Once you or your student has graduated or stops attending at least half-time, your loans will enter repayment. Below is information to help you understand repayment and what options you have. If you are having problems making your loan payments you should talk to your loan servicer immediately. Making your loan payments on time helps keep you out of default. If you default on your student loans, you will be subject to late fees and possible court costs, your credit rating will be damaged, access to federal jobs will be restricted, you will lose deferment options, and your wages and tax refunds can be garnished.
When a student graduates or stops attending at least half-time an e-mail notice will be sent to a student informing them that they must complete exit counseling. The intent of exit counseling is to refresh student borrowers on the terms and conditions of their loan, help collect new contact information and inform students of what to expect next. Exit counseling is required for all student borrowers. Exit counseling can be completed online through www.studentloans.gov.
For information regarding Perkins and Health Professions Loan exit counseling, visit the CSU Accounts Receivable Office.
The grace period refers to the period of time between when a student ceases to be enrolled at least half-time and when the first payment is required. Grace period begins the day a student drops below half-time, graduates, or withdraws. Typically most grace periods are six months however some loan programs may allow for a longer period. During this time interest will not accrue on subsidized student loans and Federal Perkins Loans and Health Professions Student Loans. Parent PLUS loans do not have a grace period with the first payment due usually 60 days after the loan is fully disbursed.
If you use your entire grace period on a loan and then your loans enter a period of deferment, you will not receive another grace period. You may experience this if you stop attending school for one or more terms and then begin attending again.
During your grace period you should review your personal situation and income information to determine what repayment plan is best for you. Keep in mind that the longer your loans are in repayment, the more you will pay in interest. Also any consolidation of your loans may change what plan is the best for you. You may be eligible for an interest rate reduction if you sign-up for automatic withdrawal from your bank account.
Here are the available repayment plans to Direct Loan borrowers:
Standard: Under the standard repayment plan you will pay a fixed amount for a period of 10 years. During that time your monthly payment will be at least $50. If you do not specify a repayment plan with the servicer you will be automatically assigned this plan. The amount of interest you will repay will be the least under this plan since it is the shortest.
Extended: If you have at least $30,000 in loan debt you may qualify for an extended repayment plan. You will have a period of 25 years to repay your loan. You may have a fixed or graduated monthly payment amount. With a fixed payment, you will pay the same amount every month until your loan is paid in full. Graduated payment amounts start low and then increase every two years until the loan is paid in full.
Graduated: Under this plan you will repay your loans in 10 years like the standard plan, but the monthly payment amount is graduated rather than fixed. Your monthly payments start low and then increase every two years until your loan is paid in full.
Income Contingent: If you experience financial hardships and expect your situation to last for an extended period of time you may want to review this plan. This plan is not available for Parent PLUS loans and only to students who have borrowed a Direct Loan.
Your monthly payment amount is calculated based on your Adjusted Gross Income (AGI), family size, and loan debt and is adjusted each year. Your monthly payment amount may be lower than the amount of interest that accrues for a month under this plan. If that happens any unpaid interest is capitalized at the end of each year but is capped at 10 percent of your original loan balance. Interest will still accrue after you reach the 10 percent threshold but it will no longer be capitalized.
The maximum repayment period is 25 years under the income contingent plan. If after 25 years your loans are still not paid in full, the remaining amount is canceled. You would no longer owe a balance at that point but the amount of loan canceled may be taxable.
Income-Based Repayment: The Income-Based Repayment plan is very similar to the Income Contingent Plan but is available to students who have borrowed through either the Direct Loan Program or the Federal Family Educational Loan Program (FFELP). Parent PLUS loans are not eligible for this plan.
Your repayment amount is calculated based on your income, family size, and loan amount. If the calculated loan amount does not cover the interest that accrues, the government will pay the unpaid interest for up to three years for any subsidized loans. After three years and for other loan types, the interest will be capitalized with the loan balance.
The maximum repayment period is 25 years. If after 25 years your loans are still not paid in full, the remaining amount is canceled. You would no longer owe a balance at that point but the amount of loan canceled may be taxable. If you work in public service your loan may be canceled after a 10 year period of time.
Pay As You Earn: Pay As You Earn is for those who have partial financial hardship. To be eligible you 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. Eligible student loans include Direct Subsidized and Unsubsidized Loans, Direct PLUS loans made to you as a graduate or professional student, and Direct Consolidation Loans that do not include PLUS loans made to parents.
Your monthly payment amount is calculated based on your income and family size. The monthly payment amount will be 10 percent of your discretionary income and will never be more than the amount you would pay under the Standard Repayment Plan. If your monthly payment does not cover the interest that accrues on your loans each month, the government will pay your unpaid accrued interest on your subsidized loans for up to three consecutive years. Your payment amount may increase or decrease each year based on your income and family size.
The maximum repayment period is 20 years. If after 20 years of qualifying repayments your remaining balance will be forgiven if you meet certain other requirements. You may have to pay taxes on any loan amount that is forgiven after 20 years. If you work in public service you loan may be canceled after a 10 year period of time.
For more information about repayment plans, visit the Federal Student Aid website. You may also visit our Calculators page to help decide what plan is best for you.
There is only one repayment plan for Perkins and HPL loans. The maximum repayment period is 10 years with a minimum payment of $40. Your payments are made directly to CSU. Repayment plan information for Perkins and HPL Loans is available from the CSU Accounts Receivable Office.
If you are experiencing trouble paying your loans you should immediately contact the servicer. You may qualify for a deferment based on your circumstances as long as you do not default on your loan. A deferment is a period of time during which payments are not required and interest does not accrue if the loan is subsidized.
Deferments are available to students who are:
- Attending at least half-time at an eligible school
- Unemployed or have an extreme economic hardship
- Serving on active duty during a war, military operation or national emergency
- A National Guard or reserve member called to active duty
Enrollment is reported regularly to loan servicers and a deferment usually granted automatically for student loans on a term by term basis. Additional documentation is usually required for other deferments and is submitted to your loan servicer. Parents must submit a request to the servicer to defer Parent PLUS loans based on the student's enrollment.
If you do not meet the qualifications for a deferment you may be eligible for forbearance. Forbearance allows you to temporarily stop making payments on your loan, make smaller payments, or extend the time you have to make a payment. Some reasons why forbearance may be granted are illness, financial hardship, or medical internship or residency.
For more information about deferment and forbearance, visit the Federal Student Aid website. Forbearance and deferment information for Perkins and HPL Loans is available from the CSU Accounts Receivable Office.
You must repay your loans even if you do not complete your program however you may be eligible for all or a portion of your loans to be canceled or forgiven. Here are a few ways your loans may be canceled:
- Teacher service in a low income elementary or secondary school for five consecutive years.
- Employed in a public service job and have made 120 monthly payments (10 Years).
- You become permanently disabled.
- Your loan was falsely obtained through identity theft.
- Bankruptcy if the borrower proves that repaying the loan would be an undue hardship.
You or your family's representative would work with the loan servicer to grant the cancelation. For more information about cancelation, visit the Federal Student Aid website. Cancelation information about Perkins and HPL Loans is available from the CSU Accounts Receivable Office.