Loan Repayment
Preparing for loan repayment can help to ensure that you pay back your loan on time and in full. Gathering the details of your student loan and budgeting early can save you time and money.
Student Loan Repayment Options
Payment Due Date
First, find out when your payments are due. Most student loans have a grace period of about 6 months after graduation before your first payment is due. If you leave school early or drop to half-time enrollment, your payments may start sooner. Parents who received student loans for their child, like PLUS loans, will have their repayment start as soon as the loan is completely disbursed.
The loan servicer will provide you with a repayment schedule that will tell you when your first payment is due, the amount of each payment, and how often you need to make that payment. It should also include how many payments there will be in total.
The NC Student Assist Loan repayment begins six months after the student graduates or drops to half-time enrollment. The NC Parent Assist Loan repayment begins after the final disbursement of the loan has been made. The standard repayment period for the NC Assist Loan is 120 months (10 years). However, if you re-enroll in school after beginning repayment, you may be eligible for a deferment.
Repayment Plan
The amount of your monthly payment will depend on your repayment plan. Federal student loans automatically default to the Standard Repayment Plan which is 120 months or 10 years. However, there are alternative repayment plans offered by the federal government that can be requested at any time.
- Standard Repayment Plan - This plan includes fixed amounts for payments to ensure that the loan is paid off in 10 years.
- Graduated Repayment Plan - This plan starts with lower payments that gradually increase to amounts that ensure the loan is paid off in 10 years.
- Extended Repayment Plan - Payments in this plan can be fixed or graduated and the loan will be paid in full in 25 years.
- Pay As You Earn Repayment Plan (PAYE) - Your payments are based on your discretionary income and are recalculated each year based on changes in your income. If married and filing joint tax returns, your spouse's income or debt will be considered. The PAYE repayment plan is eligible to Direct Loan borrowers only.
- Revised Pay As You Earn Repayment Plan (REPAYE) - Your payments are based on your discretionary income and are recalculated each year based on changes in your income. If married, your spouse's income or debt will be considered regardless if you file your taxes jointly or separately. The REPAYE repayment plan is eligible to Direct Loan borrowers only.
- Income-Driven Repayment (IDR) - Your payments will be either 10 or 15 percent of your discretionary income and will be recalculated each year based on changes in your income. If married and filing joint tax returns, your spouse's income or debt will be considered. You may have to pay income taxes on any forgiven amount.
- Income-Contingent Repayment Plan (ICR) - This plan is also based on your discretionary income, recalculated each year and can take your spouse's income into consideration if you file your taxes jointly. However, the payments in this plan are the lesser of either 20% off your discretionary income or fixed amount over 12 years adjusted based on your income.
- Income-Sensitive Repayment Plan - Your payment is based on your annual income and ensures that your loan will be paid in full within 15 years.
Making Payments
Most lenders will use student loan servicers to handle their repayment billing and other services. Payments will be made directly to the servicer either online or via check, much like other bills. Consider enrolling in automatic draft pay so you won't forget to make your payment each month and fall behind by accident. Ask your servicer if there is an incentive for participating in automatic draft payments as some will offer an interest rate discount. If you are able to pay more than the payment amount each month, this could reduce the amount of interest you pay and reduce the total amount of your loan over time.
If Payments Become Challenging
If you have trouble making your payments call your servicer immediately to find out the options available to keep you from student loan default. You may be eligible to change your repayment plan to one that lowers your payment amount or is based on your income like the ones listed above.
You can also ask your servicer if you qualify for a deferment or forbearance to temporarily suspend your payments. Deferment is a specific period of time where you are approved to stop making payments. These are granted under certain circumstances. Some examples include when you return to school as at least a half-time student, if you are unemployed and actively looking for full-time employment, if you are temporarily totally disabled, or if you are experiencing an economic hardship. However, any unpaid interest that accrues during this period may be added to the principal balance of the loan. This means that your loan balance will increase and you’ll end up paying more over the life of your loan.
Forbearance is a short-term temporary suspension of your payments or a reduction of your payment amount. Forbearance is intended to help if you are having financial difficulties and do not qualify for a deferment. During this period, principal payments are postponed but interest continues to accrue. Unpaid interest that accrues during the forbearance will be added to the principal balance of your loan, increasing the total amount you owe.
What Is Loan Forgiveness?
Under certain circumstances, your loan may be canceled or forgiven - for example, if you become completely or permanently disabled or die. Your loan may also be canceled if your school closes or if the school falsely certified your eligibility for the loan. Some loans may be eligible for partial or complete cancellation based on certain services or employment, such as teacher loan forgiveness. You will need to contact your loan servicer to see if you qualify for loan forgiveness.