Repayments

It is a requirement that you complete exit loan counselling before you leave university to ensure that you are aware of the types of repayment plans, loan consolidation options and deferment options that are available to you.

As soon as you leave university you have a 6 month grace period before you must commence monthly principal and interest repayments on your loan. If you re-enter university at least half time during your grace period, it is renewed for another six months, so you have the full grace period available when you leave university again.

Before repayment starts, you will be provided with repayment plan options and a Repayment Schedule from your lender or servicer for each type of loan you have. If you do not receive these documents toward the end of your grace period, contact your lender because repayment begins whether you are aware of it or not. Also, all of the borrower benefits will only apply if you make your first payment on time. If at any time you need to change repayment plan, contact your lender or servicer immediately.

Loan consolidation

By the time you finish university, you may have a number of loans. These loans may be with more than one lender and may have different terms. Repayment can become complicated if you have to make different payments at different times of the month. Loan consolidation is a way to make repayment of multiple loans less complicated.

You can consolidate all your federal student loans into one loan with a fixed rate and a single, lower monthly payment. You pay no additional fees to consolidate your loans. More importantly, you may reduce the amount of each monthly payment by extending your repayment term, but remember that a longer repayment term increases the amount of interest you pay over the term of your loan. To be eligible for a consolidation loan, you must be in a grace period, repayment, deferment, or forbearance. You should first discuss consolidation with your existing lenders. If your lender does not consolidate, they will most likely be able to recommend another lender.

The National Student Loan Data System  provides data on all your federal student loans to assist you keep track of the amounts borrowed.

Deferment

An advantage of borrowing through the FFELP is the option you have to postpone repayment for a period of time under certain conditions. However, it is important to note how interest must be paid or not paid on various loans:

Federal Subsidized Stafford Loans

Interest is paid by the federal government during in-university, grace, and authorized deferment periods.

Federal Unsubsidized Stafford Loans

The borrower is responsible for paying the interest that accrues during university, grace, and authorized deferment periods. To apply for a deferment, contact your lender or servicer.

You may renew a deferment, up to the maximum time allowed. You may need to complete and submit separate deferment forms for different types of loan (with FFELP loans, one deferment form is usually sufficient). You should continue making loan payments until you have been notified that the deferment is granted. Keep copies of all forms and correspondence related to your deferment. If you do not receive written confirmation of your deferment, be sure to request it.

Forbearance

If you find yourself in temporary financial difficulty and no deferment option applies to you, you can request to postpone payments with a forbearance from your lender or servicer. Forbearance is granted at the lender's discretion and allows you to have months added to the term of your loan, temporarily reduce the amount of your monthly payment or temporarily suspend monthly payments

Note that interest continues to accrue on your loan during a forbearance. That interest must be repaid, which can result in higher monthly payments once the forbearance has ended. The federal government does not pay the interest on Subsidized Stafford loans while your loans are in forbearance. To apply for forbearance, contact your lender or servicer.

Default and Delinquency

Failure to make your monthly payment within 30 days will result in you being considered as a delinquent borrower and may result in your delinquency being reported to a credit bureau. This could damage your credit rating. It is essential that you contact your lender immediately if you are unable to make a monthly payment to avoid default.

After several months of delinquency, you will be classified as a defaulter.  Defaulting on loan repayments can have a number of serious consequences, including:

• a portion of your wages can be withheld to repay the loan
• you may be sued and you will be responsible for all costs
• collection agencies take over and add an additional 15-18% interest to the loan
• your U.S. federal income tax refunds can be withheld to repay the loan
• a number of US states may cancel your drivers licence
• you lose eligibility for all federal and state financial aid until you have made satisfactory repayment arrangements 
• in a profession that requires a license to practice, that license can be denied renewal until you make satisfactory payment arrangements.

The U.S. Department of Education calculates a cohort default rate annually to determine the percentage of Stafford loan borrowers at each university who default on their loan repayments. Monash University currently has a 0% cohort default rate. A default rate of greater than 5% can result in the loss of Monash University’s entitlement to participate in the Federal Family Education Loan Program.