Loan Repayment

If you are a student loan borrower, it is important for you to understand your rights and responsibilities. A loan is a legal obligation that you will be responsible for repaying with interest.

Once you are no longer enrolled in at least six credit hours, you will have a repayment grace period. You may choose to prepay your loan without penalty; choose a repayment plan; and be notified by your loan servicer of your repayment date. It is important that you update any changes to your address and other contact information with your loan servicer. The information on this page is designed to help you begin the loan repayment process.  Additional information may be found at www.studentloans.gov. Here are some links to help guide you to a successful repayment plan.

•    Repayment plans - https://studentaid.ed.gov/sa/repay-loans/understand/plans
•    The How, When, Whom about loan payments - https://studentaid.ed.gov/sa/repay-loans/understand
•    Consolidating Loans – https://studentaid.ed.gov/sa/repay-loans/consolidation
•    Loan forgiveness – https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation
•    If you work full-time in a public service job, you may qualify for Public Service Loan Forgiveness.
•    Other opportunities for possible loan forgiveness.
•    You may also want to visit SALT for Federal Student Loan tips.

What is default?

To default means you failed to make your payments on your student loan as scheduled according to the terms of your promissory note, the binding legal document you signed at the time you took out your loan.

How is missing a payment a problem?

Your loan becomes delinquent the first day after you miss a payment. The delinquency will continue until all payments are made to bring your loan current. Loan servicers report all delinquencies of at least 90 days to the three major credit bureaus. A negative credit rating may make it difficult for you to borrow money to buy a car or a house (you will be charged much higher interest rates). You also may have trouble:
•    signing up for utilities,
•    getting home owner's insurance,
•    getting a cellphone plan, or
•    getting approval to rent an apartment (credit checks usually are required for renters).
It is important to begin repaying as soon as you receive a bill. Keep track of your student loan and learn how to manage your loan repayments.

What should I do if my loan is in default?

If you have defaulted on any of your federal student loans, take the following steps:
•    Contact the agency that is billing you.
•    Explain your situation fully.
•    Ask them what options are available to get out of default.
•    Ask them to work with you.
•    Always stay in touch with your lender, loan servicer, or collection agency.

Are you a responsible borrower?


•    Keep track of how much you’re borrowing. Think about how the amount of your loans will affect your future finances, and how much you can afford to repay. Your student loan payments should be only a small percentage of your salary after you graduate, so it’s important not to borrow more than you need for your school-related expenses.
•    Research starting salaries in your field. Ask your school for starting salaries of recent graduates in your field of study to get an idea of how much you are likely to earn after you graduate. You can use the U.S. Department of Labor's Occupational Outlook Handbook to estimate salaries for different careers or research employment opportunities advertised in the area where you plan to live to get an idea of a local starting salary. You also can use the Department of Labor's career search tool to research careers and view the average annual salary for each career.
•    Understand the terms of your loan and keep copies of your loan documents. When you sign your promissory note, you are agreeing to repay the loan according to the terms of the note even if you don’t complete your education, can’t get a job after you complete the program, or you didn’t like the education you received.
•    Make payments on time. You are required to make payments on time even if you don’t receive a bill, repayment notice, or a reminder. You must pay the full amount required by your repayment plan, as partial payments do not fulfill your obligation to repay your student loan on time.
•    Keep in touch with your loan servicer. Notify your loan servicer when you graduate; withdraw from school; drop below half-time status; transfer to another school; or change your name, address, or Social Security number. You also should contact your servicer if you’re having trouble making your scheduled loan payments. Your servicer has several options available to help you keep your loan in good standing.

How do I avoid default?

If you are having trouble making payments on a loan from the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan (FFEL) Program, immediately contact your loan servicer, the agency that handles the billing and other services for your loan.

If you are having trouble making payments on your Federal Perkins Loan, immediately contact the school where you received your loan. Whether your loans are delinquent now or not, you should read our tips to help you avoid default.

What are the consequences of default?

The consequences of default can be severe:

•    The entire unpaid balance of your loan and any interest is immediately due and payable.
•    You lose eligibility for deferment, forbearance, and repayment plans.
•    You lose eligibility for additional federal student aid.
•    Your loan account is assigned to a collection agency.
•    The loan will be reported as delinquent to credit bureaus, damaging your credit rating. This will affect your ability to buy a car or house or to get a credit card.
•    Your federal and state taxes may be withheld through a tax offset. This means that the Internal Revenue Service can take your federal and state tax refund to collect any of your defaulted student loan debt.
•    Your student loan debt will increase because of the late fees, additional interest, court costs, collection fees, attorney’s fees, and any other costs associated with the collection process.
•    Your employer (at the request of the federal government) can withhold money from your pay and send the money to the government. This process is called wage garnishment.
•    The loan holder can take legal action against you, and you may not be able to purchase or sell assets such as real estate.
•    Federal employees face the possibility of having 15% of their disposable pay offset by their employer toward repayment of their loan through Federal Salary Offset.
•    It will take years to reestablish your credit and recover from default.

Other Information

Other information on how to stay out of default can be found through the links below:

Avoiding Default - https://studentaid.ed.gov/sa/repay-loans/default/avoid

Getting out of Default - https://studentaid.ed.gov/sa/repay-loans/default/get-out

Resolving Disputes - https://studentaid.ed.gov/sa/repay-loans/disputes

Loan Deferment and Forbearance - https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance

Research salaries in your desired field - http://www.bls.gov/ooh/

John R. Justice Loan Repayment Assistance Program through KHEAAA - https://www.kheaa.com/website/kheaa/justice_repayprogram?main=1

Federal Student Aid - https://studentaid.ed.gov/sa/