Financial Literacy
Loan Consolidation
Loan Consolidation
Loan consolidation is available for direct loans when students graduate, leave school, or drop below half-time enrollment. It can be a great way to simplify loan repayment by centralizing multiple existing loans into one bill, which can also lower monthly payments by giving students up to 30 years to repay their loans.
Consider carefully whether loan consolidation is right for you. By lengthening your repayment timeline, you will make more payments and have to pay more in interest. You may also lose borrower benefits offered with the original loan.
To learn more about loan consolidation or to apply to consolidate direct loans, visit the studentloans.gov website’s Consolidating Students Loans page. We also advise students to contact their loan servicer for specific information and help comparing repayment rates.
Repayment
Potential borrowers should keep in mind that loans must be repaid and that repayment ability should be calculated in relation to total debt and future earnings. Failure to meet loan repayment obligations can jeopardize one’s credit rating and eliminate eligibility for federal student assistance funds. For more information about Direct Student Loans view the studentaid.gov.
All facilitation of loan repayment must go through the student loan servicer/lender.
Repayment Plans
There are a number of repayment plans for Federal Direct Loans. Below are simplified definitions of the various plans. For more details on these loans, please visit
Federal Student Aid Repayment Plans. There you will find a more detailed comparison of these plans.
- Standard Repayment Plan – All monthly payments will be at a fixed amount over a 10-year time frame.
- Graduated Repayment Plan – The payment amounts begin relatively low and will increase (usually every two years) over a 10-year time frame.
- Extended Repayment – This plan is only available for those who have received more than $30,000 in Federal Direct Loans. You will have 25 years to pay back your loans and may choose to have a standard fixed payment plan or a graduated payment plan.
- Income-Driven Repayment Plans – All of the following payment plans are recalculated each year and are based on your updated income and family size. Additionally, all these loans qualify for loan forgiveness after a specific number of years (the forgiven amount may be taxed):
- Revised Pay as You Earn (REPAYE) Repayment Plan – The monthly payments will change as your income changes over a 20–25 year time frame. Your maximum monthly payments will be 10% of discretionary income. Any outstanding balance will be forgiven if you haven’t repaid your loan in full after 20 0r 25 years.
- Pay as You Earn (PAYE) Repayment Plan – The monthly payments will change as your income changes over a 20-year time frame. Your maximum monthly payments will be 10% of discretionary income. Any outstanding balance will be forgiven if you haven’t repaid your loan in full after 20 years.
- Income-Based Repayment (IBR) Plan – The monthly payments will change as your income changes over a 25-year time frame. Your maximum monthly payments will be 10% – 15% of discretionary income. Any outstanding balance will be forgiven if you haven’t repaid your loan in full after 20 or 25 years.
- Income-Contingent Repayment (ICR) Plan – The monthly payments will change as your income changes over a 25-year time frame. Payments are calculated each year and are based on your adjusted gross income, family size, and total amount of your direct loans. Any outstanding balance will be forgiven if you haven’t repaid your loan in full after 25 years.
Teacher Loan Forgiveness or Cancellation
If you are a teacher or become a teacher serving in a low-income or subject-matter shortage area, it might be possible for you to cancel or defer your student loans.
Teacher Loan Forgiveness Program for Federal Direct Loans
This program is intended to encourage people to enter and continue in the teaching profession. If you teach full time for five complete, consecutive academic years in certain elementary and secondary schools and educational service agencies that serve low-income families, you may be eligible for forgiveness up to a combined total of $17,500 on your Federal Direct Loans.
Perkins Loan Teacher Cancellation Program
You qualify for cancellation of up to 100% of a Federal Perkins Loan if you have served full-time in a public or nonprofit elementary or secondary school system as a teacher in a school serving students from low-income families; a special education teacher, including as a teacher of infants, toddlers, children, or youth with disabilities; or a teacher in the fields of mathematics, science, foreign languages, or bilingual education, or in any field of expertise determined by a state education agency to have a shortage of qualified teachers in that state.
For information on Direct Loan and Perkins loan repayment and cancellation options, please visit the Federal Student Aid website.
Public Service Loan Forgiveness
Public Service Loan Forgiveness Program
The Public Service Loan Forgiveness Program is intended to encourage individuals to enter and continue working full-time in public service jobs. Borrowers may qualify for forgiveness on the remaining balance of their federal loan(s) after 120 on-time qualifying payments while working full-time at an eligible public service job. For more information, visit the studentloans.gov website’s
Public Service Loan Forgiveness page.