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Responsible Borrowing

Using student loans to finance your education is much less stressful if you are an informed and responsible borrower. Understanding when you repay, who you make payments to, what amount you must repay and how to make those payments is key to successfully making your loan repayment. Some of this information is applicable while you are still an enrolled student and some will be more important for planning after you leave school. Knowing how the process works and the options available to you can save you time and money down the road.

  • While You are Still In School
     

    When you receive your financial aid package each year, create a budget to determine exactly how much you need to borrow and accept only what you really need. Explore all grant/scholarship and work options before turning to money that must be repaid. The Financial Awareness Counseling Tool (FACT) is a great way to view your current debt, create a budget with your expenses, and help you determine if you need to borrow additional funds. Additionally, please take the time to learn about entrance and exit counseling requirements.

     With each loan you borrow, you should be aware that this effects your future monthly payment amount. You are encouraged to use the Repayment Estimator. By signing in, this tool will use your current loan debt while giving you the freedom to add loans you think you may borrow in the future.

    Having an idea of what your future salary for your intended career is also a good idea. You want to make sure that you keep your debt at an amount where you can handle your required monthly payment. Using resources such as CareerZone, the National Association of Colleges and Employers Salary Resources, and others may serve as a useful tool to estimate your potential future earnings.

    Create an online account with your loan servicer(s). This is the easiest way to know what’s going on with your existing loans. You can view account balances, see accruing interest (if your loan is not subsidized) and also keep your contact information up to date. If your loans do not have an interest subsidy, you can make interest payments at any time through your online account.

    Sample Standard Loan Repayment Chart

    (Subsidized Loan With A 4.66% Interest Rate)

     

    Loan Balance Repayment Period Monthly Payment Total Interest Paid Total Amount Paid

     $10,000

    120 months $105 $2,553 $12,553

    $15,000

    120 months $157 $3,829 $18,829

    $20,000

    120 months $209 $5,105 $25,105

    $25,000

    120 months $262 $6.382 $21,382

     

  • Who You Pay/Loan Servicer Information
     

    What is a loan servicer?

    Your loan servicer is the company assigned by the U.S. Department of Education that handles the billing and other services on your federal student loan. Your loan servicer will assist you with repayment plans and other related activities. It is very important to maintain contact with your loan servicer. If your circumstances change or you are having difficulty repaying your loan, be sure to contact your servicer because they are there to help you.

    For a list of current federal loan servicers and their contact information click here.


    How do I know who my loan servicer is?

    You can visit the National Student Loan Data System (NSLDS) to view information about your federal loans, including lender and servicer information. You will need your Federal Student Aid (FSA) ID to access your information. If you cannot remember your FSA ID, you may visit the FSA ID website to manage your account. If you have multiple servicers, be sure to contact each one regarding concerns about your loan.

    Be aware that in some situations your federal servicer(s) may change. When this happens, you will be contacted by your current servicer with all of the pertinent information, including who your loans are being transferred to. This is why it is very important that your contact information with your loan servicer(s) is kept current.


    Perkins loans borrowed while attending Stony Brook are serviced by the SUNY Student Loan Service Center. If you have questions or concerns about your Perkins Loan repayment, contact the Student Loan Service Center directly.

  • When You Leave School/Loan Repayments
     

    Subsidized and Unsubsidized loans borrowed under either the Direct or FFEL programs have a six month grace period. The grace period begins when you leave school or your enrollment falls below half-time (6 credits). These loans enter repayment when the grace period ends.

    Perkins loans have a nine month grace period. The grace period begins when you leave school or your enrollment falls below half-time (6 credits). These loans enter repayment when the grace period ends.

    PLUS Loans (Direct and FFEL) do not have a grace period.

    • Graduate and professional students with PLUS loans that were first disbursed after 7/1/08 receive an automatic deferment while in school and a 6-month deferment after they graduate, leave school, or drop below half-time (6 credits).
    • Parent borrowers of PLUS loans must request deferment while the student for whom they borrow is in-school and during the 6-month period after the student leaves.

    When the time comes, you will make your payment to your loan servicer(s). You will be notified by your servicer(s) about when your payment is due, the amount due, and where to send payment. You are encouraged to create an online account with your servicer(s) as it will make management or your repayment easier. You can also sign up for automatic payments, which will help with making your payments on time and even give you a .25% interest rate reduction.

  • Loan Repayment Plans
     

    Choosing the right repayment plan is key to successfully paying back your loans. There are a number of plans available, but your eligibility for a specific plan depends on the types of loans you have, when the loans were borrowed, and the amount you owe. There are also a number of income driven repayment plans that tie your monthly payment amount to annual income. The chart below provides a general comparison of the plans. For detailed information about each of the repayment plans, click here. If you’re not sure which plan is right for you, discuss it with your loan servicer.

    Whichever plan you choose, create a budget to make sure you have the funds to make your monthly payment on time. If you need some tips on budget creation visit our Money Smart Seawolves page.

     

    Repayment Plan Monthly Payment Pros

    Cons

    Standard Repayment Amount owed is spread over 10 years.  Monthly payment amount determined by amount owed (min $50). Generally you will pay the least amount of interest under this plan. Typically your monthly payment amount will be higher than it would on other plans.
    Graduated Repayment Payments start off lower and then increase every 2 years. Lower monthly payment amount in the beginning may be more manageable. You will pay more in interest over the life of the loan than under the 10-year Standard Plan.
    Extended Repayment Payments spread out over longer period of time, up to 25 years.  Payment amounts may be fixed or graduated. By extending the time to pay, you will have a lower monthly payment. You will pay significantly more interest than under the 10-year Standard Plan.  In some cases, you will pay back almost double what was originally borrowed.
    Income-Based Repayment (IBR) Must demonstrate  partial financial hardship .  Maximum payment amount is 15% of your  discretionary income  for up to 25 years.  Monthly payment changes as income changes.

    Payment amount will be lower than on the 10-year Standard Plan.

     If loan is not repaid after making the equivalent of 25 years of qualifying payments, the outstanding balance may be forgiven.

    You will pay more in interest over the life of the loan than under the 10-year Standard Plan.

    Forgiven balance may be taxable.

    Revised Pay As You Earn (REPAYE) Must demonstrate  partial financial hardship .  Maximum payment amount is 10% of your  discretionary income  for up to 20 years.  Monthly payment changes as income changes.

    Payment amount will be lower than on the 10-year Standard Plan.

     If loan is not repaid after making the equivalent of 20 years (if all loans were taken out for undergraduate study) or 25 years (if any loans were taken out for graduate or professional study) of qualifying payments, the outstanding balance may be forgiven.

    You will pay more in interest over the life of the loan than under the 10-year Standard Plan.

    Forgiven balance may be taxable.

    Pay As You Earn (PAYE) Must demonstrate  partial financial hardship .  Maximum payment amount is 10% of your  discretionary income  for up to 20 years.  Monthly payment changes as income changes.

    Payment amount will be lower than on the 10-year Standard Plan.

     If loan is not repaid after making the equivalent of 20 years of qualifying payments, the outstanding balance may be forgiven.

    You will pay more in interest over the life of the loan than under the 10-year Standard Plan.

    Forgiven balance may be taxable.

    Income Contingent Repayment (ICR) Financial hardship not needed.  Payments are calculated annually based on your adjusted gross income, family size, and total loan debt.  Monthly payment changes as income changes.

    Payment more aligned with annual income making monthly payment more manageable.

    If loan is not repaid after making the equivalent of 25 years of qualifying payments, the outstanding balance may be forgiven.

    You will pay more in interest over the life of the loan than under the 10-year Standard Plan.

    Forgiven balance may be taxable.

    Income-Sensitive Repayment FFEL loans only.  Monthly payment based on annual income for up to 10 years.  Monthly payment changes as income changes. Payment more aligned with annual income making monthly payment more manageable.

    You will pay more in interest over the life of the loan than under the 10-year Standard Plan.

    Formula for calculating monthly payment will vary based on lender.

  • Loan Consolidation
     Consolidating your loans is the process of combining one or more loans into a single new loan.  In some cases, consolidation can simplify payment by turning multiple payments into one.  Consolidation can also make you eligible for repayment plans you did not previously qualify for.  However, in some cases consolidation can eliminate certain borrower benefits.  To determine if consolidation is right for you, please visit Federal Student Aid’s consolidation information page.
  • Trouble Making Payments?
     

    There may come a time during your loan repayment that you experience difficulty making your monthly loan payment. The last thing you want to do is skip payments. This will cause your loan status to be reported as delinquent which has negative implications for your credit history. If you become delinquent for an extended period of time, you will default on your loan, which has more severe negative consequences. If you are having trouble, you have some options:

    1. Speak to your loan servicer about changing repayment plans. By switching to a plan that provides a lower monthly payment, that payment may be more manageable.
    2. If you need to postpone making payments and meet certain conditions, you may qualify for a deferment. During deferment, any subsidized loan you have will not accrue interest. To see if you meet the conditions for deferment click here. Also speak to your loan servicer to see if you qualify.
    3. If you do not qualify for deferment, but still need to postpone making payments, you can make a request to your loan servicer to put your loans into forbearance. Be aware that interest accrues on your loans while in forbearance status.

    With all of the different options available, avoiding default is easy. Because the consequences of defaulting are so severe, you want to make sure you take the appropriate steps to avoid it completely. Some of the consequences include:

    • The entire outstanding balance is immediately due.
    • Your wages can be garnished.
    • Your credit rating is negatively affected.
    • Your federal and state tax refunds can be seized.
    • Amount of debt will increase due to late fees, additional interest, court costs, and collection fees.
    • The loan holder can take legal action and you could have liens placed on your assets.