FAFSA Repayment

“Do you have to pay back FAFSA?” is one of the most common questions asked by students seeking federal aid. When the time comes for FAFSA loan repayment to occur, there is a lot at stake.

For instance, determining when the repayment will begin, as well as how to make the payment will be made, is critical for students to understand after graduating or leaving a post-secondary college or university.

There may be plenty of questions circling the process of federal loan repayment that should be answered in advance. Students should be able to work out a payment schedule, payment amount, as well as any other required information before repayment can occur. To find out more regarding repayment of FAFSA loans, continue reading below.

When do I have to pay back FAFSA loans?

“When do I have to pay back FAFSA loans?” is one of the first questions asked by students who are borrowing federal aid for college tuition. Student loan repayment most commonly occurs after a student leaves college or drops below half-time enrollment. Other specific loans may have different repayment options in place, for instance repayment which begins as soon as the entire loan is fully disbursed.

Related Article: What is FAFSA?

Any lender or loan servicer is required to provide a loan repayment schedule which will state when the first loan payment is due. In addition, the loan servicer will also provide information regarding the frequency of payments as well as the dollar amount for each payment. Different loan options may provide a grade period for students in order for them to acclimate to being out of school and in the work force.

What is a grace period for FAFSA loan repayment?

A financial aid repayment grace period is a set amount of time after a student graduates, drops below half-time enrollment or leaves school in which he or she must begin repaying the loan. The grace period is intended to provide students with time to find a job, become financially settled and select a repayment plan that works with his or her career. While not all federal student loans will provide a grace period for students, it is worth knowing in advance which loans do and do not. Students should also keep in mind, however, that during a grace period for repayment of loans, interest continues to accrue on the loan and will need to be repaid.

An estimate of the grace periods for many government student loan repayment options are as follows:

• Direct Subsidized Loans – 6 months before payment is due.
• Direct Unsubsidized Loans – 6 months before payment is due.
• Subsidized Federal Stafford Loans – 6 months before payment is due.
• Unsubsidized Federal Stafford Loans – 6 months before payment is due.
• PLUS loans – no grace period.
• Federal Perkins Loan – will be determined by the school.

Can a grace period for FAFSA loan repayment change?

Grace periods can change for loan repayment of FAFSA during particular circumstances. Occasions in which the grace period for paying back federal student loans can change, includes:

• Active duty military – when a student is called to active military service for minimum of 30 days before the end of the grace period.
• Returning to school – when a student returns to school or reenrolls at least half-time before the end of the grace period, he or she will receive the full 6 month grace period.
• Loan consolidation – when a student consolidates his or her loans during the grace period, he or she will give up the grace period and being repayment once the entire loan is paid out.

How to Pay Federal Student Loans

Students will be required to pay back federal student loans directly to their loan servicer. The loan servicer will be the one issuing requirements for loan repayment including the terms and start dates. However, students will have the option to determine the repayment plan that he or she wishes to use. There are different federal loan repayment plans that provide students more flexibility based on their income and financial circumstance. Although a student may be selected or assigned a repayment plan to begin repaying his or her FAFSA loan in the beginning, he or she has the option to change the plan for free.

To change a student loan repayment plan, students can contact their loan servicer to discuss the options available to them. In addition, students can use specific resources through the Federal Student Aid website that will help provide different opportunities to explore repayment options. For instance, the Repayment Estimator tool can help students find out in advance which plans he or she will be eligible for and how much he or she can afford to pay monthly or overall.

Different FASFA Loan Repayment Plans

There are a few different options to repay FAFSA loans based on eligibility, such as income-driven repayment plans. Students who have a Direct Loan and Federal Family Education Loan, have the following FAFSA loan repayment options:

• Standard loan repayment plan – all borrowers are eligible and payments are in a fixed amounts to be paid off within 10 to 30 years.
• Graduated repayment plan – all borrowers are eligible and payments are lower at first and increase every two years to ensure the loan is paid within 10 years.
• Extended repayment plan – borrowers with more than $30,000 in outstanding loans can have a fixed or graduated payment plan so loans can be paid within 25 years.
• Revised Pay As You Earn – any borrower with an eligible loan type will have loan repayments in the amount of 10 percent of his or her discretionary income, which can be recalculated each year based on certain factors.
• Pay As You Earn – New borrowers on or after October 1, 2007 will have 10 percent of their discretionary income paid to their loan, but no more than the amount for a standard loan repayment plan.
• Income Based Repayment Plan – Borrowers with a high debt-to-income ratio will make payments in the amount of 10-15 percent of their discretionary income.
• Income contingent plan – borrowers with eligible loans can make payments of 20 percent of their discretionary income or the amount from a fixed repayment plan over 12 years, whichever is a lesser amount.
• Income sensitive repayment plan – borrowers will make a monthly payment based on annual income, but the loan will still be paid in full in 15 years.

Students should explore their options for FAFSA loan repayment in order to choose which is best to suit their needs both right out of school and long term.

Related Article: FAFSA Application Process