Janice Lozano
Paying off student loans while in school can be a challenging task, but there are ways to make it more manageable. It is important to understand the different loan types, such as federal or commercial loans, and their respective repayment programs and websites. Additionally, loan servicing companies can provide customer service and support for federal loan programs. These companies can help students navigate their loan options and make the repayment process more accessible while they are still in school. Understanding these options can help students make informed decisions about repaying their student loans in a timely and cost-effective manner.
| Characteristics | Values |
|---|---|
| Loan Types | Federal loans under accounts beginning with E or commercial loans under accounts beginning with D and J |
| Servicer Websites | Nelnet.studentaid.gov, SloanServicing.com |
| Servicer Specialties | Nelnet: Federal Direct Loan Program, Federal Family Education Loan (FFEL) Program; Sloan Servicing: Commercially held FFEL Program |
| FSA ID Usage | Log in to StudentAid.gov to determine loan type |
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What You'll Learn
Federal vs. commercial loans
Federal student loans are provided by the government, while commercial or private student loans are funded by banks, credit unions, and other financial institutions. Both types of loans have their own eligibility criteria, application processes, terms, and conditions.
Federal student loans are generally cheaper, more available, and offer better repayment options. They have low fixed interest rates that are not dependent on the borrower's credit history. Some federal loans, such as Direct Subsidized Loans, are specifically for students with demonstrated financial need and do not accrue interest while the student is in school. Federal loans also offer income-driven repayment plans, where the rate of repayment is based on the borrower's salary after college. Additionally, borrowers can change their repayment plan even after taking out the loan.
On the other hand, private student loans offer flexibility in terms of who can take them out, as they can be obtained by a student (often with a cosigner), parent, or creditworthy individual. Private loans usually offer the choice of a fixed or variable interest rate. Fixed rates provide predictable monthly payments, while variable rates can fluctuate based on the loan's index. Private loans may be less expensive for borrowers with excellent credit scores. They also offer different repayment plans, including options to make interest-only or fixed payments while in school, which could lower the total loan cost.
When deciding between federal and commercial loans, it is important to consider factors such as cost, eligibility, repayment options, and safety nets. Federal loans often provide more favourable terms, but private loans can fill the gap if additional funds are needed beyond what federal loans provide. It is recommended to explore federal loan options first before resorting to private loans.
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Repayment programs
There are various repayment programs available for students to help pay off loans while in school. Firstly, there is the Federal Student Loan Repayment Program, which permits agencies to repay federally insured student loans as a recruitment or retention incentive. This program is designed to attract or retain highly qualified employees, and any employee is eligible unless they occupy a position that is excepted from the competitive civil service. Loans that are eligible for payment include those made, insured, or guaranteed under parts B, D, or E of Title IV of the Higher Education Act of 1965, as well as health education assistance loans.
Additionally, there are two types of loans: subsidized and unsubsidized. With subsidized loans, the U.S. government pays the interest on the loan while the student is in school, during the 6-month grace period, and during authorized periods of deferment. On the other hand, with unsubsidized loans, the student is responsible for paying the interest accrued during these periods.
Furthermore, agencies may negotiate with lenders to adjust the existing payment schedule to conform to dollar limits established under the Student Loan Repayment Program. This may involve setting a minimum period of service and determining the loan payment period based on the loan amount and the annual school cost.
It is important to note that eligibility for repayment programs may vary, and certain positions or appointments may be excluded. It is always best to review the specific requirements and conditions of each program to determine eligibility and understand the repayment process.
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Forgiveness plans
Public Service Loan Forgiveness (PSLF)
PSLF is one of the most well-known student loan forgiveness programs. To qualify for PSLF, borrowers must make 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. Qualifying employers typically include government organizations and not-for-profit organizations.
Income-Driven Repayment (IDR) Plans
IDR plans base your monthly payment on your income and family size. At the end of the term, which could be 20 or 25 years, the remaining balance on your student loans may be forgiven. The amount you owe is calculated as a percentage of your discretionary income, which is the income left after taxes and essential expenditures. Discretionary income varies by state and family size, so life events such as marriage or having children can impact your monthly payment.
Teacher Education Assistance for College and Higher Education (TEACH) Grant
The TEACH grant provides loan forgiveness for teachers who commit to working full-time for five complete and consecutive academic years in certain elementary or secondary schools that serve low-income families. This program can provide forgiveness of up to $17,500 and may have additional qualification criteria.
Total and Permanent Disability (TPD) Discharge
If you have a physical or mental disability that severely limits your ability to work now and in the future, you may qualify for a TPD discharge. With this discharge, you don't have to repay any of your federal student loans, and you won't have to complete any outstanding service obligations. You will likely need to provide proof of your disability and may be subject to a post-discharge monitoring period.
Remember, each forgiveness plan has its own specific criteria and requirements. Be sure to review the details of each program to understand your options and determine your eligibility.
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Customer service options
Nelnet, a student loan servicing company, provides customer service for Federal Direct Loan Program and Federal Family Education Loan (FFEL) Program loans owned by the US Department of Education. To access their services, you can log in to Nelnet.Studentaid.gov using your FSA ID to find out which loan types you have. Bookmark this web address for easy access to your loans in the future.
Sloan Servicing is another option for customer service related to commercially held Federal Family Education Loan (FFEL) Program loans. You can log in to SloanServicing.com to access their services and bookmark the login page for future use.
Both Nelnet and Sloan Servicing are part of a broader network of student loan servicing companies that specialize in consumer finance, telecommunications, and K-12 and higher education. These companies provide support and resources to help borrowers navigate their student loan obligations and make informed decisions about their financial aid.
It is important to identify the specific loan type you have to determine the most appropriate customer service options. Federal loans typically fall under accounts beginning with 'E', while commercial loans often start with 'D' or 'J'. Understanding your loan type is crucial for receiving accurate guidance and assistance throughout your repayment journey.
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Making payments on time
Understand Your Loan Terms
Firstly, it is crucial to understand the terms of your specific loan. Different loans have varying grace periods, interest rates, and repayment requirements. Familiarise yourself with the due date of your first payment, which is influenced by your loan type and the terms outlined in your loan agreement. Federal student loans, for instance, typically don't require payments while you're enrolled in school, but interest may accrue depending on the loan type.
Establish a Budget and Payment Plan
Before making any extra payments, establish a realistic budget that takes into account your income, essential expenses, and loan repayment capacity. Contact your loan servicer to discuss your options and direct your payments effectively. You can make one-time payments or set up recurring payments for automatic withdrawal from your bank account.
Prioritise Payments During Grace Periods
If your loan has a grace period, take advantage of it to make payments towards your outstanding interest. By default, loan servicers apply payments to outstanding interest first, and then to the principal balance. During your grace period, ensure that any payments made go towards the outstanding interest on all your loans, and then to the principal of the unsubsidised loan with the highest interest rate.
Make Extra Payments Strategically
If you have the means, consider making extra payments while in school to reduce your overall debt faster. Federal law permits extra payments on federal and private student loans without penalty. This strategy can significantly reduce interest charges and accelerate debt elimination. However, consider your current financial situation and whether you might need those funds for immediate expenses or future loan requirements.
Focus on Unsubsidised Loans
If you have a mix of subsidised and unsubsidised loans, prioritise making payments on the unsubsidised ones. Subsidised loans do not accrue interest while you're in school, so you can save money by focusing on the loans that are actively growing.
Remember, while making payments on time is crucial, it's equally important to balance loan repayment with your immediate financial needs and long-term financial goals.
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Frequently asked questions
Log in to StudentAid.gov using your FSA ID to find out.
A student loan servicing company, like Nelnet, specializes in consumer finance, telecommunications, and K-12 and higher education. They provide customer service for your Federal Direct Loan Program and Federal Family Education Loan (FFEL) Program loans.
You can look into repayment programs and forgiveness plans to help make your student loan payments more manageable.
