Repaying Your Student Loans

Part I: Planning for Student Loan Repayment

Understanding the loan repayment process is important in making sure you are building a solid financial foundation as you begin your career. There are several different federal student loan repayment options, and you should choose the option which, based on the length of repayment and monthly payment amount, makes the most sense for your financial situation.

Part I focuses on the steps you need to take to gather the information you need in order to determine which repayment option will work best for you.

1. Make a list of all of your outstanding student loans

Federal Student Loans

A list of all of your federal student loans is available in the National Student Loan Data System (NSLDS) which is the Department of Education’s database for student federal financial aid records. All borrowers can access their student loan records online by visiting the NSLDS website. This database will help you to keep track of your loan balances, loan interest rates, and the status of each loan. You can also find out the lender/servicer for each loan and their contact information.

NSLDS lists all of your federal Subsidized and Unsubsidized Stafford Loans, Graduate PLUS loans, and Perkins Loans taken out for each school year of undergraduate school, graduate school, and law school. You may see different names listed for the Stafford or Graduate PLUS Loan, i.e. the Federal Family Education Program (FFELP) and the Federal Direct Loan Program. FFELP is the government guaranteed student loan that was offered through individual banks and lending agencies from 1965 until 2010. The Federal Direct Loan Program is the Department of Education's student loan program that became the sole government-backed loan program in the United States when FFELP was discontinued. Any federal loans you borrowed prior to July 2010 while attending Temple were borrowed through FFELP, and federal loans borrowed after July 2010 were borrowed through the Federal Direct Loan program.

Recent graduates may find that they have loans from both programs, and should consider consolidating their loans through the Direct Loan program to help simplify the repayment process and also make them eligible for more repayment plan options.

Perkins Loan

The Perkins loan is a federal loan with a fixed interest rate of 5%. Your school is the lender for the Perkins loan and any questions or concerns about the repayment of the loan should be addressed to school from which you borrowed the loan. Perkins loans borrowed while attending Temple are handled by the university department of credit and collections, www.temple.edu/bursar, 215-204-5549, and Perkins loans payments are serviced by ACS, www.acseducation.com.

The Perkins loan has the benefit of partial and full loan cancellation for borrowers employed in certain types of public service or law enforcement (includes District Attorney). The amount cancelled depends on the field and the length of service.

Private Student Loans

Private student loans, including bar loans, are credit-based student loans that are offered through banks and other lenders. These loans are not listed on NSLDS. You will need to contact the lenders directly for information about private loans. Most banks and lenders provide online access to your loan information.

2. Find out when loans will go into repayment

Different types of loans have different grace periods and deferment options for delaying repayment. While grace periods are a predefined amount of time available between graduation and when you must begin repaying your loan, deferments are not usually automatic and may have eligibility criteria. These options will be discussed in more detail in Part II, and you can find out more information from the Department of Eduction's Federal Student Aid website.

As a general rule, use the table below as a starting point for understanding your grace period and deferment options.

Loan Type Grace Period Deferment Available
Stafford Loans 6 Months Yes
Graduate PLUS Loans None Yes (Up to 6 Months post graduation)
Perkins Loans 9 Months Yes
Private Loans Varies Varies

It is important to note that student loans borrowed prior to attending law school may go into repayment earlier if more than six months elapsed between leaving undergraduate or graduate school and the start of law school. In this case, your undergraduate and/or graduate school loans will go into repayment approximately 30 days after you graduate law school. Additionally, if you took a leave of absence from law school that lasted more than six months, the loans you borrowed prior to taking the leave will go into repayment 30 days after you graduate and the loans borrowed after will retain their grace period and deferment options. You may want to consider requesting a forbearance or deferment on loans that go into repayment early.

3. Determine if you are eligible for lower repayments or loan forgiveness

Lower Repayments, Deferments and Forbearance

If your income prevents you from making payments on your loan, you may be eligible for different repayment options, forbearance or deferment. If you find yourself unable to make payments, you should check with your loan servicer to investigate the various options and eligibility requirements.

Loan Forgiveness

If you plan to work for at least 10 years in public service employment, you may benefit from the Public Service Loan Forgiveness Program.

4. Consider consolidating all of your loans into one

Loan consolidation can make repayment easier because you will have a single loan to repay instead of many different loans spread across different lenders. You should consider consolidation if:

  • You have loans that are being serviced by different agencies, for example, undergraduate Stafford loans with Sallie Mae and law school Stafford with Federal Loan Servicing.
  • You have many different types of loans, for example some loans under the FFEL Program and other loans under the Direct Loan Program.
  • You plan to work 10 years in public service employment and would like to qualify for the Public Service Loan Forgiveness Program

5. Create a budget

Once you know your income, you should review all of your living expenses, i.e. rent/mortgage, utilities, and spending habits to determine how much you have available each month to make loan payments. You may have to make some adjustments in your lifestyle and spending habits to be able to pay off your student loans in a reasonable amount of time.

6. Prioritize your debt

Your goal should be to pay as little in interest on your loans as possible. Sort your list of outstanding loans by interest rate and plan to make larger payments on higher rate loans in order to pay them off more quickly. Lower rate loans can be paid over a longer period of time.

In most cases, this means paying credit cards first because they usually have the highest interest rate and are the most expensive. If you have private student loans, these should be paid next since they are typically variable and have the potential for high interest rates. Your federal student loans will most likely have the lowest interest rates, and therefore, should be the last payment allotted.

7. What's next?

Now that you have created a budget and identified the essential details of your student loans, you should have a good idea of what you can afford to pay on your federal loans. In Part II of this series, we'll take a look at the many repayment options available to you so you can identify the method of repayment that best fits your budget.

Continue to Part II: Loan Repayment Options