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Debt Reduction Education

1 - Your Debt2 - Your Budget3 - Reducing Your Debt4 - Debt Consolidation5 - Federal Student Loans6 - Avoiding Debt7 - Resources




Paying Off Your Student Loans

If you financed your education with a federal student loan, you must repay the loan six to nine months (depending on your specific loan) after you graduate, stop attending school or drop out of school.  Use the grace period wisely to start preparing of how you plan to pay back the loan.

Many students graduate and don’t know the details about their loans.  It’s imperative that you review your loan agreement to determine what type of loan you have which includes the grace period, the interest rate and contact information if you have questions or problems.  If you are uncertain as the type of federal student loan you have, you can contact the U.S. Department of Education’s National Student Loan Data System (NSLDS) website at  The site also allows you to track the outstanding balance of your federal student loan.

It’s also a good idea to prepare a monthly budget to help you allocate money to pay your student loan.  (See Making a Budget to help you prepare a budget.)

Choosing a Plan

During your payment grace period after your graduate or leave school you can choose 1 of 4 repayment plans to repay your Direct or FFEL student loan.  The plan options offer differing payment options and length of time to pay back the loan.  If you don’t choose a plan, you will place automatically placed in the standard plan.  

After choosing a plan, you may switch to a different one if your financial circumstances change.  You may switch as often as you like if you have a Direct Loan, but if you have a FFEL loan, you can only change once per year.

If you have a Perkins Loan, your school will determine the amount of your monthly payments based on the amount of loan and your loan repayment period, which is no more than 10 years.

If you have a Direct Loan, you will have the following options:

Standard Plan – This plan is similar to a traditional bank loan, where every month for a period of time (up to 10 year), you repay a fixed payment of at least $50 until the loan is repaid with interest.  The monthly payments are higher with this plan; however, the total amount of interest you will pay is less.

Extended Plan - This plan is similar to the Standard Plan, however, you have 12 to 30 years to repay the loan depending on how much you owe.  The monthly payment for this plan is lower than the Standard Plan but you will pay more interest over the time-frame of the loan.

Graduated Plan – This plan starts your monthly payments out small but gradually increase to a certain amount over time because it’s assumed that when you first graduate from college you can’t afford to pay much but your income should increase over time.  Normally, you will get 12 to 30 years to repay your loan depending on the total amount of money you owe.

Income Contingent Plan – This plan recalculates your monthly payments every year based on your adjusted gross income you reported on your previous IRS tax return.  The total amount of your student loan, the interest rate and your family size is used to determine your monthly loan payment amount.  If your income is very low in a particular year, you may not have to pay anything; however, interest will continue to accumulate causing your debt to grow larger.

If you have a FFEL loan, you have the following options:

Standard Plan - This plan works just like the Standard Plan for a Direct Loan described above.

Graduated Plan - This plan works just like the Graduated Plan for a Direct Loan described above.

Extended Plan – If you owe more than $30,000 in the FFEL loan, you may use to plan because you get up to $25 years to repay the loan with your payments being fixed or graduated.

Income Sensitive Plan - This plan works just like the Income Contingent Plan for a Direct Loan described above.

If you need help in determining which plan is good for you, use the DOE’s interactive calculators at


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