Many students borrow for their education through the federal government's Stafford student loan program. When you are nearing your graduation date or otherwise leaving school, begin thinking about how you are going to repay your Stafford loans. The process varies slightly depending on when you got your loans, how much you borrowed and how quickly you want to repay the debt.
Loan Servicing Company
When you repay your Stafford loan, you need to make payments to the agency that services your loan. In some cases, you might have to work through a loan servicing company other than the United States Department of Education. This is especially true if you borrowed through the Federal Family Education Loan program, which operated until July 1, 2010, to allow private lenders to issue federally guaranteed Stafford loans. For example, Sallie Mae services Stafford loans for many students. If you do not know who services your loans, look up the information through the National Student Loan Data System (see Resource).
Beginning Repayment
Your Stafford loan payments are automatically deferred while you are enrolled in school at least half-time. You do not have to begin repaying the loan until you drop below half-time enrollment. In addition, you get one six-month grace period between leaving school and beginning Stafford loan repayment. This allows you to get your finances in order and get in touch with your loan servicing company. After you have used up this grace period, you have to begin repayment immediately after any other times of deferment end.
Monthly Payments
When you begin repayment, you must make monthly Stafford loan payments to your servicing company. The amount of the monthly payments depends on which repayment plan you choose. The default plan is 10 years of equal payments. Other options include extending repayment over up to 25 years, choosing a graduated payment plan with smaller payments at the beginning and larger payments at the end or signing up for a plan that bases payments on your income. Regardless of the plan you choose, your monthly payments will first go toward paying off any accrued interest and then go toward repaying your principal.
Postponing Repayment
The federal government offers a few ways to postpone repayment again after you begin. One option is to apply for deferment, which allows you to postpone payments for a time while you are attending school again, unemployed or suffering extreme financial hardship. During deferment, the government pays all interest if you have subsidized Stafford loans. The other option, forbearance, does not have the perk of paid interest on subsidized loans. However, you can get forbearance for a variety of circumstances, including less-extreme financial difficulty. If you cannot afford to make your payments, applying for deferment or forbearance can allow you to stop making payments without late fees or damage to your credit score.
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