Standard Repayment — This plan is the most common and typically the least expensive option in terms of total interest costs. It provides a fixed monthly payment of at least $50 over a period of up to 10 years. You will pay less interest on your loan over time under this plan than you would under other plans. If your monthly payments under this plan exceed 8-10% of your gross monthly income, you might want to consider one of the other repayment options below or loan consolidation.
Graduated Repayment — Monthly payments start low and then increase, usually every two years, over a period of up to 10 years. This may be a good choice if you have a limited income to start, but expect higher earnings in the future. You will pay more for your loan over time than with the 10-year standard plan.
Extended Repayment — This plan is only available if you did not have a balance on a federal student loan as of October 7, 1998. Additionally, it is only available if your outstanding education loan balance is more than $30,000. Under this plan, you may reduce the amount of your monthly payment by spreading payments over a period of up to 25 years. You may choose to make fixed or graduated payments over this extended period. Because payments are stretched over a longer term, total interest costs are higher than under the other repayment plans.
Income-Based Repayment (IBR) — You must have a partial financial hardship to qualify for this plan. Your maximum monthly payments will be 15% of the difference between your adjusted gross income and 150% of the poverty guideline for your family size and state of residence. Payments change as your income changes over the repayment period of 20 or 25 years. Your monthly payments will be lower than payments under the 10-year standard plan, but you will pay more for your loan over time. If you do not repay your loan after making the equivalent of 20 or 25 years (as applicable) of qualifying monthly payments, the unpaid portion will be forgiven.
Pay As You Earn Repayment — You must have a partial financial hardship to qualify for this plan. Your maximum monthly payments will be 10% of the difference between your adjusted gross income and 150% of the poverty guideline for your family size and state of residence. Payments change as your income changes over a period of up to 20 years. To be eligible for this plan, you must be a new borrower on or after October 1, 2007, and must have received a disbursement of a Direct Loan on or after October 1, 2011. Your monthly payments will be lower than payments under the 10-year standard plan, but you will pay more for your loan over time. If you do not repay your loan after making the equivalent of 20 years of qualifying monthly payments, the unpaid portion will be forgiven.
Revised Pay As You Earn Repayment (REPAYE) — Your maximum monthly payments are generally 10% of the difference between your adjusted gross income and 150% of the poverty guideline for your family size and state of residence. Payments change as your income changes over a period of up to 25 years. You may pay more for your loan over time than under the 10-year standard plan. If you do not repay your loan after making the equivalent of 25 years of qualifying monthly payments, the unpaid portion will be forgiven.
Income-Contingent Repayment — Payments are calculated each year and are based on your adjusted gross income, family size, and the total amount of your Direct Loans. Your payments change as your income changes over a period of up to 25 years. You may pay more for your loan over time than under the 10-year standard plan. If you have not repaid your loan in full after making the equivalent of 25 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven.
Loan Consolidation — If you have multiple federal student loans, you can consolidate them into a single Direct Consolidation Loan. This will allow you to make one convenient single monthly loan payment at a fixed interest rate. Depending on your total outstanding loan balance, you may also be able to extend your repayment period and lower your monthly payments. By extending your payment period and making smaller payments over a longer period of time, you will most likely pay more total interest.
After you leave school and start to repay your student loans, it's important to stay in touch with your student loan lender. If you have difficulty making payments, there may be alternative repayment options available to you. If you need contact information for your lender, please contact the GSEP Financial Aid Office at 310.568.5775 or gsepfaid@pepperdine.edu.
Defaulting on a student loan is serious. Default is reported to all national credit bureaus, which could lead to the inability to obtain a credit card, mortgage, or car loan. Your name will be given to the Internal Revenue Service (IRS) which may withhold your State and Federal Income Tax refund. You will lose your rights to deferments and forbearances. Legal action could be taken against you: the interest rate you pay on your loan may increase, and your wages may be garnished. In addition, you will not be eligible for financial aid at any school until your default status has been resolved satisfactorily.
When it is time to repay your student loans, there are several repayment options. Here are some things you need to know before proceeding:
- Know your loan servicer(s) and set up online accounts with them. If you do not remember who your lender is visit the National Student Loan Data System (NSLDS) at nslds.ed.gov. You will find your loan provider's name and contact information and be able to view a detailed list of your outstanding student loans.
- Know how much you can afford to pay each month. In general, education lenders recommend that student loan payments not exceed 8-10% of your gross monthly income. For example, if your annual income is $35,000, you likely can afford monthly student loan payments of no more than $233-$292.
- Explore the different repayment plans that are available and discuss with your loan servicer which one may be best for you.
- You can pay more than your required monthly payment. You may also make payments before they are due. Contact your loan servicer to make sure the payment is applied to the principal balance since interest is charged on this amount.
- If you are having trouble making your loan payment, contact your loan servicer as soon as possible. You may be able to change your repayment plan to one that will allow you to have a longer repayment period and lower monthly payments, or to one that is based on your income. Also ask your loan servicer about your options for a deferment, forbearance, or loan consolidation.
- Understand the basics of consolidation and talk with your loan servicer about whether or not consolidating your student loans may be a good option for you.
- Know how to resolve a defaulted student loan. Default occurs 270 days after failure to make a payment.
- Update your contact information with your loan servicer(s) whenever it changes.
The following websites provide additional information about managing your student loans and loan repayment:
Federal Student Aid ~ Repayment Calculators
Federal Student Aid ~ Repay Your Loans
Federal Student Loans ~ Learn the Basics and Manage Your Debt
PayBackSmarter ~ Managing Your Student Loan Debt & Repayment Comparison
ECMC ~ Your Source for Managing Student Loans
SallieMae ~ Managing Your Money