Around graduation you should have received a letter via email from the Bursar’s office that read something like this:
As a Federal Direct Loan borrower, you are required to complete an exit counseling session. More importantly, we want to remind you of your rights and responsibilities when your loans are to be repaid. Exit counseling provides a complete explanation of repayment, deferments, consolidation, and cancellation privileges.
Exit Counseling is required by federal regulations, so it is important that you do complete the exit soon after graduation.
We also want to alert you to an opportunity to consolidate, or combine all of your student loans, into one new loan at a lower interest rate. The interest rates on most federal student loans are variable and are adjusted annually with a cap of 8.25%. However, interest rates on consolidation are calculated at a weighted average of your loans and may result in a lower interest rate for the life of the loan.
Contact the federal Direct Consolidation Loan Information Center at studentaid.ed.gov to find out if consolidation will result savings for you.
You need to complete an exit interview with each loan lender. Do not delay completing the exit interview. It does not take a lot of time and there is valuable information about your rights and responsibilities. Some of the information is summarized below
Federal Direct Loans
Website for Federal subsidized and unsubsidized student loans through Direct Loans is studentaid.ed.gov
This site has information that you may need to consult, some of which is summarized here.
The Exit Counseling Guide (available at website above), covers the following topics: Money Management, Repaying Your Loan, Payment of Interest and Capitalization, Avoiding Delinquency and Default, Deferment and Forbearance (Postponing Payments), Discharge (Cancellation/Forgiveness), and Loan Consolidation.
Some key points are summarized here:
- Make sure that your loan companies have your current email and snail mail addresses, they will be sending you pertinent information about both pre and post graduation.
- You are required to begin repayment 6 months after the day you are no longer enrolled in school
- There are four repayment plans for federal loans:
Standard Repayment Plan – You make fixed monthly payments and repay your loan within 10 years from the date the loan entered repayment (not including periods of deferment or forbearance). Your payments must be at least $50 a month and will be more, if that is necessary to repay the loan within the required time period.
Extended Repayment Plan – You make fixed monthly payments and repay your loan within 12 to 25 years, depending on the total amount of your Direct Loans. Your payments must be at least $50 a month and will be more, if that is necessary to repay the loan within the required time period.
Graduated Repayment Plan – Your monthly payments will be lower when you begin repayment and will increase, usually every two years. You will repay your loan in full within 12 to 30 years, depending on the total amount of your Direct Loans. At a minimum, your payments must cover the interest that accumulates on your loan between payments.
Income Contingent Repayment Plan – Your monthly payment amount will be based on your annual income (and that of your spouse if you are married), your family size, and the total amount of your Direct Loans. Until they obtain the information needed to calculate your monthly payment amount, your payment will equal the amount of interest that has accrued on your loan, unless you request forbearance. As your income changes, your payments may change. If the loan is not fully repaid after 25 years under this plan, the unpaid portion will be forgiven. You may have to pay income tax on any amount forgiven.
But remember: The longer you take to repay, the more you will repay. Use the chart at the end of the Exit Counseling Guide to estimate the monthly and total amounts you would repay under these plans.
- Choose a repayment plan which is reasonable for you to pay.
- You may change your repayment plan at any time. If you cannot afford the payments of the standard plan, switch to another plan, such as the income contingent plan.
- If at any time you are unable to afford your monthly payments it is important that you communicate with your lender. Defaulting on your loan is not a good idea.
- In times of hardship, it will save you lots of money (in the long run) if you can pay the accrued interest each month. As any unpaid interest gets added to your principle thus causing you to pay much more than you otherwise would.
- Loan consolidation is an option for your various federal student loans. You may be able to lock in a lower interest rate that is fixed for the life of your loan. If you choose to consolidate, make sure you do not waive your right to a six-month grace period post graduation. Note that if you are in repayment, consolidation may extend your repayment period. DO YOUR RESEARCH ABOUT THIS, IT MAY OR MAY NOT BE A GOOD IDEA FOR YOU. More information is listed below.
Student Loan Forgiveness Program:
In 2007, Congress created the Public Service Loan Forgiveness Program to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance due on their eligible federal student loans after they have made 120 payments on those loans under certain repayment plans while employed full time by certain public service employers. The website listed above has a lot of good information about this program, and even easy to understand!
- You can consolidate one or more eligible loans
- Fed will repay those loans and issue you a new loan at a fixed interest rate
- Loan consolidation is free
- Process takes between 30-50 days to complete
- You can take .25% off interest the rate if you elect to use an electronic debit account to pull repayment monies from your checking or savings account
- There are no prepayment penalties, you can pay more per month to pay the loan back sooner without a penalty
- All of the federal repayment plan options are still available
- Repayment plans can be changed at any time
- Borrowers are eligible for 3 years of deferment and 3 years of forbearance
- Consolidation can be done at any time, while in school, in grace period, or while in repayment
- Your consolidation loan interest rate will be fixed, and is calculated by taking the weighted average of the interest rates on the loans being consolidated, rounded to the nearest one-eighth of one percent.
When to consolidate
- Timing is important! Borrowers who apply too early may lose some of their grace period. But, you must make sure the Loan Consolidation Center receives your loan consolidation application while you are still in your grace period. If your application is received after your grace period has expired, you will not receive the lowest possible interest rate.
- Benefit of completing consolidation while in school (prior to graduation) is you maintain your 6-month grace period and you will receive a lower fixed rate than while in repayment. Consolidation must be completed by day of graduation, or you will loose your 6-month grace period.
- If you consolidate during grace period, once process is complete the grace period ends and payment starts immediately. Therefore, it is best to begin the process 45-50 days prior to end of grace period to keep most of grace period and still lock in a lower rate than while in repayment.
- If you are in repayment, consolidating loan will start a new loan repayment period. If you only have 6 months remaining on your loan repayment, this is not a good time to consolidate your loan. It will start a new 10 year repayment timeline.
Eligible loans for consolidation
- Direct Subsidized and Unsubsidized Loans
- Federal Subsidized and Unsubsidized Federal Stafford Loans
- Direct PLUS Loans and Federal PLUS Loans **
- Direct Consolidation Loans and Federal Consolidation Loans
- Guaranteed Student Loans
- Federal Insured Student Loans
- Federal Supplemental Loans for Students
- Auxiliary Loans to Assist Students
- Federal Perkins Loans
- National Direct Student Loans
- National Defense Student Loans
- Health Education Assistance Loans
- Health Professions Student Loans
- Loans for Disadvantaged Students
- Nursing Student Loans
If you have loans through private lenders such as Citi Bank or Sallie Mae, you are required to complete an exit interview with them as well. This is to ensure that you understand the ins and outs of repaying your student loans. Some lenders offer different regulations about repaying your loans. Many of these interviews can be completed online.
Sallie Mae Loan services also offers repayment options similar to the direct loans from the federal government. Visit them online at salliemae.com for full details.
CitiAssist loans from Student loan corporation/Citi Bank offer two repayment plans. Visit them online at studentloan.com
There is a six-month grace period post graduation before repayment begins.
- Level Repayment Plan: You pay the same amount every month for the duration of your repayment period. It’s the least expensive plan in the long run.
- Graduated Repayment Plan: Offers lower, more affordable payments for up to four years with higher payments later. Your loan is repaid in the same time frame as Level Repayment. Total interest costs are slightly higher than the level payment plan. You can now apply online for a Graduated Repayment Plan. (Not available for CitiAssist K-12 Loans).
For CitiAssist® Loans, the maximum repayment periods are:
- Undergraduate loans: 12 years
- Graduate loans: 15 years
Troubleshooting loan problems
Problem #1: You never completed an exit interview.
Action plan: Contact your financial Aid office they will direct you to the appropriate place to complete the interview.
Problem #2: You received loan money in school, but have never received any bills and have not paid any money to your lenders.
Action plan: Call your loan company.
If you do not know how to get in touch with your loan company, call the Federal Student Aid Information Center at 1-800-433-3243. They will be able to tell you who your lenders are and how to contact them.
Problem #3: You cannot afford to pay any money to the lenders, and have never contacted them.
Action plan: Call your lenders and negotiate with them. At this point you may be in default on the loan. As this is not good for your credit history, you should try to work/negotiate with the loan company to get them to help you get out of your default status. Each loan company wants their money back, and they will do what they can under the law to get it. However, if you are broke and you cannot pay them, they will help you work out a mutually beneficial deal. If you do not contact them, they will not be able to help you and will try to get their money anyway they can. If you call them they will work with you, which is generally much better for you!
The bottom line: No matter what the problem is, and no matter how much time has passed, contact your loan company.
Avoiding Delinquency & Default
If you think you might have a problem making the scheduled payments on your loans, contact the Direct Loan Servicing Center immediately to discuss other repayment plan options and whether you are eligible for a deferment or forbearance.
You are delinquent if your monthly payment is not received by the due date. If you fail to make a payment, they will send you a reminder that your payment is late. If your account remains delinquent, we’ll send you warning notices reminding you of your obligation to repay your loans and the consequences of default. Late fees may be added, and your delinquency will be reported to one or more national credit agencies.
Default occurs when you become at least 270 days delinquent in making payments on your loans. If you default:
- The entire unpaid amount of your loan becomes due and payable.
- You will be reported in default to national credit agencies.
- You may be sued, all or part of your federal tax refund or other federal payments will be taken, and your wages will be garnished so that your employer is required to send part of your salary to pay off your loan.
- You’ll have to pay collection fees and costs, plus court costs and attorney fees.
- You’ll lose eligibility for other Federal Student Aid and most other federal benefit programs.
- You’ll no longer be eligible for loan deferments (such as deferments while you’re in school, unemployed, or experiencing economic hardship).