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November 23, 2023 / F&M Trust
Student loans have a variety of repayment options

Student loans have a variety of repayment options

More than 43.6 million borrowers have student loan debt, both federal and private. If you are among them, here are some things you should know about your repayment options.

  • Most federal student loans come with a six-month grace period before repayment begins. (With a Perkins loan, the grace period can be as long as nine months.) The idea behind the grace period is to give you time to get settled after school and to figure out a repayment plan. Keep in mind that for many loans, interest still accrues during the grace period and is added to the outstanding balance. Some circumstances impact your grace period, like if you enter active-duty military service, re-enroll in school at least part-time, or consolidate your loans.
  • You’ll likely be assigned a repayment plan for your federal student loans, but you can change plans anytime, for free, depending on what works for your financial situation. Think through all your eligible options, rather than simply picking the lowest monthly payment or the quickest payoff. For instance, some plans include loan forgiveness after a set number of payments, or offer flexible payments based on a percentage of your income. Details on repayment plans can be found at https://studentaid.gov/manage-loans/repayment/plans.
  • No matter what plan you choose, pay close attention to the amount due each month and pay it in full by the due date. Your loan is considered past due, or delinquent, one day after you miss a payment. If your account is delinquent for 90 days or more, the loan servicer reports that delinquency to the three major credit bureaus, impacting your credit score and making it difficult to secure other loans. If you fail to make loan payments for about nine months, your loan could go into default. This carries serious consequences, like the entire balance coming due, loss of ability to choose a repayment plan, potential pay garnishment and tax refund withholdings, and even legal repercussions.Graphic of a woman cutting a ball and chain labeled "Debt" from a giant graduation cap.
  • If you’re in a tight spot and making your loan payments is a challenge, explore deferment or forbearance options. The details vary, but both options suspend your payments for a period of time. Deferment temporarily postpones loan repayment under certain conditions, like if you’re undergoing treatment for cancer, experience a qualified economic hardship, enroll in a graduate fellowship program, or are on active-duty military service. Forbearance temporarily suspends or reduces loan payments. Your loan servicer can grant a general forbearance for things like financial difficulties and changes in employment. There are also situations that require mandatory forbearance, including National Guard Duty, and participation in a medical or dental residency.
  • Borrowers with multiple federal student loans might be able to save money (and time) by consolidating them into one fixed-rate loan. Consolidation is free and can lower your monthly payment or make it possible to qualify for income-based repayment plans and loan-forgiveness programs. Consolidation can extend your repayment period, though, and you might pay more in interest. Also, you’ll lose any borrower benefits such as interest rate discounts, principal rebates, or some loan cancellation benefits on your existing loans when you combine them into a new loan. Keep in mind you can consolidate some of your loans while keeping others as-is. If you have private loans, consolidation might also be an option, but it depends on your lender.

You can find federal student loan information at https://studentaid.gov/h/manage-loans. If you have private loans, you’ll need to contact each lender individually for this information.

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