First thing’s first – do you have student loans already from a previous degree? If this answer is ‘no’ you can skip ahead and just focus on options for graduate students by and of itself. But, if you are like millions of students who do have some educational debt from your undergraduate or other degree work, the first step is to determine which types of loans you have.

Federal vs. Private Student Loans

Fundamentally, there are two main categories of student loans: federal loans and private or alternative loans. These two categories are very different from one another when it comes to repayment and consolidation options, so it’s important to take inventory of what type of loans you have already to ensure your graduate educational debt ‘plays nicely’ with your existing loans when it comes to repayment. There is nothing worse than needing to write eight or ten or more checks a month for small individual loans that cannot be consolidated (aka merged) together. Not only is this a hassle, but it also means a much higher monthly payment amount than if your loans were consolidated.

If you don’t know which of your loans are federal and which are private, there are a few options for you to find out. First, you can review each of your current monthly loan statements and look for the words ‘Federal Direct Unsubsidized, Federal Direct Subsidized, Federal Perkins or Federal Direct PLUS Loans’ on the payment section of your monthly statement or online account. Any loans with those names are clearly Federal Loans.

Alternatively, you can log into your Federal Aid account or at the National Student Loan Database and view your federal loans there. Once you determine which of your loans are federal, you can assume that any remaining loans (if any!) are private or alternative loans. You want to make a list of which loans you have that are federal and which ones are private and your total loan balance on each before making the best decision for how to fund your graduate studies.

When it comes to monthly payments, consolidation, deferral, and payment plans, federal loans can only be combined with federal loans, and private loans can rarely be combined with anything. In fact, in most cases, if you have three different private loans, even if they are with the same servicer, you may still be required to make three separate payments. Private loans all have different terms and conditions, and unless you took the exact same private loan for more than one year in a row, you are bound to have private loans that don’t play nice together in repayment.

This same tenant is true for graduate student loans as well. Graduate federal student loans can be easily and automatically combined with any other federal student loans that you have, which means a lower monthly payment in the long run for you. Similarly, graduate private loans can never be combined with other loans.

Which is Better for Me?

So, if you have federal student loans from previous education, and you are seeking the most affordable and flexible repayment options, federal graduate student loans are a no-brainer. They are automatically consolidated once you graduate and offer a far greater variety of flexible and adjustable repayment options.

Furthermore, you also retain the advantages of forbearance, deferment, Teacher Loan Forgiveness and Public Service Loan Forgiveness that are only available for federal loan holders. Federal graduate student loans don’t all require a credit check, income requirements, and can be processed for you by your Financial Aid Office.

If you do not have federal loans from previous degrees, or if you are looking for the best interest rate and are comfortable with potentially a higher monthly payment for less interest paid during the life of the loan, then a private loan might be something to consider. Private loans do require a strong credit score and consistent income, but they give you the option of a strong cosigner if your credit or income is less than what you want it to be. In some cases, this can mean that you could receive a private loan for as low as 3.75-5%.

This contrasts with federal graduate loans which start at around 6.6% for the 2018/2019 award year. While this interest rate difference might sound massive, it’s only an average difference of $285 a year in interest on a $10,000 loan. But, for the consumer who is looking for the best rate and the lowest cost over time, it may be a good option with one caveat. Often the lowest interest rate private loans are variable and are not fixed rates. This means that the loan interest rate is subject to change at any time, so you do run the risk that in the long run your interest rate could exceed that of a fixed rate federal graduate loan.

In summary, if you have existing federal loans, it’s almost always the best decision to take a federal graduate loan for your graduate studies. This ensures you the most benefits when it comes to monthly payments and the potential for loan forgiveness down the road. If you do not have any federal loans from previous education, and you have a strong credit and financial status, a private loan may be worth the consideration. Whichever route you take, it’s best to read the fine print to ensure you know all the terms and conditions prior to signing on the dotted line.

Interested in learning more about your financial aid options for graduate school? Explore our comprehensive funding e-guide here.

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Benefits of the Federal Student Loan Programs

The biggest benefit (in my opinion) of the Federal Student Loan programs are not just the low interest rates and easier eligibility requirements, but the number of different repayment options and contingencies that they offer. I have always been a ‘what if’ kind of a person myself, so knowing that all these options exist for students is one of the many reasons I have worked in this field for over fifteen years.

Whether you have just begun paying back your student loans, or if you have been in repayment for a while, there are a number of different options available if you struggle to make your monthly payments. However, if you are applying for Teacher Loan Forgiveness or Public Service Loan Forgiveness down the road, you should always check with your loan servicer(s) before making any changes to your federal loan repayment. Sometimes the changes you may make now will have implications in your Teacher or Public Service Loan Forgiveness eligibility, so it’s always best to know the full array of options before making a decision. More information on contacting your loan servicer or finding out who your servicer is can be found here.

Ways to Reduce, Adjust, or Postpone Your Loan Payments

Below are some of the most common ways to reduce, adjust, or postpone your federal student loan payments:

Reduce or Adjust Your Payments:

1. Apply for an Income Driven Repayment Plan (IDR) – If you are looking for a long-term solution to reduce your monthly student loan payments, changing to an Income Driven Repayment (IDR) plan is a great option. These repayment plans cap your monthly payment at a percentage of your monthly discretionary income, assuring that you will always be able to afford your loan payments. There are four different types of Income Driven Repayment Plans which all have different requirements and options. For information on how to apply or to get a repayment estimate, click here.
2. Recertify your Income Driven Repayment Plan (IDR) – If you have had a change in income during your annual payment period, you can opt to update your income and recertify your IDR early before your 12-month cycle is up. This way if you have an unforeseen change in income you can adjust your payments automatically anytime. Information on the recertification process is located here.
3. Change your Income Driven Repayment Plan (IDR) – If you have had an increase in family size or the number of people you are taking care of (such as having a baby, getting married, taking care of relatives, etc.), you can apply to have your IDR plan recalculated. This can be done anytime during your annual application process, and you do not need to wait until your year is up. The same is true if you want to switch from one of the four different IDR plans, because one may benefit you more now than before based on the changes in your family circumstances. Information on changing your plan can be found here.

Postpone Your Payments:

1. Deferment – Deferment is an automatic ‘pause’ on your student loan payments if you qualify. Depending on your circumstances, you could be granted up to 36 months to suspend your loan payments. However, interest will accrue during this time and will be capitalized on your loan balance. This is a particularly helpful option if you have unexpectedly lost a job, had a large or unforeseen medical expenses within your family, or some other financial crisis. A deferment will give you time to get back on your feet financially without any negative impact to your credit score for the time you are in deferment. Common situations that would qualify for a deferment include:

• In-School Deferment – Returning back to school at least half-time
• Graduate Fellowship Deferment – Enrollment in an approved graduate fellowship
• Military Service Deferment – Service in the US Military, Peace Corps, or AmeriCorps. The application is available here.
• Rehabilitation Program Deferment – Enrollment in an approved program for vocational, drug abuse, mental health, or alcohol abuse treatment. Apply here.
• Unemployment Deferment – If you are currently unemployed or working less than 30 hours a week while searching for full-time employment, you could qualify (for up to 3 years!). Apply here.
• Economic Hardship Deferment – If you are receiving a means-tested benefit, such as TANF, SSI, SNAP, welfare, or other government benefits, or if you work full-time and have earnings below the poverty guidelines for your family size and state of residence, you may qualify. Apply here.
• NEW Cancer or Medical Hardship– Starting in 2019, the Department of Education Appropriations Act now allows for a deferment while you or someone in your immediate family is undergoing cancer treatment. This is a new program, so it’s best to contact your servicer directly if you think you may qualify. Find more information here.

2. Forbearance – Forbearance is at the discretion of your loan servicer and can also allow for you to temporarily suspend your loan payments for up to 12 months. This is a good option if you need to extend your deferment or if you have a situation that may not qualify for an automatic deferment. Contact your servicer directly for their forbearance application, but common reasons for a forbearance include financial difficulties, medical expenses, changes in your employment, or other catastrophic or unforeseen life events. While a forbearance is only approved for 12 months at a time, you can receive up to 3 consecutive forbearances so you could pause your loan payments for a total of 36 months.

The post What Student Loan Deferment Options are Available after Graduation? appeared first on Graduate Programs for Educators.

Sometimes people wonder if they can afford to go to graduate school while they are still paying on their undergraduate student loans. The good news is that you don’t always have to pay on them when your back in school (unless you want to!), so you shouldn’t have to worry! Learn about how to delay student loan payments below.

How Long can I Defer Student Loans?

Fundamentally, there are two different types of loan categories, federal loans and private loans. Each one of these has slightly different rules when it comes to repayment options. For federal loans, as long as you are degree-seeking and enrolled at least half-time in your program, your federal loans will automatically be deferred.

At the graduate level, ‘half-time’ status can mean different things based on how your program is designed. However, as a general rule of thumb, as long as you are taking two courses each term you are most often considered at least half-time and therefore able to delay your student loan payments. While you are in graduate school you can of course choose to continue to make payments on your undergraduate federal loans as well, but you won’t be required to.

How to Defer Your Private Student Loans

If you have private loans from your previous degree, those have a variety of different rules regarding in-school deferment options. In most cases they will follow similar rules as your federal loans, and you can defer them while you are enrolled at least half-time. However, not all private loans offer an in-school deferral option, and it certainly won’t be automatic if they do. You will need to consult directly with your loan company to find out the details for your particular loans and what the process is for requesting a deferral. In most cases they will have an online form to complete or a paper form for your new school to complete and submit to them on your behalf. This process is individual to your particular loan holder, so it’s best to inquire early so you know what their timelines are to ensure adequate time.

However, if you have the option of paying on any of your loans while you are in graduate school, you should always pay on your private loans rather than your federal loans. Private loans are often at higher interest rates than federal loans, and they cannot be consolidated the way your federal loans are, so these are always in your best interest to pay off first.

Either way, it’s important to know that even if you choose to put your private loans in deferment for financial reasons while you go back to school, it’s always a better choice to go to graduate school. The increase in earning potential that a graduate degree provides always far exceeds the amount of interest you would have accrued had you chosen to pay your private loans off faster rather than going to graduate school.

When you come to the end of your graduate program and are completing your practicum, thesis, or final culminating experience, some schools do not consider you to be enrolled ‘at least half-time,’ so it’s a good idea to ask your advisor what your specific program defines as half-time in your final semesters. If you are not considered half-time, your federal and private loans will go back into repayment. In those cases, based on your economic status, you can still apply for a deferment for up to a total of twelve months; however, this will not be automatic, and you will need to contact your loan holders at that time.

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What is Student Loan Consolidation?

In essence, a student loan consolidation is when several individual student loans are grouped into one big loan. The interest rates are then averaged in many cases (although some lenders will negotiate and offer you lower rates to consolidate with them, so it’s best to shop around), and you have a longer period of time to pay them back. By consolidating, you not only pay less in interest over the long term, but you almost always significantly reduce your monthly payments. An average student who completed his/her bachelor’s degree in four years, and completed a two-year master’s program, will have an average of 10-14 individual federal loans.

Student Loan Categories

There are two main categories of student loans – federal loans (FFELP Stafford Loans and Direct Loans) and alternative (private) student loans.

• Federal loans are broken into two subcategories categories — FFELP Stafford Loans and Direct Stafford Loans. Each one has the same interest rate and fee structure, however, their consolidation rules are different. To see what loans you have, you can log into the National Student Loan Database (NSLDS) using your specific information and check your loan types.
• Alternative (private) student loans — these are loans that you would have applied for independently from your FAFSA application. These would have required additional steps, such as a credit check, proof of income, and (in many cases) a cosigner. These are held independently by a separate bank or agency (such as a Wells Fargo, Sallie Mae or other lenders). With rare exceptions, these loans are not typically eligible under most consolidation programs. These will also not show up in NSLDS when you log in, as NSLDS is just for your federal student loans and does not include alternative loan data.

Once you’ve logged into NSLDS to see what types of loans you may have, you can also check to see who your “servicer” is for each loan. When you look at each one your loans, there will be an individual servicer associated with it (who you write your checks to each month). Sometimes you may get lucky, and many of your loans have the same servicer, which makes consolidation a bit easier, but it’s more common that you may have several different servicers. In the student loan world, you have one or more individual loans from each year you attended school, so it’s highly possible that based on what school you attended and when, that you would have more than one servicer.

Question to Ask about Consolidation

While the consolidation rules are the same for federal aid programs regardless of which servicer you choose, it’s always best to contact each one and “shop around.” Sometimes different servicers will run programs to incentivize you to consolidate with them for a reduced interest rate or automatic payment reduction. Common questions you would want to ask would be:

• How much would your interest rate be if you consolidated with them?
• What repayment options would you have available?
• What would your monthly payments be?
• Will the interest rate be lowered with automatic payments (most lenders offer up to a .24%-.49% interest rate reduction simply by signing up for automatic payments)?

It’s also very important to let them know right away if you are going to be pursuing the Teacher Loan Forgiveness Program or Public Service Loan Forgiveness, as you must make sure you are enrolled in a qualifying repayment plan.

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Just like with your studying, do not procrastinate when coming up with a plan to repay your loans. If you do, you will never be officially debt-free. Check out the following tips to help you get on the right track.

Pay off Interest While in School

Some of your loans may not require you not start paying anything until after you have graduated. However, the interest is still accruing. If you can financially begin paying some of the interest while you are studying, this will help immensely in the long run. Whether you set aside money weekly, biweekly, or monthly, having a set routine like this will be beneficial after you graduate and start making these payments.

Make More than the Minimum Payment

Just because the bottom line says you only have to pay this amount does not mean that is the best decision. If you only make the minimum payment each month, it will take you significantly longer to pay off the entire loan. It is very common to pay more than the minimum payment. Even doing so in small increments can be very helpful financially.

Additionally, making extra payments each month will chip away at the accruing interest. You can even set up auto-pay so that you do not even have to decide whether or not to make that extra payment.

Choose Loans Carefully

Reach out to your financial aid office before enrolling in a degree program. Ask them to explain all of the different types of loans that you qualify for (such as federal student loans vs. private), what interest rates they have, when you have to begin paying them back, and how much debt you will have when you graduate. Educating yourself will make you financially savvy and ensure that you are not surprised by the debt you are accumulating.

Jobs that Help Pay Back Student Loans

There are many jobs and companies that offer incentives to workers that include assistance programs to pay back student loans also known as student loan forgiveness. Teachers, volunteer organizations, doctors, nurses, and some government workers can enroll in loan forgiveness programs after a certain amount of time in the job. If you do your research and graduate in that field, try to find a job like this.

Choose a Payment Plan

Take the time and call the banks or companies that own your loans. Speak to an actual person and have them explain how to set up a payment plan; a payment plan will be created based on how much you can pay per month and will show you how long it will take you to pay off the loan. Be honest with yourself about your finances to set up a plan that you can stick to and not create more stress in your life. There is no point in making a payment plan if you do not commit to it.

Refinance Your Loans

Do your research on interest rates. Compare current interest rates with the interest rate on your loans. If the current rates are lower, it could be advantageous to refinance your loans and possibly combine loans. This will lead to lower payments and the ability to pay off the loans more quickly. However, be aware that if you refinance federal loans with a private lender, you will not be eligible for federal loan forgiveness programs or deferment programs.

Student loan debt can be overwhelming, but you do not have to let it be. You have done all of the hard work by studying and getting your degree; try not to let the stress of student debts overwhelm your life. Instead, sit down, take the time to understand your loans, and make a plan to pay them back.

Finally, do not accept a plan that will make it difficult for you to live your life from month to month just because you will be able to pay back the loans faster. You will most likely never stick to a plan like that, and then you will end up accumulating even more interest and lengthening the time it takes to become debt-free. Do your research about paying back student loans; it will be worth it.

*Updated January 2022

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Once you graduate, if you teach full time for five consecutive years in a low-income school (or educational service agency), you may be eligible to have up to $17,500 of your Federal Direct Subsidized or Unsubsidized loans eliminated (so yes, this could include any eligible student loan debt from your bachelor’s degree too!). However, there are a few things that you should keep in mind if you want to apply for this program.

First of all, does where you work qualify you for the program? If you are a teacher in a federally approved ‘low-income’ school district (or educational service agency), you may qualify. Every year the U.S. Department of Education puts out an updated list of all the approved schools. While this list may change annually, it’s always a good idea to check ahead when you are interviewing for where you want to work to see if your school qualifies. Check to see if your school qualifies.

Do You Qualify?

Second of all, do YOU as a borrower qualify? Any Federal Direct Subsidized or Unsubsidized loan balances can qualify, as long as you are in good standing on your payments. If you are in default on your student loan debt, you will need to be back in good financial standing with your loans before the remaining balance can be forgiven. But if you make your payments on time, and you borrow only Subsidized or Unsubsidized loans, you should be in good shape for forgiveness. It’s also important to note that Direct Plus Loans and Perkins Loans do not qualify for the Teacher Loan Forgiveness Program.

The good news is that applying for this program is easy. After you’ve completed your five years of service at an eligible school, you can submit your Teacher Loan Forgiveness Application to your loan servicer (aka, who you send your payments to each month). However, it’s always a good idea to contact your servicer before you start your five years of teaching, just in case they have any specific annual requirements. Here’s current application for forgiveness. Your chief administrative officer (or HR Office) at your school will need to complete the certification section prior to your submission to the loan servicer.

There is also a little known secret: If you have more than $17,500 in qualified Federal Direct Student Loans, you could qualify for even MORE forgiveness under the Public Service Loan Forgiveness program as well! For more information on qualifying for both programs together, check out the Federal Student Aid page.

Interested in learning more about your financial aid options for graduate school? Explore our comprehensive funding e-guide here.

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