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Tips for Borrowing and Repaying Student Loans

Now that you know there are available sources to help pay for your education, you may ask yourself, "how much do I really need?"

This is a great question! When it comes to possibly borrowing money, you need to budget and borrow sensibly.

Estimate the Real Cost of College

Financing your college education means much more than just paying tuition expenses. It's important to understand all of the costs involved, including room & board, books, lab fees, student membership fees, online access fees, spending money, etc.

Estimate a personalized college budget. You can also calculate your Expected Family Contribution (EFC) and any loan related repayment costs.

Some Important Facts About Managing Your Finances

Developing and maintaining a manageable budget can be a challenging experience. It's important to focus on developing the ideal budget to fit your unique financial needs. A budget that doesn't reflect your priorities, your preferences, and your personality will never work. See Oklahoma Money Matters for more information on creating a budget.

Some Important Facts About Borrowing

Once you decide to borrow, borrow only what you need.

Estimate the amount of debt you may be able to afford and your monthly student loan payment before you borrow. To get a better idea for how much you should borrow, we recommend that you check out the SLOPE calculator.

Borrowing is a responsibility - take it seriously!

If a student loan is your first borrowing experience, consider this responsibility seriously - your ability to borrow in the future depends on it. Make sure you read and understand the terms and conditions on your promissory note. You are agreeing to repay the loan with all accrued interest and fees. You are obligated to repay your loan whether or not you complete your education, are satisfied with your education, or are able to find a job. Read and keep all records relating to your loan. For additional tips on managing student loans, see Oklahoma Money Matters.

Some Important Facts About Repaying Your Student Loan

When do you have to pay back student loans?

After you graduate, leave school, or drop below half-time enrollment, you have six months before you begin repayment on a Federal Stafford Loan. This is called a grace period. Federal Perkins Loans have a nine-month grace period.

During the grace period on a subsidized Federal Stafford loan, you don't have to pay any principal, and no interest will be charged. However, during the grace period on an unsubsidized Federal Stafford loan, you don't have to pay any principal, but interest will be charged. You can either pay the interest or allow it to be capitalized.

After you leave school or drop below half-time enrollment, you'll receive information about repayment and you will be notified of the date repayment begins. However, you're responsible for beginning repayment on time, even if you don't receive your repayment information.

How do you pay back your student loan?

  • Federal Perkins Loans - For information on repaying your Federal Perkins loans, check with your school's financial aid administrator.

  • FFEL Stafford Loans - There are four repayment plans available to borrowers. The repayment plans will be explained in more detail during entrance and exit counseling sessions at your school. Aspects of these repayment plans will vary by lender. You may choose one of the following repayment plans:

    • A Standard Repayment Plan requires you to pay a fixed amount each month - at least $50 or the interest that has accrued. Unless you receive a deferment, you will have a maximum of 10 years to pay off your loan.

    • A Graduated Repayment Plan begins with lower payments and increases over time. Each of your payments must at least equal the interest accrued on the loan between scheduled payments.

    • An Income-Sensitive Repayment Plan bases your monthly payment on your yearly income and your loan amount. As your income rises or falls, so do your payments. No single required payment may be more than three times greater than any other of your required payments. Each of your payments must at least equal the interest accrued on the loan between scheduled payments.

    • The Extended Repayment Plan allows you to extend loan repayment over a period that is generally 12 to 25 years, depending on your loan amount. Your monthly payment will be lower than it would be if you repaid the same total loan amount under the Standard Repayment Plan, but you will repay a higher total amount of interest over the life of your loan because the repayment period will be longer. You must have loans totaling more than $30,000 to qualify for this plan.

  • Direct Loans - For information on repaying your Direct loans, see our page on Federal Direct Loans or visit the Direct Loan Servicing Center website.

  • Income-Based Repayment - The Income-Based Repayment (IBR) plan is designed to make loan repayment easier for student FFEL and Direct Loan borrowers with lower salaries. The plan caps the monthly payments at a percentage of a your discretionary income and factors in your family size and total amount borrowed. The monthly payment amount adjusts each year based on changes in your annual income and family size. The maximum repayment period is 25 years. After 25 years, any remaining debt is forgiven.

Is it ever possible to postpone repayment of your loan?

  • Federal Perkins Loans - If you have a Federal Perkins loan, you must contact your school's financial aid administrator. For all programs, you might have to provide documentation to support your request. You must continue making scheduled payments until you receive notification that the deferment or forbearance has been granted.

  • Federal Stafford Loans - Under certain circumstances, you can receive a deferment or forbearance on your loan. A deferment allows you to temporarily postpone payments on your loan. If you have a subsidized loan, you will not be charged interest during the deferment. If your loan is unsubsidized, you will be responsible for the interest on the loan during the deferment. If you don't pay the interest as it accrues, it will be capitalized (added to the principal balance of the loan) and will increase the total amount you have to pay. Deferments are available to borrowers during specific situations such as: returning to school, unemployment, disability, or economic hardship.

    If you are temporarily unable to meet your repayment schedule and you are not eligible for a deferment, you may receive a forbearance for a limited and specified period. During forbearance, your payments are postponed or reduced. Whether your loans are subsidized or unsubsidized, you will be charged interest. If you don't pay the interest as it accrues, it will be capitalized.

    Deferment and forbearance options may vary depending on the type of student loans you have borrowed. Additionally, deferments and forbearances are not automatic. If you have a Federal Stafford Loan, you must contact the lender or agency that holds your loan. For more information on deferments and forbearances, you may visit the
    Oklahoma Guaranteed Student Loan Program website.

  • Direct Loans - If you have a Direct loan, you must contact the Direct Loan Servicing Center to request either a deferment or forbearance.
Are there any interest deductions available for paying back student loans?
  • Student Loan Interest Deduction - Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. However, there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education for those who qualify. For more information visit www.irs.gov/publications/p970/ch04.html or see the Internal Revenue Service's (IRS) Publication 970. You can get a copy of Publication 970 Tax Benefits for Higher Education by calling (800) TAX.FORM ((800) 829-3676). You can also view or download the publication from the Internet at http://www.irs.gov/formspubs/index.html.

  • Student Loan Cancellations and Repayment Assistance - Generally, if you are responsible for making loan payments, and the loan is canceled (forgiven), you must include the amount that was forgiven in your gross income for tax purposes. However, if your student loan is canceled, you may not have to include any amount in income. Information is available at www.irs.gov/publications/p970/ch05.html regarding the requirements for tax-free treatment of canceled student loans.

What happens if you don't repay your student loans?

If you fail to repay your student loan for a specified period of time, your loan will default, and the outstanding balance becomes immediately due and payable. A defaulted student loan can negatively affect your credit rating and your ability to borrow in the future. It can also result in:
  • Loss of federal and state income tax refunds
  • Legal action
  • Assessment of collection charges, including attorney fees
  • Loss of professional license
  • Loss of eligibility for deferments
  • Wage garnishment

Need more information on repaying your student loans?

If you have questions on repaying your student loans, there are several people to help you manage your repayment:
  • Federal Perkins Loans - Contact your school's financial aid administrator regarding your repayment options.

  • Federal Stafford, PLUS and Consolidation Loans - You may contact the Oklahoma Guaranteed Student Loan Program (OGSLP) for assistance in developing a successful repayment strategy. For more information about OGSLP's Early Assistance department, visit www.ogslp.org/borrowers. You may also contact Early Assistance at (405) 234-4352 or (800) 358-5460 or by email at wecanhelp@ogsp.org.

  • Direct Loans - Contact the Direct Loan Servicing Center at www.dl.ed.gov.

  • Not sure who to contact?
    You can visit the National Student Loan Data System (NSLDS) website to inquire about the lender and status of your student loans. NSLDS is the U.S. Department of Education's central database for student aid. It receives data from schools, agencies that guaranty loans, the Direct Loan program, the Pell Grant program, and other U.S. Department of Education programs.