Managing Your Loan Payments

It's easier than you might think. What's more, it will save you considerable angst and eliminate serious negative consequences.

  • On-time repayment of your student loan is critically important. It's also a great way to develop a good credit history, which follows you wherever you go and whatever you do.
  • Delinquent payments are reported to a national credit agency and will damage your credit report and your future ability to borrow.
  • Your servicer can provide you with options if you're having difficulty making payments. If you are not sure who your servicer is, logon to studentaid.gov to find out.
  • The consequences of defaulting on your student loan can be downright scary:
    • You lose the privilege of monthly payments, and the full amount of your loan becomes immediately due and payable.
    • Your wages and/or your entire tax refund may be garnished.
    • Collection charges and attorney fees may be assessed, increasing the loan payoff amount.
    • You will lose your eligibility for any additional federal student financial aid.
    • Your payments may increase, further straining your ability to repay.
    • You will lose the options of deferment and forbearance.
    • You may not be eligible for certain federal and state jobs.
    • You may lose your professional license.

  • A deferment is the temporary postponement of payments on your student loan.
  • Your servicer can advise you on your deferment eligibility status.
  • Primary reasons and time considerations for deferment include:
    • Returning to school at least half time (unlimited periods).
    • Unemployment (six-month period with a maximum of six periods).
    • Economic hardship (12-month period with a maximum of three periods).
  • Deferments are not automatic; you must apply for one and receive approval from your servicer.
  • When subsidized loans are deferred, the principal payments are postponed and the interest is billed to the federal government.
  • When unsubsidized loans are deferred, the principal payments are postponed, but you are responsible for paying the accrued interest.
  • If you received a student loan prior to July 1, 1993, additional factors may constitute eligibility for deferment - a graduate fellowship, military duty, parental leave, and more. Talk to your servicer for details.

  • Forbearance is the temporary cessation or reduction of principal payments on your student loan.
  • You are still responsible for all accrued interest during the forbearance period.
  • If you did not qualify for a deferment but are having a hard time repaying your student loan, you may be eligible for forbearance.
  • Common reasons for forbearance include:
    • Poor health.
    • A rigorous residency program.
    • A loan payment that exceeds 20 percent of your total monthly gross income.
  • Forbearance is allowed at the discretion of the servicer.
  • Forbearance often results in an extended repayment period.

  • A loan may be cancelled under extreme circumstances:
    • Permanent and total disability.
    • Inability to complete a course of study because your school closes (if certain conditions prevail).
    • Eligibility falsely certified by your school.
    • Death.