BORROWER - Estimated loan payment obligations on your federal student loans

"BORROWER - Estimated loan payment obligations on your federal student loans" submitted by SchoolGrantsfor Editorial Team and last updated on Monday 9th January 2012

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A borrower is the person who receives the loan. Students are the borrowers under the Federal Stafford and SLS programs. Parents of a legally dependent undergraduate student are the borrowers under the current Federal PLUS loan program.

If you’re a federal student loan recipient, there are two key points to remember. First, the interest rate you pay is lower than commercial rates because the federal government subsidizes the loan. Second, if you are a student borrower, you don’t have to begin to repay your Perkins or Stafford Loans until you leave school or drop below half-time. If you are a first-time borrower you must complete an entrance counseling session before you’re given your first loan disbursement. This session provides you with useful tips and tools to help you develop a budget for managing your educational expenses and helps you to understand your loan responsibilities. Parent PLUS Loan borrowers do not participate in entrance counseling.

An Extended Repayment Plan with a fixed annual or graduated repayment amount to be paid over a period not to exceed 25 years. If you’re a FFEL borrower, you must have more than $30,000 in outstanding FFEL Program loans to be eligible for this plan. If you’re a Direct Loan borrower, you must have more than $30,000 in outstanding Direct Loans. This means, for example, that if you have $35,000 in outstanding FFEL Program loans and $10,000 in outstanding Direct Loans, you can choose the extended repayment plan for your FFEL Program loans but not for your Direct Loans. Your monthly payment will be lower than it would be under the Standard Plan, but you’ll ultimately pay more for your loan because of the interest that accumulates during the longer repayment period. Whether you’ll lose any borrower benefits if you consolidate, such as interest rate discounts or principal* rebates, as these benefits can significantly reduce the cost of repaying your loans.

How Much Money Do Students Actually Borrow?

According to the Department, 57 percent of four-year public college graduates in 2003–04 borrowed from the federal student loan programs, with a median debt of $14,400. For students who elected the standard 10-year repayment, the monthly payment is roughly $170. At private four-year colleges, 69 percent of the graduates borrowed, with a median indebtedness of $17,125. This translates into a monthly payment of $200. At community colleges, 30 percent of associate degree graduates borrowed, with a median indebtedness of $5,760, or $65 per month.

The amount of debt that students—especially professional school students— accumulate can be substantial. However, the dollar amount of debt alone does not indicate that a student will have difficulties in repayment. The debt burden facing a borrower in repayment often depends less on the amount borrowed than on the borrower’s income. A radiologist who borrowed $100,000 may find his or her income less encumbered by student loan repayments than a preschool teacher who borrowed $15,000. Financial experts estimate that borrowers who spend more than 10 percent of their gross income on repaying student loans carry a significant debt burden.

Subsidized Direct or FFEL Stafford Loan:

The U.S. Department of Education pays interest while the borrower is in school and during grace and deferment periods; student must be attending at least half-time and have financial need; fixed interest rate of 5.6% for loans made to undergraduates with the first disbursement date between July 1, 2009 and June 30, 2010; fixed rate of 6.8% is set for loans made to graduate students. If you’re a first-year undergraduate student and a first time borrower, your first disbursement can’t be made until 30 days after the first day of your enrollment period and you must complete entrance counseling before you receive your first loan disbursement.

Unsubsidized Direct or FFEL Stafford Loan:

The borrower is responsible for all interest; must be at least half-time; financial need not required; fixed interest rate of 6.8% for new borrowers.

Direct or FFEL PLUS Loan: Borrower must not have adverse credit history PLUS Loans are unsubsidized, the borrower is responsible for all interest; fixed interest rate is 8.5% for FFEL PLUS Loans and 7.9% for Direct PLUS Loans. A PLUS Loan applicant must not have an adverse credit history. (A credit check will be conducted.) If a PLUS Loan applicant does have an adverse credit history, he or she may still receive a loan by documenting existing extenuating circumstances or by obtaining an endorser who does not have an adverse credit history. An endorser is someone who agrees to repay the loan if the borrower fails to do so. Interest is charged on PLUS loans during all periods, beginning on the date of the first loan disbursement. A PLUS borrower may pay the interest as it accrues during a deferment, or allow it to accrue and be capitalized* at the end of the deferment period. A borrower can cancel a PLUS Loan the same way that a borrower would cancel a Perkins or Stafford Loan.

Is there a grace period?

Repayment of a PLUS loan begins on the date of the last disbursement. There is no grace period. However, graduate and professional student PLUS borrowers may defer repayment while they are enrolled in school at least half-time and, for PLUS loans first disbursed on or after July 1, 2008, for an additional six months after they cease to be enrolled at least half-time. Parent PLUS loan borrowers may request a deferment of repayment on PLUS loans first disbursed on or after July 1, 2008, while the student on whose behalf the loan was obtained is enrolled at least half-time and for an additional six months after the student ceases to be enrolled at least half-time. Interest that accrues on a PLUS loan during a period of deferment may be paid by the borrower or capitalized when the deferment period ends.

Military service deferments:

An active duty military deferment is available to borrowers in the FFEL, Direct Loan and Perkins Loan programs who are called to active duty during a war or other military operation or national emergency. This deferment is available while the borrower is serving on active duty during a war or other military operation or national emergency, or performing qualifying National Guard duty during a war or other military operation or national emergency, and, if the borrower was serving on or after Oct. 1, 2007, for an additional 180-day period following the demobilization date for the qualifying service. A borrower who is a member of the National Guard or other reserve component of the U.S. Armed Forces (current or retired) and is called or ordered to active duty while enrolled at least half-time at an eligible school or within 6 months of having been enrolled at least half-time is eligible for a deferment during the 13 months following the conclusion of the active duty service, or until the borrower returns to enrolled student status on at least a half-time basis, whichever is earlier.

For teacher service:

if you are a new borrower (you did not have an outstanding balance on an FFEL or Direct Loan on Oct. 1, 1998, or on the date you obtained an FFEL or Direct Loan after Oct. 1, 1998) and are a full-time teacher in a low-income elementary or secondary school for five consecutive years, you may be able to have as much as $17,500 of your subsidized or unsubsidized loans canceled. This provision is not available for borrowers of PLUS Loans. For more information visit www.FederalStudentAid.ed.gov/TC or call the Direct Loan n Servicing Center at 1-800-848-0979.

Loan forgiveness for public service employees:

For a borrower not in default and who makes 120 monthly payments on the loan after Oct. 1, 2007.

Determine your estimated loan payment obligations on your federal student loans. Repay your loan

Borrow conservatively, budget wisely and plan ahead. Knowing the monthly payments for the amount you borrow is a great start. Knowing in advance how much your monthly student loan payment will be makes it a lot easier to create a workable budget. As you plan for your financial future, use this below chart to determine your estimated loan payment obligations on your federal student loans.

INTEREST RATE 5.00% 6.80% 8.25%
TOTAL AMOUNT BORROWED NUMBER OF PAYMENTS MONTHLY PAYMENT TOTAL INTEREST NUMBER OF PAYMENTS MONTHLY PAYMENT TOTAL INTEREST NUMBER OF PAYMENTS MONTHLY PAYMENT TOTAL INTEREST
$1,000 27 $40 $59 22 $50 $67 22 $50 $77
$3,500 110 $40 $870 90 $50 971 97 $50 $1307
$5,500 120 $58 $1,501 120 $63 $2095 120 $167 $2595
$6,500 120 $69 $1,773 120 $75 $2,476 120 $80 $3,066
$7,500 120 $80 $2,046 120 $86 $2,857 120 $92 $3,539
$9,500 120  $101 $2,591 120 $109 $3,620 120 $117 $4,482
$10,500 120 $111 $2,864 120  $121 $4,000  120 $129 $4,955
$12,500 120 $130 $3,410  120 $144 $4,762 120 $153 $5,898
$20,000 120 $212 $5,456 120 $230 $7,619 120 $245 $9,437
$30,000 120 $318 $8,184  120 $345 $11,429 120 $368 $14,155
$40,000 120 $424 $10,911 120  $460 $15,239 120 $491 $18,873
$50,000 120 $530 $13,640 120 $575 $19,048 120 $613 $23,592
$75,000 120 $795 $20,459 120  $863 $28,572 120 $920 $35,387
$100,000 120  $1,061 $27,279 120 $1,151 $38,096 120 $1,227 $47,183
$125,000 120 $1,326  $34,098 120 $1,438 $47,620 120 $1,533 $58,979
$138,500 120 $1,469  $37,781 120  $1,594 $52,764 120 $1,699 $65,349

Note: These numbers are accurate to the nearest dollar and are based on a standard 10-year repayment plan. For more detailed information, talk to your lender or current holder of your loan.

Courtesy of EdFund

Master promissory note (MPN): a legally binding contract between a borrower and lender listing all terms and conditions of a loan; federal student loans require an MPN.

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