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Loan repayment options and consolidation

Students who have graduated, withdrawn, or dropped below half time begin their six-month grace period for Federal Direct Loan(s). Students are not required to make principal payments during this time, but it is advisable to consider making payments.

Students who borrowed a Federal Direct Unsubsidized Loan may be responsible for interest payments during their grace period.

When students enter repayment at the end of the six-month grace period, different repayment options are available. They may choose the option that is best for them given their current situation, but may change repayment plans at any time after beginning repayment. 

Students need to contact their servicer if they decide to choose any repayment option besides the Standard Plan. Depending on the total loans borrowed, options available include the following:

  • Standard Plan. This default option will be selected if students do not select a repayment plan. Borrowers using this plan will make fixed monthly payments and will repay their loan(s) within 10 years from the time they entered repayment. This option will result in the least amount of interest being paid.
  • Graduated Plan. Payments will be lower to start and will be increased every two years. The entire amount of the loan(s) will still be paid within 10 years. Using this option will cost borrowers more in interest than the standard repayment plan.
  • Extended Fixed or Extended Graduated Plan. Allows fixed or graduated monthly payments over time, not to exceed 25 years. Borrowers must have more than $30,000 in outstanding Direct Stafford Loans to be eligible for this plan. This option will result in a significantly greater amount of interest paid over the repayment period.
  • Income Contingent Plan. Monthly payments are based on the borrowers' annual household income, family size and total amount of Federal Direct Loans. Repayment will be up to 25 years with loan forgiveness applying after this time. Borrowers will pay a great deal more in interest using this plan.
  • Income-Based Plan. You may utilize this option when experiencing a financial hardship. If granted, repayment will be based on borrowers' income during the hardship period. This, too, will result in more interest being paid over time.

Borrowers also may consider loan consolidation. Loan consolidation allows borrowers to combine multiple loans into a single payment, obtain a fixed interest rate and extend the repayment term (possibly lowering monthly payments). Benefits to loan consolidation include the following:

  • Lower payments by extending the term
  • Fixed interest rates
  • Eligibility for new deferments
  • Flexible repayment options
  • No fees or prepayment penalties

Items to consider when consolidating include:

  • Repayment begins immediately; borrowers may lose six-month grace period
  • Longer term means more interest paid over time
  • Loss of lender incentives from the original loan
  • Cannot consolidate private loans

Contact the Direct Loan Consolidation Center for additional information at 1-800-557-7392.

Please review this information about tax implications related to interest on your student loans.

Consumer information on Public Service Loan forgiveness

The Department of Education posted information to consumers regarding the Public Forgiveness Program.  

Public Service Loan Forgiveness Program