Printer FriendlyRepayment Begins
Repayment of your loan begins six months after the day you leave school or drop below half time enrollment. This six-month period is called the "grace period." If you return to school at least half time before the grace period ends, repayment of your loan will again be delayed until six months after you finally leave school.
The first payment on Direct Subsidized and Direct Unsubsidized Loans is due no later than 60 days after the grace period ends. The first payment on a Direct PLUS Loan is due within 60 days after the final loan disbursement. You will receive a bill letting you know your monthly payment amount and the due date.
If you have a Direct Subsidized Loan, you don't pay interest until the grace period ends. If you have a Direct Unsubsidized Loan, interest accumulates on the loan while you are in school and during the grace period. You can either pay this interest as it accumulates, or wait until you begin repaying the loan principal (the amount of money you borrowed). If you decide to delay interest repayment, the interest that accumulates will be capitalized; that is, will be added to your loan principal when you begin repayment. As a result the total amount you'll have to repay will increase.
Whether you have a Direct Subsidized or Unsubsidized Loan, once repayment begins, you will pay interest plus the loan principal; therefore, the total amount you repay will be more than you borrowed. You may prepay your loan - that is, pay all of your loan or make a payment larger than agreed upon, at any time without penalty.
Repayment Options
There are four ways you can repay a Direct Subsidized Loan or Direct Unsubsidized Loan. Direct PLUS Loan borrowers may choose only from the first three options given here. Borrowers can choose a plan to fit their financial circumstances and can change plans if their financial circumstances change.
Here are the four repayment options:
- Standard Repayment Plan
requires fixed monthly payments (at least $50.00) over a fixed period of time (up to 10 years). The length of the repayment period depends on the loan amount. This plan usually results in the lowest total interest paid because the monthly payment is higher and the repayment period is shorter than under the other plans. - Extended Repayment Plan
allows loan repayment to be extended over a period from, generally, 12 to 30 years depending on the total amount borrowed. You will still pay a fixed amount each month (at least $50.00), but usually your monthly payments will be less than under the Standard Repayment Plan. These lower monthly amounts make repayment more manageable, however, you will usually pay more interest because the repayment period is longer. - Graduated Repayment Plan
allows payment to be low at first and increase, generally, every two years. Graduated Repayment may be helpful if your income starts out low but will increase steadily. Your monthly payments must be at least half, but may not be more than one-and-a-half, of what you would pay under Standard Repayment. As in the Extended Repayment Plan, the repayment period will vary from, generally, 12 to 30 years, depending on the total amount borrowed. This extended repayment means your monthly payments may be lower, but again you'll pay more interest than you would under Standard Repayment. - Income Contingent Repayment Plan
bases monthly payments on your adjusted gross income (AGI) and the total amount of your Direct Loans. As your income rises or falls each year, your repayment amounts will be adjusted accordingly. Your required monthly payments will not exceed 20 percent of your discretionary income. The repayment period for this plan will not exceed 25 years. After 25 years, any unpaid amount will be discharged, but you will have to pay taxes on the amount discharged. (Remember, this plan is not an option for Direct PLUS Loan borrowers).
If, because of exceptional circumstances, you can not repay your loans using one of the repayment plans described, you may be able to work out an alternative repayment plan with the Servicing Center. Such a plan would be provided only on a case-by-case basis.
The Direct Loan Servicing Center
Repayment will be simple because the U.S. Department of Education is your lender and will remain your lender. Your payments will go to the Department's Direct Loan Servicing Center. Although the Department has several Servicing Center locations (with separate addresses and telephone numbers), you'll always have only one Servicing Center to deal with, even if you take out several Direct Loans or transfer from one school to another.
Once you get a Direct Loan, you will be notified of your Servicing Center location (the telephone number and address will appear on all correspondence and on all monthly statements you receive). The Servicing Center then becomes your point of contact for information about your Direct Loans. You must make sure the Servicing Center always has your correct address and contact the Servicing Center if you have any questions about, or problems with loan repayment.
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