Student Loan Repayment

There are two categories of student loans – federal and private – and your rights and responsibilities differ depending on which category your loan falls into.  Below, learn how to determine which type of loan you have and what your repayment, deferment or forbearance, and consolidation options are. 

A. What’s the difference? Federal Student Loans versus Private Loans

Most of the student loan debt in the United States is for federal loans, however many students may have private loans.  Federal loans are made by the federal government, while private loans are made by entities such as banks, credit unions, and state-based organizations.  This means that the terms of the loan often differ.  For example, federal loans are made with a fixed interest rate, while private loans can carry variable interest rates, meaning the interest rate will change over time.  Additionally, certain repayment options, such as income-based repayment plans, may be more readily available for federal loans. 

The National Student Loan Data System (“NSLDS”) lists all of your federal loans.  To find out if a loan is federal or private, log on to NSLDS with your FSA ID.  If you hold a loan that is not listed on NSLDS, then that loan is a private loan.  There is no central database like NSLDS for private student loan information.  

For questions about private loans, including how to make repayment more affordable, contact your loan servicer.  The information covered below relates only to federal loans. 

B. Federal Loan Repayment  

When it is time to repay student loans, federal borrowers must choose a repayment plan.  By default, loan servicers will enroll borrowers in the Standard Repayment Plan.  Many other plans are available, however, and loan borrowers have the right to choose a plan. 

Some plans are linked to your income and can significantly lower your monthly payments.  For example, the “Pay As You Earn” repayment plan caps monthly payments at 10% of your income, extends the term of your loan to up to 20-25 years, and offers loan forgiveness after 20-25 years. Federal Student Aid provides a list of the available repayment plans and their associated eligibility requirements, as well as an estimator tool. To change your repayment plan, contact your loan servicer, and if you don’t know who your servicer is, call the Federal Student Aid Information Center at 1-800-433-3243.

Military service members also have access to unique repayment, interest rate reduction, loan forgiveness, and military deferment options that you can learn about here. 

C. Deferment and Forbearance

In some cases, you may wish to postpone payment of your loan for a short time period and may be able to do so by requesting deferment or forbearance.  Deferment is a postponement of payments on a loan, while forbearance is a suspension of loan payments.  Interest will continue to accrue during deferment for some types of federal loans but not others, and will continue to accrue for all types of federal loans during forbearance. 

Deferment or forbearance may be a good option if you are struggling to repay your loans due to a temporary circumstance.  For example, if you are enrolled in school, serving active duty in the military or Peace Corps, or facing a short period of unemployment, deferment could be helpful.

If you are having trouble paying your federal loan due to circumstances that may continue for an extended period, a better option may be to consider changing to an income-driven repayment plan that could  lower your monthly payments and put you on track for loan forgiveness after 20 to 25 years of payments.  This is because deferment and forbearance likely will not advance your progress toward loan forgiveness or repayment.

Learn more about the eligibility requirements for federal student loan deferment and forbearance. 

Private student loans may not have deferment or forbearance options. If you have a private student loan and are worried about making payments, reach out to your student loan provider about your options as soon as possible to discuss your options.

D. Loan Consolidation

If you have more than one student loan, you can combine some or all of your loans into one new loan with one monthly payment.  This is called loan consolidation. Such a decision should be weighed carefully, as you can lose the benefits of some loans when you consolidate them.

Loan consolidation can be beneficial because it only requires one payment each month. It can also lower the monthly payment amount, which can free up funds to pay bills with higher interest rates such as credit cards.  However, it may also extend the repayment period, meaning more interest will accrue over the life of your loan(s), and you may forfeit payment incentives or discounts that are attached to specific loans.  Additionally, consolidation loans have a fixed interest rate that could be higher or lower than your variable rate at different points in time.

Determining if and how to consolidate your loans depends on your individual circumstances. Learn more about federal student loan consolidation, and how to apply. 

While it is possible to consolidate federal and/or private student loans into one private consolidation loan, doing so has risks, including losing many of the benefits (such as qualification for certain repayment plans) that are available only to federal student loans.