Student Loan Guide
For low-income survivors it is important to understand how transferring schools or taking time off from school may affect your student loans. If you apply for financial aid, your school will likely include student loans to your financial aid package. It’s important to understand what types of loans you are offered as a student. There are federal student loans funded by the federal government and private student loans are usually funded by private lenders such as a bank, credit union, state agency, or school. There are many differences between federal and private student loans you can read about here. The terms for private loans can vary for each borrower. However, the options for federal loan programs are standardized. The following are some basics of federal student loans:
The basic eligibility criteria for students is to demonstrate financial need (for most programs), be a US citizen or eligible noncitizen, be enrolled or accepted to a school with at least a half time course load in a degree or certificate program, and maintain satisfactory academic progress in school.
Federal student loans can be direct subsidized or unsubsidized loans, direct plus loans, or federal perkins loans. Direct subsidized loans the interest is paid by the US Department of Education until you leave school (see grace period and in-school deferment), while unsubsidized loan interest accumulates while you’re in school during grace periods and deferment. Federal PLUS loans are for graduate and professional students or parents. Federal Perkins loans are only offered at certain schools where they are the lender.
Additionally, some federal student loans have loan forgiveness programs where a borrower can apply for their student loan debt to be cancelled or forgiven -- meaning you are no longer expected to repay your debt.
For federal direct loans, students are offered a grace period and in-school deferment options
A grace period is the period of time after a borrower leaves school (i.e. graduates, withdraws, or course load drops below half time) where they are not required to make payments on certain federal loans. This grace period is usually a one time six month deferment.
Some federal direct loans will accumulate interest during the grace period; if the interest goes unpaid, then it will be added to the principal amount of the loan once repayment begins.
In-school deferment is the postponement of repayment of a loan while the borrower is enrolled in school and ends when a student leaves school
If a student leaves school, such as taking a leave of absence, but re-enrolls (does not matter if at the same or different school) within six months they will not be required to begin repayment of student loans. However, if the student graduates or leaves school again, they are required to begin paying off their student loan debt immediately.
When a student re-enrolls in school the in-school deferment begins again and, unlike the grace period, the in-school deferment does not have a one time allowance. Anytime a student is enrolled at least a half time course load their in-school deferment applies for all federal loans.
Federal loans also have multiple options for loan repayment. Some options are standard repayment, income-based repayment, deferment, forbearance, consolidate your loans, and many other plans as well as loan forgiveness. You can also default on your student loan debt which leads to negative consequences on a borrower’s credit. For more information on federal loan repayment options, visit Federal Student Aid.
Deferment is similar to in-school deferment, where a borrower’s responsibility to repay loans is postponed. However, interest on certain federal loans accumulates while others do not. A borrower must first see if they are eligible for short-term deferment due to unemployment or financial hardship.
Forbearance is a period during which your monthly loan payments are suspended or reduced. A lender can grant you forbearance if you are willing, but unable to make loan payments due to financial hardship. During forbearance payments are postponed, but interest accumulates and will be added to the principal amount.
If you have multiple federal student loans you can consolidate them into a single Direct Consolidation Loan. This can simplify repayment, however there are tradeoffs to consider before signing up for this plan.
Additionally, to get a look at which plans you may be eligible for and to see estimates of monthly and overall payments, log into the Repayment Estimator.