Student Loan Repayment Schedules

Student loan payments can take a big bite out of your paycheck--especially early in your career. But most lenders offer payment plans to ease the burden of repayment. Investigate these options and choose the one that fits your situation. Each offers certain advantages and disadvantages:

• Standard plan. Monthly payments are fixed, so they stay the same until your loan is repaid. The advantage is that you always know exactly what you have to pay each month. However, your monthly payment may prove difficult to handle in the initial years after you leave school.

• Graduated plan. Lower payments at the start gradually adjust upward at two-year intervals. While this approach is easier on your paycheck for the first few years, you pay more in total interest than with the standard plan. This plan allows you to extend your payments, depending on the amount borrowed, by up to 30 years. The disadvantage to this option is that it extends the number of years you are in repayment and increases the total amount of interest you pay.

• Income-sensitive plan. Based on your annual salary, your payments would vary from year to year, based on a percentage of your gross monthly income. With this plan, you can also extend your payments for up to 30 years. But consider the impact of extended payments on your future before you take advantage of this feature.

Unless you receive a deferment or forbearance, according to the type of loan you have, repayment begins when your loan enters repayment status. 

• Subsidized Stafford Loan. Payments of principal and interest start six months after school enrollment drops below half-time status, unless you request and are granted a repayment schedule that allows you to begin repaying earlier.

• Unsubsidized Stafford Loan. Interest begins to accrue immediately and is billed quarterly. If not paid, the accrued interest is added to the loan balance when the loan enters repayment (for Bank of America borrowers) six months after school enrollment drops below half-time status.

• PLUS Loan. Interest begins to accrue on the day the loan is made. The first payment is due within 60 days after the loan is fully disbursed.

Repayment
Your monthly payments depend on the total amount borrowed, the type of loan, and the payment option you choose. In every case, there's no penalty if you pay off your loan ahead of schedule to reduce the overall cost of your loan. 

All borrowers are to receive an exit interview before they leave school. During the exit interview borrowers will be informed of important information regarding their student loans and repayment responsibilities and amounts. The next step to repayment is the payment schedule. This schedule, usually in the form of a bill or coupon book, is mailed by the holder or servicer of your loan to your last known address. 120 days before the first payment on your loan is due.

The schedule should show the total loan balance, amount and due date of your monthly payments, interest rate, and address to which you send your payments. If any of this information is missing or you don't receive your schedule within the 120-day period, contact your loan holder or servicer immediately.

It is very important that you keep in touch with the your lender and their servicer. You should do this both during and after your college years. Clear and consistent communication with your lender and servicer is vital until your loan is repaid. Frequent communications helps to prevent loan defaults, because it ensures that all pertinent information reaches you and that your payments reach are sent and received on time. By keeping your lender or servicer informed, potential and actual payment difficulties are greatly reduced. You also want to be attentive to the information sent to you by the lender and servicer. The information may be an early indication that a problem is on the horizon or that your loan has been sold to a secondary market and you will need to send your payments to a new address.

Always communicate in writing. Even after a telephone conversation, you should write to confirm what was said and agreed upon. You should always write the lender, other appropriate parties, such as your school, when there is a change in your status or circumstance your repayment, including:

• You change your name, address, or telephone (If you move frequently, you might consider using your family's address on all loan materials.)

• You change your graduation date.

• You transfer to another school.

• Your enrollment drops below half-time.

• You withdraw from school.

Always make your loan payments on time. When you are scheduled to start making loan payments, you need to begin the process right away and make your payment by the due date. Otherwise, you may be charged a late fee. Consider setting up an electronic transfer from you checking or savings account to assure that you don't forget a payment. Many lenders offer rate discounts for those who make a certain number of consecutive on-time payments. These rate reductions can be as much as 2%, which makes them most worthwhile. Also consider, having overdraft protection on your account to assure that you do not mistakenly bounce checks.

The following is what happens when your student loan payments are late:

• If your payment is 60 days late, the lender may place you loan in pre-claim - a status that identifies you as one who may be headed for default.
  

• If your payment is 90 days late, your loan is seriously delinquent. This status may make you ineligible for further financial aid, deferments, or forbearances until you resolve the delinquency and may damage your chances for obtaining credit in the future.
  

• If your payment is 180 days late, your loan status and the consequences that this status information, refer to "Serious Consequence

Sample Monthly Repayment With the Standard Plan:

Sample Monthly Repayment With the Graduated Plan:

Sample Monthly Repayment With the Graduated Plan:

Some Suggestions and Considerations for Repayment Planning: 

• Early payments on principal will reduce the total interest costs over the life of the loan.
  

• Take advantage of the grace period to save money for your future loan payments.
  

• Pay on time--interest is compounded daily.
  

• Think before making big purchases soon after graduation.
  

• Take advantage of financial planning programs such as your local Consumer Credit Counseling Service.