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Federal Direct Loan Repayment Options

The direct loan program offers loan repayment plans designed to meet the needs of almost every borrower. Understanding the repayment process for your federal student loans can go a long way toward building a solid financial foundation.

Standard Repayment

With the standard plan, you'll pay a fixed amount each month until your loans are paid in full. You will have up to 10 years to repay your loans.

Extended Repayment

To be eligible for the extended plan, you must have more than $30,000 in direct loan debt and you must not have an outstanding balance on a direct loan as of October 7, 1998. Under the extended plan you have 25 years for repayment and two payment options: fixed or graduated. Fixed payments are the same amount each month, while graduated payments start low and increase every two years.

Graduated Repayment

With this plan your payments start out low and increase every two years. Your monthly payment will never be less than the amount of interest that accrues between payments. Although your monthly payment will gradually increase, no single payment under this plan will be more than three times greater than any other payment.

Income Contingent Repayment (ICR)

With this plan, each year your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse's income if you're married), family size, and the total amount of your direct loans. Under the ICR plan you will pay each month the lesser of:

  1. The amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or
  2. 10 percent of your monthly discretionary income.

If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized.

The maximum repayment period is 20 years. If you haven't fully repaid your loans after 20 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged. You may, however, have to pay taxes on the amount that is discharged.

Income-based Repayment

Under this plan the required monthly payment will be based on your income during any period when you have a partial financial hardship. Your monthly payment may be adjusted annually. The maximum repayment period under this plan may exceed 10 years. If you meet certain requirements over a specified period of time, you may qualify for cancellation of any outstanding balance of your loans.

Service Repayment Loan Programs

Loan repayment programs offered by federal, state, and local sources may be used as an incentive to recruit and retain health care workers. Loan repayment programs offer health professionals funds for the repayment of qualifying educational loans if particular criteria are met, often including service to particular communities or underserved areas for a specific period of time.

Public Service Loan Forgiveness Program (PSLF)

The Public Service Loan Forgiveness Program is designed to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, direct loan borrowers may qualify for forgiveness of the remaining balance due on their eligible federal student loans after they have made 120 payments on those loans under certain repayment plans while employed full time by certain public service employers. Only loans you received under the direct loan program are eligible for PSLF. Loans you received under any other student loan program are not eligible for PSLF. 

For additional information and/or application materials, please contact: http://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service#what-is-the-public

National Health Service Corps (NHSC) Loan Repayment Program

The NHSC Loan Repayment Program offers primary care medical, dental, and mental and behavioral health providers the opportunity to have their student loans repaid for serving communities in need.  The Loan Repayment Program (LRP) offers two levels of funding, based upon the need of the community in which a provider works. The LRP will provide up to $60,000 to primary care providers practicing at NHSC facilities in Health Professional Shortage Areas for their initial two-year commitment and may be eligible to apply for additional years of support to repay their student loans.

For additional information and/or application materials, please contact: http://nhsc.hrsa.gov/loanrepayment/index.html

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