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Student Loan Repayment
Repayment begins at the end of your grace period, which is typically six months after you graduate or fall below half-time enrollment status, or withdraw from school. There may be several payment methods available, depending on your lender.
For the Federal Subsidized Stafford Loan, the Federal Government pays the interest while the student is in school and for the six-month grace period after the student graduates, drops below half-time, or withdraws from school. At that time the student is responsible to pay the principal and interest.
For the Federal Unsubsidized Stafford Loan, the student is responsible for the interest while in school, during the six-month grace period, and when the loan enters repayment.
The easiest payment method for both the borrower and the lender is an automatic fund transfer through the Automated Clearing House (ACH). This is an automatic withdrawal from your account to pay your student loan payment. There is no charge and there are major advantages. You do not pay for checks, envelopes, or postage; payment is never late, ensuring you have no late charges; and, it could save you interest because payments are posted sooner. You just make the entry in your checkbook on the date of withdrawal. Your lender may offer other options such as payment coupons or billing statements. Contact your lender to find out what is available and select the one that suits your needs.
As of July 1, 1996, if you pay an additional amount on a loan payment one month, the amount will automatically be applied to the next month's payments. If your payment is $50 a month and you pay $150 one month, it will pay up the loan for three months. If you don't want this automatically applied to the next payment(s), you must contact your lender and tell them to apply the entire payment to the principal and not count it for the next month's payment.
If for any reason, you have difficulty making the payment on your student loan, contact your lender immediately. Your lender will help you arrange a payment option that will work for both of you and help you avoid the serious consequences that will result if you default on your loan.
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