Federal Loan Repayment

Federal Stafford loan borrowers are not required to make any payments while enrolled in school at least half-time and receive a 6-month grace period prior to repayment.

PLUS loan borrowers generally begin repayment 60 days after the loan has been fully disbursed; however, both parents and graduate students are eligible to receive an in-school deferment as well as a 6-month deferment extension after the student graduates or drops below half-time status (see Deferments below for more information).

Once you enter repayment, you will automatically be set-up on a Standard Repayment plan, given a maximum of 10 years (excluding periods of enrollment of at least half-time, grace, deferment and forbearance, if applicable) to repay your federal loan(s) including interest, and be required to make monthly payments of no less than $50.

In the event you need a lower monthly payment or are curious about other repayment options, NTHEA/HESC does offer a variety of repayment plans including: Standard, Graduated, Income-Sensitive, Income-Based and Extended Repayment. Find out more about each plan below.

Standard Repayment establishes a schedule of equal payments over the life of the loan. This is also the normal repayment plan borrowers are set up with unless a different plan is requested.

Graduated Repayment allows you to begin repaying your loan at a lower payment amount than normal. Every two years, your payment amount will increase until the balance of the loan is repaid within the maximum repayment term applicable to your loan. Overall, you will pay more in interest, but your initial payments are lower than the Standard Repayment plan.

Income-Based Repayment is a new option effective July 1, 2009 for borrowers who experience a partial financial hardship (as explained below). Under this plan, your required monthly payment amount is determined by your annual gross income (AGI) and the poverty level associated with your family size and state of residence. If your total annual student loan payments are greater than 15% of the difference between your AGI and 150% of the poverty level applicable to you, you are considered to be experiencing a partial financial hardship and are eligible for the Income-Based Repayment plan.

Example: For 2009, 150% of the poverty level for a family of 1 living in Texas is $16,245. A borrower with an AGI of $40,000 would have a partial hardship if his/her annual student loan payments were greater than $3,563, or $296 per month ($3,563 is 15% of the result from subtracting $16,245 from $40,000).

The maximum repayment period under this plan may exceed 10 years. If after 25 years of qualifying payments your student loan balance is not paid in full, your remaining balance will be forgiven. The Income-Based Repayment plan is not available for Parent PLUS loan(s), Consolidation loan(s) that repaid any Parent PLUS loan or any defaulted loan(s).

Income-Sensitive Repayment With this option, your monthly payment amount is adjusted annually to reflect changes in your income, based on your total monthly income and total student loan debt. This option may be used for a maximum of five years at which time your account(s) will convert to Graduated or Standard payments. Under this option, you are required to provide documentation of income on an annual basis. If you do not provide documentation of income each year, your loan(s) will be placed on a Standard Repayment schedule.

Extended Repayment allows you to extend your Standard or Graduated Repayment plan for up to 25 years. This plan is only available to "new borrowers" whose federal loan(s) were disbursed on or after October 7, 1998, and who have an outstanding balance of principal and interest totaling more than $30,000. If you have considered consolidating your federal loan(s) you may want to compare the overall benefits alongside those of Extended Repayment - it may be a better option for you.

NTHEA/HESC also understands that there are periods of time, in which you may not be able to make your monthly payment due to certain circumstances. This is why we also offer deferment and forbearance options, so that you can reduce or postpone your monthly loan payments. These periods of time do not count toward the length of time you have to repay your loan(s).

During a deferment you are not required to make any payments. Accrued interest on unsubsidized Stafford or Parent/Grad PLUS loans will be capitalized at the end of the deferment period unless it is paid prior to the deferment end date; interest for subsidized Stafford loans will be paid by the government. You may be eligible for a deferment due to in-school enrollment status of at least half-time, economic hardship, unemployment, or other reasons (contact NTHEA/HESC for additional deferments that may apply). Grad PLUS borrowers whose loan(s) are disbursed on or after 7/1/2006 will automatically be placed in a deferment once their loan(s) have been fully disbursed. Grad PLUS borrowers whose loan(s) are disbursed on or after 7/1/2008 will also receive a 6-month deferment extension after they graduate or drop below half-time status. For Parent PLUS loans first disbursed on or after 7/1/2008, the parent may request that these loans be deferred while the parent or their student is enrolled at least half-time and for 6 months after such enrollment ends.

Forbearance may be granted for a specified period of time if you cannot meet your monthly payments (normally up to 12 months at a time, for a maximum of three years). If forbearance is agreed upon, the lender or loan-servicer has the option to either postpone or reduce your monthly payments. Interest on all loan types will continue to accrue. If you do not pay the interest, it will be capitalized and added to your loan balance.

If you fail to make a payment on time, your loan(s) will be considered delinquent. Failure to make scheduled monthly payments or special arrangements, such as a deferment or forbearance, with your lender to suspend your payments will result in default after 270 days of delinquency. Results of default may include: wage garnishment, negative credit reporting, withholding of IRS refunds, denial of further federal financial aid and much more.

If you are currently in repayment and would like to enroll in a plan other than Standard Repayment or if you are having trouble making your monthly payment and need to apply for a deferment or forbearance, visit the Forms and Calculators section of our site and complete the appropriate "Deferment, Forbearance or Repayment Options" form or call us at 1-800-366-4372 (Monday - Friday between 8:00 am-7:00 pm CT).

Make the right choice!

Be sure to consider the total interest accrued as well as the total amount to be paid when selecting your repayment option.

* The Income-Sensitive Plan is calculated based on an annual salary of $30,000 and 4% monthly gross income allocation to the loan payment. Total interest paid over the life of the loan and the term will vary depending on the percentage of income that the borrower chooses to allocate each year to the loan payment.

Note: The payment amount for any of these repayment options may be adjusted to reflect annual changes in variable interest rates or to account for capitalized interest. Repaying your loans under any plan other than Standard Repayment may result in you paying more interest over the repayment period.