Federal Loan Repayment

College can be an expensive time in a student’s life. For this reason, many students take out federal loans to help pay for their education. There are various types of federal student loans, and each has different stipulations for repayment. This article will help sort out the process of federal loan repayment.

First of all, it is important to understand the different types of loans you may receive from the government. There are subsidized loans and unsubsidized loans. Subsidized loans are based on financial need, and no interest is charged to the student while he or she is in school. Therefore, the interest on these loans is subsidized by the government until the student is finished with school. Unsubsidized loans work in the opposite way. With an unsubsidized loan, interest is accrued beginning on the day the funds were disbursed until the loan is paid off in full. That means that interest can be charged for the amount of the loan as well as interest that has accrued already. To avoid high interest payments, students may begin to pay on the interest while they are still in school.

Once a student is enrolled in less than half-time or after graduation, the student must begin to pay back his or her loans to the government. There are different grace periods for repayment based on which type of loan the student used. For a Federal Stafford Loan, the grace period is six months. For Federal Perkins Loans, this grace period is nine months. After this grace period has elapsed, the student must begin to make monthly payments for a set period of years (usually ten years) to pay back the loans in full. It is extremely important that students make loan repayments on time, because if payments are not received in full and on a timely manner the student could go into default, which destroys credit scores and could end up with serious financial consequences.

For more information on federal loans and federal loan repayment, visit the government’s student aid website at studentaid.ed.gov. There you will find even more information on the various types of loans, federal repayment information, and helpful tools for calculating different repayment plans.