Understanding federal student loan repayment

Learn about federal student loan repayment to better plan and avoid forbearance

During college, you can choose to set up your federal student loans so they are deferred, which means you don't need to make payments until you finish school or drop below part-time status. Most federal loans are deferred, but if you obtain a private student loan, you will also have the choice of immediate or interest-only repayment until graduation.

After you graduate college (or leave school), you'll typically have a grace period before you enter your student loans' repayment period. At this point in time, you'll need to begin making regular monthly payments toward the principal and interest of your student loans. Learn more about student loan repayment options below.

Private student loan repayment

The more you know about your private student loan's repayment, the more you'll save

Most lenders offer a number of repayment options. With our Citizens Student Loan you can choose between three different repayment options, with the ability to prepay on your loan without triggering full repayment or a prepayment penalty. The following are three standard options most lenders offer to repay private student loans:

• Full deferral. No principal or interest is due while you are still enrolled at least half-time. Payment begins 6 months after graduation.
• Interest-only. You pay only the accrued interest while you are in school.
• Immediate repayment. Payment of principal and interest begins as soon as the loan is disbursed.

It's important to closely read and understand the language in your loan's promissory note, since it governs terms and conditions of private student loan repayment.

Lenders will most likely notify you before repayment should begin and you'll usually have a period of time between 10 and 25 years to pay off your private student loan. Remember, as the borrower, you are responsible for knowing when your payments are due, regardless of whether or not you've been reminded. Failure to pay in a timely manner can lead to credit problems, student loan forbearance or even loan default.

Having access to the right student loan repayment information helps you make the right choice for your family

Citizens helps you make wise choices by providing student loan repayment information. Visit our student services page to learn more about repayment options on our Citizens Student Loan. If you still have questions, call an Education Finance Specialist at 1-888-411-0266, and we'll help walk you through the process.

Federal student loan repayment

Take the time to understand the steps necessary to repay federal student loans

Among the many attractions of a Federal student loan is the flexibility it offers in repayment terms. You won't be required to begin repaying your Federal student loan until six months after you either graduate or drop below half-time student status. However, for unsubsidized Federal student loans, interest will begin accruing on the loan while you are still enrolled in school. Learn more about the Federal student loans repayment plans you can choose from with Direct Stafford Loans below.

Standard Federal student loan repayment plan

Under this plan you are required to pay a fixed amount each month until the loans are paid in full, with up to ten years to repay. Monthly payments must be at least $50.

Extended Federal student loan repayment plan

Offering a fixed, annual, or graduated repayment amount, the student loan repayment period on this plan doesn't exceed 25 years. The fixed monthly payment is lower than under the standard plan, but the total that is repaid is higher, because interest accumulates for a longer time.

Graduated Federal student loan repayment plan

With this structure payments are lower at first, covering at least the interest that accrues between payments. However, your payments are then ratcheted up every two years, during which time your income will presumably be increasing. Federal student loan repayment is accomplished in a period of up to ten years.

Income-based Federal student loan repayment (IBR)

With this affordable way to repay a Federal student loan, monthly payments are capped at an amount based on your family's size and income. You are eligible for IBR if the monthly student loan repayment amount under IBR will be less than the monthly amount calculated under a 10-year standard repayment plan. If you choose to pay back your college loans under the IBR plan for 25 years, you may be eligible to have your loan balances cancelled at the end of that time. This also applies to anyone who works in the field of public service for 10 years.

Learn more about affordable student loan repayment options

You can find helpful information about repayment and financing options by visiting our student services page. Or, learn more about our Education Refinance Loan, which allows borrowers to consolidate private and federal loans into one new loan. If you still have questions, call an Education Finance Specialist at 1-888-411-0266, and we'll help walk you through the process.

Federal Student loan deferment and deferred interest

Temporary federal student loan deferment scenarios

Your student loan's repayment is important. Experts in college finance warn that no one should take their obligation to repay a federal student loan lightly. Failure to pay, or defaulting on your federal student loan, can have serious consequences for your financial reputation and credit score, just as it would for any other debt. Under certain circumstances you may qualify for a short-term federal student loan deferment. They include:

• Military service: Deferment is offered in cases of active duty service in the armed forces or National Guard.
• Economic hardship: Financial difficulties, including unemployment, might allow you to defer repayment for up to three years, if you qualify.
• Graduate school: Going back for further education often qualifies you for deferment.
• Teaching: If you plan to teach full-time in a low-income area or in critical subject matters (including science, math and certain foreign languages), you may qualify for deferment or even cancellation of your federal student loans. For Federal Stafford Loans, this only applies to loans made on or after October 1, 1998.
• Other forms of payment relief: These may include the right to switch student loan repayment options once a year, and are guaranteed under some federal aid programs.

Generally speaking, if your underlying federal student loan was subsidized, interest will not continue to accumulate during the federal student loan deferment period. To find out more about federal student loan deferment please visit the Federal Direct Loans website or check with your federal student loan lender or servicer.

Learn more about private student loans and deferment from Citizens

Find out more about our affordable financing options and helpful student financing resources. Also, learn about our Citizens Student Loan. If you have additional questions about financing options from Citizens, call an Education Finance Specialist at 1-888-411-0266, and we'll help walk you through the process.

Student loan repayment

Why it makes sense to pay student loans off early

When you're thinking about the structure of your student loan repayment, keep in mind you can make early payments no matter what plan you choose. Most students take the maximum period allowable to pay back their student loans, with some even applying for deferments when they encounter trouble making payments. But for other thrifty students, the idea of paying thousands of dollars in student loan interest on top of their original loan can be unsettling.

If you're worried about how your interest rate will affect your private student loan repayment, you may be thinking about paying your private student loan off early. Most private student lenders don't charge a prepayment penalty, allowing you the flexibility to start paying more whenever you want. Plus, starting payment in school or before the end of your grace period won't trigger full repayment responsibilities. Check out some of the strategies you can employ to pay off private student loans early, thus limiting the amount of interest you'll pay over the life of the loan.

Begin federal student loan repayment during the grace period

Federal student loans include a provision that allows you a grace period during which you're not required to begin repayment for a certain period after graduation. For Federal Stafford Loans, that grace period is six months, and for Federal Perkins Loans, it's nine months. If you land a post-graduation job before that grace period kicks in, why not begin paying your loan earlier than you're required to?

Apply more money toward the principal to pay off federal student loans faster

Remember that the interest on federal student loans accrues, or builds up, on a daily basis. So paying earlier in the monthly cycle will shave a little off your outstanding principal, which in turn reduces the total accumulated interest. You can also pay a little extra each month as long as you make sure to apply it to the principal.

Use financial windfalls to prepay your student loans

At various times, you may come into money that was completely unexpected. Perhaps you receive an inheritance from a grandparent, a bonus at work or get an unexpected tax return. Rather than spending that money, why not consider using it - or at least a portion of it - toward your student loan's repayment? Some people also choose to use any pay raises they receive to pay down their student loans more quickly.

Learn more about affordable financing from Citizens

Another option to help reduce your overall student loan debt is to make interest-only payments while in school. The Citizens Student Loan offers this choice as a repayment option. To learn more about our Citizens Student Loan, call an Education Finance Specialist at 1-888-411-0266, and we'll help walk you through the process.

Federal student loan forbearance

Get federal student loan help when you need it the most

In the context of federal student loans, the word forbearance means a temporary postponement of, or reduction in, payments for a certain period, due to the borrower's financial difficulties. It is not to be confused with loan forgiveness because you still have to pay your remaining loan balance; you are simply delaying it for a time. Some borrowers receive student loan forbearance after unsuccessfully seeking a deferment.

Unlike deferments, federal student loan forbearance means interest will continue to accrue on your loans, whether they are subsidized or unsubsidized. Despite being granted federal student loan forbearance, you're still responsible for paying that interest.

What federal student loan forbearance means to you

Federal student loan forbearance—which is granted in one-year intervals, for up to a total of three years—can help the borrower avoid delinquency or default. To qualify, you must apply to your federal loan servicer and continue to make payments until you've been formally notified that your request for forbearance has been granted.

During the period of federal loan forbearance, you will continue to receive quarterly statements that outline the interest that has accumulated on your loan. If you do not pay that interest, it will be added to your loan's outstanding principal amount.

Do you qualify for mandatory federal student loan forbearance?

There are certain circumstances in which lenders are mandated to grant you forbearance of your federal student loans. They may include:

• A medical or dental internship or residency
• A time when your student loan payments represent 20% or more of your monthly income
• A time when your student loan payments are being made by the Department of Defense

Find flexible student loan help from Citizens

We want to help you find the financing you need, as well as the student budgeting resources and convenient bank accounts that meet the needs of busy students like you. If you need help financing additional education pursuits, find helpful information about our affordable Citizens Student Loan. If you have more questions, call an Education Finance Specialist at 1-800-708-6684, and we'll help walk you through the process.