Paying Back

Frequently Asked Questions

Q: When does my student or I have to pay back the principal and the interest on the loan?
A: Repayment of interest and principal depends on the type of loan received.

Q: How do I, as a parent, begin paying back the Parent (PLUS) Loan?
A: You are responsible for all interest beginning from the date of disbursement. Your first payment (principal and interest) is due within 60 days of the last disbursement.

Q: Are there any tax discounts available for paying back student loans?
A: Yes, for certain higher education expenses, including a deduction for student loan interest for certain borrowers. This benefit applies to all loans used to pay for postsecondary education costs, including PLUS Loans. The maximum deduction is $2,500 a year. IRS Publication 970, Tax Benefits for Higher Education, explains these credits and other tax benefits. You can find out more at irs.gov, or by calling the IRS at 1-800-829-1040. (TTY callers can call 1-800-829-4059.)

Q: What do I do if I can’t make my payments? Can I apply for Deferment or Forbearance?
A: Receiving Deferment or Forbearance is not automatic. As a parent, either you or your student must apply for it.

Q: What kind of loan deferments and forbearances are available to my student or me?
A: Under certain circumstances, you, as a parent can receive periods of deferment or forbearance that allow you to postpone loan repayment. This may also apply to your student. Deferments and forbearance periods don’t count toward the length of time you have to repay your loan. You cannot get a deferment or forbearance for a loan that is in Default.

Q: How does my student qualify for a deferment?
A: The most typical loan deferment conditions are:

1. Enrollment in school at least half time
2. The inability to find full-time employment (for up to three years)
3. Economic hardship (for up to three years).

Other deferment conditions are loan specific. Your student should see their school financial aid office and/or contact the lender or agency holding the loan.

Q: Can I, as a parent, defer repayment of the Parent (PLUS) Loan?
A: Yes, as long as the loan isn’t in Default. Generally, the same deferment provisions that apply to Stafford Loans apply to PLUS Loans. Because PLUS Loans are unsubsidized, however, you will be charged interest during periods of deferment. If you don’t pay the interest as it accrues, it will be capitalized (click here for more).

Q: What are the consequences of Default?
A: The consequences of Default are severe. Your school, the lender or agency that holds your loan, the state, and the federal government may all take action to recover the money, including notifying national credit bureaus of your Default. This affects your credit rating for a long time. For example, you might find it very difficult to borrow money from a bank to buy a car or a house. In addition, the Internal Revenue Service can withhold your U.S. individual income tax refund and apply it to the amount you owe, or the agency holding your loan might ask your employer to deduct payments from your paycheck. Also, you’re liable for loan collection expenses. If you return to school, you’re not entitled to receive additional federal student aid. Legal action also might be taken against you. In many cases, Default can be avoided by submitting a request for a deferment, forbearance or discharge (cancellation), and by providing the required documentation.

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