What Do You Know About Loan Repayment Module? Trivia Quiz

Under the Standard Repayment Plan the student will pay a fixed monthly amount for a loan term of up to 10 years. Depending on the amount of the loan, the loan term may be shorter than 10 years. There is a $50 minimum monthly payment.

Under the Extended Repayment Plan, the student will pay a fixed annual or graduated repayment amount over a period not to exceed 25 years. As a FFELP borrower, the student must have more than $30,000 in outstanding FFEL Program loans.

Current regulations require that when a student leaves IBR Program, s/her must go into a 10-year standard payment plan (or longer for a consolidated loan), minus the number of years s/her was in IBR. If a standard plan is not affordable, the student can switch to another plan, but can only return to IBR Program if s/her has a "partial financial hardship" and qualifies for the IBR Program.

All Federal education loans allow prepayment without penalty. For loans that are not in default, any excess payment is applied first to interest and then to principal. However, if the additional payment is greater than one monthly installment, payment must include a note with the payment telling the processor whether prepayment is to be treated as a reduction in the principal. Otherwise, the government will treat it as though the borrower paid the next payment(s) early, and will delay the next payment due date as appropriate. (It is best to tell them to treat it as a reduction to the principal, since this will reduce the amount of interest borrower will pay over the lifetime of the loan.)

The process of federal student loan consolidation can take up to 120 days to process. When a borrower consolidates loans in the Direct Consolidation Loan Program, the U.S. Department of Education (Department) pays off the original Federal education loans and originates a new loan for the total amount of the loan(s) consolidated. Processing Steps: Application Review, Loan Verification, Repayment Processing, Loan Statement Sent to Borrowers, Payment to Loan Holders, Account Set-Up and Adding Loans to an Existing Direct Consolidation Loan.

Determine Date Entered Repayment DERP) = Separation date plus six months and one day The date of graduation, withdrawal, or less than half-time status will begin the student's grace plus one day will determine the student's DERP.

Until recently, a borrower could consolidate his or her loans under either the Federal Family Education Loan Program (FFELP) or the Federal Direct Loan Program (FDLP). However, recent legislation has amended the law that governs federal student loans. Specifically, the Health Care and Education Reconciliation Act of 2010 requires that no new loans may be made under the FFELP; any Stafford, PLUS, or Consolidation loan first disbursed on or after July 1, 2010, must be made under the FDLP. All Federal student loan consolidations have been appointed to be processed by Direct Loans.

The Federal Family Education Loan Program (FFELP) allows the student to choose his/her repayment plan and to switch his/her plan annually if his/her financial needs change. Borrower can switch from one plan to another, s/her can do so once per year, so long as the maximum loan term for the new plan is longer than the amount of time the loans have already been in repayment. (In other words, if borrower is in year 26 of a 30-year extended repayment plan, s/he cannot switch to the income-based repayment plan and have the remaining balance written off.)

IBR Benefit #1 - Lower Monthly Payments The IBR program may substantially lower a graduate's monthly student loan payment. The calculation of the actual amount is based on a formula that considers the student's adjusted gross income level, the Federal poverty line, and the number of people the graduate financially supports. Payment can be as low as zero dollars. IBR Benefit #2 - Student Loan Forgiveness Under the Income-Based Repayment program, balances not paid off after either 10 or 25 years are forgiven by the Department of Education. While all borrowers can qualify for student loan forgiveness after 25 years, the 10-year forgiveness feature is reserved for those who have worked full-time in public service. IBR Benefit #3 - Student Loan Interest Subsidy If the newly calculated IBR payment doesn't cover the interest that is added to subsidized Stafford loan, the government will pay the difference for the first three years in the IBR program. After that, the unpaid interest is added to the loan balance.

With this plan, the student's payments start out low and increase every two years. The length of the repayment period will be up to ten years. If the student expects his/her income to increase steadily over time, this plan may be right for him/her. The monthly payment will never be less than the amount of interest that accrues between payments. Although the monthly payment will gradually increase, no single payment under this plan will be more than three times greater than any other payment. There is no graduate status required for this repayment plan.

For married borrowers who file their taxes jointly, lenders will factor in the couple's total federal student loan debt, as well as their total income, to calculate payments. Originally, IBR did not recognize that joint income has to cover both spouses' federal loan payments, resulting in payment requirements up to twice what two equivalent single people would have to pay.

The following conditions must be met in order to qualify: 1. The student must be diligently seeking but unable to find full-time employment in any field or at any salary or responsibility level even if student is not eligible for unemployment benefits (or if eligibility expired). 2. A student must be registered with a private or public employment agency if there is one within 50 miles of his/her permanent or temporary address. School placement offices and “temporary agencies” do not qualify as public or private employment agencies. 3. If a student is requesting an extension of current unemployment deferment and is not providing documentation of eligibility for unemployment benefits, s/he must certify that s/he has made at least 6 diligent attempts to find employment on the most recent 6 months by checking the box in Section 2, Item B.

An Unsubsidized Stafford Loan is a federally guaranteed loan that is not based on financial need. Interest will accrue from the time the loan is disbursed to the school. The borrower does not have to make interest or principal payments until six months after graduation, or six months after you drop below a half time status.

The IBR Program is available to federal student loan borrowers in both the Direct and Guaranteed (or FFEL) loan programs, and covers most types of federal loans made to students, but not those made to parents (ParentPlus). To enter IBR, the student must have enough debt relative to his/her income to qualify for a reduced payment. That means it would take more than 15 percent of whatever s/her earn above 150% of the poverty level to pay off your loans on a standard 10-year payment plan. Because incarcerated students have no source of income and are not actively seeking full-time work, s/he is eligible for the IBR Program.

The Federal Government will pay any unpaid interest on subsidized loan during authorized deferment periods. If a student's monthly IBR payment amount does not cover the interest that accrues on his/her loans each month, the government will pay any unpaid accrued interest on the Subsidized Stafford Loans (either Direct Loan or FFEL) for up to three consecutive years from the date the student began repaying his/her loans under IBR.

With Federal Subsidized Stafford Loan, the federal government pays the interest while the student in attending school and during grace and eligible deferment periods.

Regardless of whether at student received subsidized or unsubsidized funds, the Stafford Loan has a six-month grace period. If the student allows his/her six-month grace period to elapse after leaving school, the Stafford Loan will not be eligible to receive a new grace period in the future. However, if the student interrupts his/her initial grace period by going back to school, enroll in enough units to maintain at least half-time status in a qualifying course of study and file the appropriate student deferment form, s/he will be allotted another six-month grace period.

Most servicers prefer the processing of Graduated and Extended Repayment Plans to be processed via phone to ensure the student is provided with projected monthly payment adjustments to complete total loan payoff.

The National Student Loan Data System (NSLDS) is the U.S. Department of Education's (ED's) central database for student aid. NSLDS receives data from schools, guaranty agencies, the Direct Loan program, and other Department of ED programs. NSLDS Student Access provides a centralized, integrated view of Title IV loans and grants so that recipients of Title IV Aid can access and inquire about their Title IV loans and/or grant data.

Consolidation is similar to refinancing a loan. A borrower can consolidate all, just some, or even just one federal student loan.