Repaying Subsidized Student Loans
Most subsidized student loans repayments are for Stafford Loans. Starting in 2010, all federally backed student loans, including Stafford Loans will only be issued and disbursed by the government. However, students that already have student loans with other lenders will not be automatically changed over to the Direct Student Loan program.
While enrolled in school for either undergraduate studies, or in a graduate program, borrowers are not required to make payments on subsidized Stafford Loans. Once the student graduates, or otherwise drops below half-time enrollment, the repayment grace period begins. The grace period lasts six-months during which time payments are not required to be made, and interest continues to be subsidized. After six-months, the student must begin repaying their loans according to a repayment schedule.
Loans issued through a private lender like a bank must be repaid directly to the bank or financial institution. Many banks will either send monthly statements or a booklet of payment coupons, however, this varies from bank to bank.
Loans issued directly from the government are repaid via the U.S. Department of Education Direct Loan Servicing Center. Borrowers may choose from several different repayment schedules. The repayment plans are Standard, Extended, Graduated, Income Based Repayment (IBR), Income Contingent Repayment (ICR) and Income Sensitive Repayment. Students who do not make a repayment election will be enrolled in the Standard repayment plan, and will be mailed a monthly statement.
Payments can be made by check to the address on the statement, or electronically via the Direct Loan Servicing website at www.dl.ed.gov. Some borrowers may be eligible for a reduction in their loan’s interest rate if they setup an automatic monthly payment online and sign up for electronic billing.
Remember that student loans do count on your credit report and factor into your overall credit score. A history of on-time student loan payments is a major plus, especially for students who are just starting out with a new career and building up credit on their own.