Loan Repayment

Loan Deferment

A deferment is a postponement of repayment under various specific circumstances - returning to school at least half-time meets the criteria for a deferment. In most cases, you are not granted a deferment automatically; you must formally request one through the procedures your loan holder has established. Keep up with your student loan payments until you are certain that your in-school deferment has been approved by your lender.  

Borrowers are not required to pay principle or interest during the deferment of Subsidized Stafford Loans. Borrowers are not required to pay principle but are responsible to pay interest during the deferment of Unsubsidized Stafford Loans and Graduate PLUS Loans. Please note that you may pay the interest during the deferment period or the loan holder can capitalize the interest when the deferment ends. Remember that capitalization will increase the loan balance.

Repayment Plans

Federal Student Loan borrowers may choose from several repayment options - availability of repayment plans will be dependent upon the type of loan program. Borrowers are advised to select the plan that best suits their financial situation and that will keep the cost of repayment to a minimum. Please note that there is no pre-payment penalty for federal educational loans, therefore, it is advantageous to the borrower to repay a loan as quickly as possible.

  1. Standard Repayment Plan: The borrower pays a set amount throughout repayment. You will have a higher monthly payment, however, this plan has the least cost for the borrower.
  2. Graduated Repayment Plan: Payments start low and increase over time, usually every 18-24 months (addresses short-term cash flow problems in the early years of employment). Higher interest paid compared to the standard repayment plan, but is generally significantly less than the interest paid with the extended and income-based repayment plans.
  3. Extended Repayment Plan: Payments are extended up to 30 years, depending on the amount of and type of loans that the borrower has received. This results in a lower, more affordable payment; however, it is significantly more expensive if the borrower takes the full 30 years to repay.
  4. Income-Based Repayment Plan: Payments are based on your income. It typically lasts 10 years for Stafford Loans or longer if you consolidate your federal loans.

Loan Consolidation 

A consolidated loan combines several federal loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. This may reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12-30 years. The reduced monthly payment may make the loan easier to repay for some borrowers, however, by extending the term of a loan the total amount of interest paid is increased.

For help calculating your Stafford Loan Repayment you may refer to the Loan Repayment Calculator provided by Wells Fargo.