FFE loan as of Oct. 1, 2007, or had no outstanding balance on a Direct Loan or FFE loan when you received a new loan on or after Oct. 1, 2007.

Deferment

 

 

If you are having temporary problems repaying your federal student loans, contact your loan servicer to see if you are eligible for deferment. A deferment allows you to temporarily stop making payments on your federal student loans. If you have Direct Subsidized Loans, you are not charged interest on those loans during deferment. You are never charged a fee for applying for a deferment on your federal student loans. Note: interest will continue to be charged during deferment on your Direct or FFEL Unsubsidized and PLUS Loans. If you do not pay this interest during the deferment, it will be capitalized at the end of the deferment.

You may qualify for a deferment if you are:

  • enrolled at least half time at an eligible postsecondary school;
  • in a full-time course of study in a graduate fellowship program;
  • in an approved full-time rehabilitation program for individuals with disabilities;
  • unemployed or unable to find full-time employment (for a maximum of three years);
  • experiencing an economic hardship (including Peace Corps service) as defined by federal regulations (for a maximum of three years);
  • serving on active duty during a war or other military operation or national emergency and, if you were serving on or after Oct. 1, 2007, for an additional 180-day period following the demobilization date for your qualifying service;
  • performing qualifying National Guard duty during a war or other military operation or national emergency and, if you were serving on or after Oct. 1, 2007, for an additional 180-day period following the demobilization date for your qualifying service;
  • a member of the National Guard or other reserve compo¬nent of the U.S. armed forces (current or retired) and you are called or ordered to active duty while you are enrolled (or within six months of having been enrolled) at least half time at an eligible school.

Forbearance

If you are having temporary problems repaying your federal student loans and are not eligible for a deferment, contact your loan servicer to see if you are eligible for forbearance. A forbearance is another method of temporarily postponing or reducing loan payments. You are never changed a fee for applying for a forbearance on your federal student loans.

You may be granted a forbearance if you meet one of the following requirements:

  • You are unable to make your scheduled loan payments for reasons including, but not limited to, financial hardship and illness.
  • you are serving in a medical or dental internship or residency program and you meet specific requirements
  • the total amount you owe each month for all of the Title IV student loans you received is 20% or more of your total monthly gross income (for a maximum of three years)
  • you are serving in an approved AmeriCorps position.
  • You are performing a teaching service that would qualify for loan forgiveness under the requirements of the Teacher Loan Forgiveness Program
  • you qualify for partial repayment of your loans under the Student Loan Repayment Program, as administered by the Department of Defense
  • you are called to active duty in the U.S. armed forces.

Note: Interest will continue to be charged during a forbearance on all types of loans. If you do not pay this interest, it will be capitalized at the end of the forbearance.

Deferment

If you are having temporary problems repaying your federal student loans, contact your loan servicer to see if you are eligible for deferment. A deferment allows you to temporarily stop making payments on your federal student loans. If you have Direct Subsidized Loans, you are not charged interest on those loans during deferment. You are never charged a fee for applying for a deferment on your federal student loans. Note: interest will continue to be charged during deferment on your Direct or FFEL Unsubsidized and PLUS Loans. If you do not pay this interest during the deferment, it will be capitalized at the end of the deferment.

You may qualify for a deferment if you are:

  • enrolled at least half time at an eligible postsecondary school;
  • in a full-time course of study in a graduate fellowship program;
  • in an approved full-time rehabilitation program for individuals with disabilities;
  • unemployed or unable to find full-time employment (for a maximum of three years);
  • experiencing an economic hardship (including Peace Corps service) as defined by federal regulations (for a maximum of three years);
  • serving on active duty during a war or other military operation or national emergency and, if you were serving on or after Oct. 1, 2007, for an additional 180-day period following the demobilization date for your qualifying service;
  • performing qualifying National Guard duty during a war or other military operation or national emergency and, if you were serving on or after Oct. 1, 2007, for an additional 180-day period following the demobilization date for your qualifying service;
  • a member of the National Guard or other reserve compo¬nent of the U.S. armed forces (current or retired) and you are called or ordered to active duty while you are enrolled (or within six months of having been enrolled) at least half time at an eligible school.

Forbearance

If you are having temporary problems repaying your federal student loans and are not eligible for a deferment, contact your loan servicer to see if you are eligible for forbearance. A forbearance is another method of temporarily postponing or reducing loan payments. You are never changed a fee for applying for a forbearance on your federal student loans.

You may be granted a forbearance if you meet one of the following requirements:

  • You are unable to make your scheduled loan payments for reasons including, but not limited to, financial hardship and illness.
  • you are serving in a medical or dental internship or residency program and you meet specific requirements
  • the total amount you owe each month for all of the Title IV student loans you received is 20% or more of your total monthly gross income (for a maximum of three years)
  • you are serving in an approved AmeriCorps position.
  • You are performing a teaching service that would qualify for loan forgiveness under the requirements of the Teacher Loan Forgiveness Program
  • you qualify for partial repayment of your loans under the Student Loan Repayment Program, as administered by the Department of Defense
  • you are called to active duty in the U.S. armed forces.

Note: Interest will continue to be charged during a forbearance on all types of loans. If you do not pay this interest, it will be capitalized at the end of the forbearance.

 

 

 

 

Last updated: 8/26/2016 6:17:09 PM