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Repaying Your Loan
There’s no way around it: You have to pay back the money that you borrow through a Direct Loan—with interest. You have to pay it back even if you don’t complete your education, don’t like the education that you received, or can’t get a job after leaving school.
You have to start repaying your Direct Loan six months after you graduate, leave school, or drop below half-time enrollment. Your loan servicer, which is a company that collects your payments and answers your questions, is required to give you a loan repayment schedule. It states when your first payment is due, the number and frequency of payments, and the amount of each payment.
There are six different repayment plans, and they give you from 10 to 25 years to repay your loan. You can change repayment plans at any time. If you have multiple loans, you also can consolidate them.
You’ll get lots of information about repaying your loan during exit counseling, which you must complete online when you graduate, transfer, or drop below half-time enrollment.
Deferment and Forbearance
Deferment and forbearance let you temporarily postpone or lower your loan payments while you’re back in school, in the military, having financial problems, or in certain other situations.
During deferment, you temporarily don’t have to repay the principal balance of your loan. In addition, depending on the type of loan you have, interest will not accrue during deferment. With forbearance, you may be able to stop making payments or reduce your monthly payments for up to 12 months. However, during forbearance interest will accrue on all of your loans.
There are numerous situations under which you may qualify for deferment or forbearance. With either one, you must apply by filing a request with your loan servicer.
Delinquency and Defaulting
If you don’t make your monthly loan payments, you will become delinquent and risk going into default. You become delinquent the first day after you miss a payment. If you’re delinquent for at least 90 days, your loan servicer will report the problem to the three major credit bureaus. This will make it hard for you to do everything from borrowing money for a car to getting a cellphone plan.
If you’re having trouble making your loan payments, contact your loan servicer as soon as possible. You may be able to change your repayment plan or qualify for a deferment or forbearance.
If you fail to make a loan payment for 270 days, you’re in default. This will further harm your credit rating and may cause the federal government to withhold your income tax refunds and take part of your wages until the debt is paid. And all the time that you’re in default, interest charges and late fees will keep growing, causing your debt to become even larger.
The federal government offers tips for repaying your student loan successfully and avoiding default. If you default on your loans, visit the federal government’s Federal Student Aid Debt Resolution site for information about how to resolve the problem.