Repaying your Student Loans

In order to repay your loans, you must know what loans you have. Organize your student loans and keep your records in order so that you can make more informed decisions about managing your debt. There are many tools available to assist you with this process, including the following:

AAMC’s Medloans Organizer and Calculator. It’s a great tool to track your loans now and to project repayment scenarios in the future, both during and after residency.

Federal Student Aid Repayment Estimator. This tool also allows you to estimate your federal student loan payments under each repayment plan.

Know Your Loans

All Stafford loans at UIC are Direct Loans. You borrow directly from the federal government. You may have borrowed Stafford Loans from private lenders, Federal Family Education Loans (FFEL) in the past.

Know Where to Locate Your Federal Loan History

The National Student Loan Data System (NSLDS) is the Department of Education’s central database for student aid. You can access all your federal student loan history online at www.nslds.ed.gov. You will need your Department of Education PIN (the same PIN you use to sign the FAFSA).

Know What Is Expected of You Before You Graduate

Before you graduate, plan to attend the Exit Presentation. This presentation will provide you with detailed information about your repayment obligations and options.

Know What Is Expected of You After You Graduate

After you graduate, leave school, or drop below half time enrollment, you will go into repayment on your student loans. For Stafford Loans, you have a grace period of six months. Perkins Loans have a nine month grace period. Graduate PLUS loans have a deferment period of six months. Previously Consolidated loans do not have a grace or auto deferment period, and will go into repayment immediately after you graduate, leave school, or drop below half time enrollment. Any subsized loans do not accrue interest during grace or deferment periods. Any type of unsubsidized loans (including Graduate PLUS), accrue interest during grace and deferment periods, and unpaid interest is capitalized at the end of these periods.

Know the Repayment Plans Under the Direct Loan Program

STANDARD REPAYMENT PLAN – Under this plan you will pay a fixed monthly amount for up to 10 years (if you do not select a repayment plan by the time repayment begins, your loan(s) will be placed in the Standard 10 year Repayment Plan). For most borrowers, this plan results in the lowest total interest paid because the repayment period is shorter than it would be under the other plans.

EXTENDED REPAYMENT PLAN – Under this plan you will pay a fixed amount monthly for up to 25 years, depending on the total amount you owe. Selection of this plan will result in a lower monthly payment; however, total interest paid will be higher than the total interest paid with Standard Repayment Plan.

GRADUATED REPAYMENT PLAN – With the Graduated Repayment Plan, your payments start out low, and then increase every two years. The repayment period for your loan can be up to 10 years, depending on the total amount you owe. Generally, the amount you’ll repay over the term of your loan will be higher under the Graduated Repayment Plan than under the Standard and Extended Repayment Plans. However, if your income is low when you leave school but is likely to steadily increase, this might be the best plan for you.

INCOME CONTINGENT REPAYMENT PLAN – The Income Contingent Repayment Plan (ICR) is designed to give borrowers the flexibility to meet their student loan obligations without causing undue financial hardship. The maximum repayment period is 25 years under this plan. Each year your monthly payment will be based on your family size, annual Adjusted Gross Income (A.G.I.) as reported on your federal tax return, and the total amount of your Direct Loan(s). To participate in the ICR Plan you must authorized the U.S. Internal Revenue Service (IRS) to inform the U.S. Department of Education (ED) of the amount of your income. This information will be used to calculate your repayment amount, which will be adjusted annually to reflect changes in your A.G.I.

INCOME BASED REPAYMENT PLAN – The Income Based Repayment Plan (IBR) is similar to the Income Contingent Plan, but might be a better option for many medical students. It sets monthly payment amounts at 15% of your discretionary income. Payment amounts are recalculated each year based on your Adjusted Gross Income (AGI) on your federal tax return, family size and state of residence. The maximum repayment period is 25 years under this plan.

PAY AS YOU EARN PLAN – The Pay As You Earn Repayment Plan (PAYE) is similar to the Income Based Plan, but is only available to new borrowers on or after Oct. 1, 2007 that have received a disbursement of a Direct Loan on or after Oct. 1, 2011. It sets monthly payment amounts at 10% of your discretionary income. Payment amounts are recalculated each year based on your Adjusted Gross Income (AGI) on your federal tax return, family size and state of residence. The maximum repayment period is 20 years under this plan.

Know That You Can Prepay on Your Loans at Any Time:

You may prepay all or part of the unpaid balance on any Direct Loan at any time, without an early repayment penalty. If you have more than one Direct Loan, be sure to specify which loan you are prepaying. Like all other Direct Loan payments, your prepayment will first be applied in the following order: outstanding fees and charges, then outstanding interest, and finally to the principal balance of your loan(s).

Know the Consequences of Default:

Default occurs when you become 270 days delinquent in making a payment on your loan(s). If you default: you will not be eligible for any further federal student financial aid; your employer, at the request of the federal government, can withhold (garnish) part of your wages and forward them to the federal government; your account will be reported delinquent to credit bureaus, which can damage your credit rating; you will lose your deferment option; the entire unpaid balance and accrued interest on your loan could become immediately due and payable. Your account will be turned over to a collection agency and you could be responsible for court costs, collection fees, attorney’s fees, and other costs that may increase your total debt; the federal government can impose a federal offset, which includes tax refunds, social security payments, veteran’s benefits, and federal government pensions; and the federal government can take legal action against you.

Know Your Deferment or Forbearance Options:

DEFERMENTS – A deferment is a temporary postponement of your monthly loan payment. The are many types of deferments available.

FORBEARANCE – A forbearance is a temporary postponement or reduction of loan payments for a limited and specified period of time. A forbearance can help you during times when making your monthly payment is difficult and you are not eligible for a deferment.

Know About the Opportunity for Loan Consolidation

Loan consolidation is when you take one or more federal loans and combine them into one new loan. It simply means paying off or refinancing multiple loans with one new loan. It is not the same thing has having all your loans with one lender servicer (often called “serialization” or “combining” loans). A consolidated loan typically has a longer repayment schedule, up to 30 years, thereby decreasing the monthly amount you pay, but increasing the total amount of interest you pay over the life of the loan.

Before you make the decision to consolidate, you should consider the following:

Ø Why do you want to consolidate?

Ø How long does your internship/residency take to complete?

Ø What benefits will I lose if I consolidate my individual loans into one bigger loan?

Ø What are the deferment options on the consolidated loan?

For typical U of I COM graduates, there are a few circumstances where consolidation might provide benefits:

If a student has a large amount of variable-rate student loan debt from prior to 2006 and he wants to lock in a fixed rate for those loans.
If a student has already exhausted deferment options on her student loans, and she anticipates the need for additional deferment options in the future
If a student has FFEL loans from prior academic pursuits, and he wants those loans to be eligible for Public Service Loan Forgiveness or the Pay As You Earn income driven repayment plan. Read more on these programs for eligibility criteria.
If a student has multiple FFEL lenders from prior academic pursuits, and she wants the convenience of consolidating down to one loan.

Sample Loan Repayment Scenarios

To give you a rough idea of what repayment of your student loans might look like, here is a loan repayment sample using the assumption that all loans are Direct Stafford Loans at a 6.8% fixed interest rate. The following chart shows monthly payment amounts for different aggregate loan totals and under different repayment plans.

Monthly Payment Amounts for Various Loan Totals
	$100,000	$150,000	$200,000
Standard	$1,150	$1,726	$2,301
Extended	$694	$1,041	$1,388
Graduated	$790 – $1,726	$1,185 – $2,589	$1,580 – $3,452