Finding your way through the peaks and pitfalls of student loan repayment can be a daunting task and many borrowers head down the repayment trail without having the tools they need. Some situations may cause you to stray from making payments while other obstacles simply leave you bewildered.

You may have several different types of student loans, each being held by a different lender or servicer. For example, if your school participated in the Federal Family Education Loan (FFEL) Program, you borrowed from a commercial lender and your loans are guaranteed by a guaranty agency. If your school participated in the Federal Direct Loan Program (FDLP), your lender is the U.S. Department of Education. If you were a "high need" student, you may have received a Perkins Loan which must be repaid to your school or its servicer. Finally, you may have borrowed an "alternative loan," which is a non-federal loan made by a private lender. Whatever the source of your loans, this guide can help you navigate through the repayment process. 

A brief comment about student loan types and interest rates. The loans you received to finance your higher education expenses are either subsidized or unsubsidized loans. Subsidized loans are "interest-free" while you are enrolled at least half-time or in a period of grace or authorized deferment. (Most Stafford Loans have a one-time, six-month "grace period," meaning payments are not required to be made for a period of six months after the borrower leaves school.) For unsubsidized loans, accruing interest is always your responsibility.
 
Speaking of interest, here are a couple of things to know. The interest rates on your loans are either fixed or variable. Variable rates are adjusted annually on most federal student loans and can rise or fall with market conditions. The maximum rate is 8.25 percent on student loans and 9 percent on parent (PLUS) loans borrowed after July 1, 1994. (If you borrowed some of your loans prior to July 1, 1994, contact your lender or servicer for your interest rate information.) Regardless of the rate, interest paid on your federal student loans may be tax deductible. Visit with your tax preparer for details. 

When you signed your student loan promissory notes, you acknowledged the following rights and responsibilities.

Your Rights:

• You are entitled to a copy of your Repayment Schedule and Disclosure Statement.
• You have the right to be notified in writing if your loans are sold or transferred for servicing.
• You are entitled to a repayment period of at least five years.
• You have the right to prepay any part of your loan at any time without penalty.
• If you qualify, you have the right to defer your loan payments.
• You are entitled to have any questions about your student loan answered by your lender, guarantor, or the U.S. Department of Education.
• You have the right to have your loan canceled as a result of death or total and permanent disability.
• You have the right to a graduated or income-sensitive repayment schedule.
• If you first borrowed on or after October 7, 1998, and have a debt of at least $30,000, you are entitled to an extended repayment schedule.
• You are entitled to receive the original Promissory Note when your loan is paid in full.

Your Responsibilities:

• You must notify your lender or servicer if you change your name, address, or enrollment status (i.e., you withdraw, graduate, drop to less than half-time enrollment, or change your school of attendance).
• You are responsible for knowing the terms of your student loans. You should keep copies of all student loan documents in a safe place.
• You must repay your loan whether or not you complete your studies, are satisfied with the education you receive, or are able to find employment.
• You must make your loan payments on time.
• You must begin making payments at the end of your grace period whether you have received a repayment schedule or not. If your first payment due date is nearing and you have not received a payment schedule, you must immediately contact your lender or servicer.
• If you are unable to meet a scheduled payment, you must contact your lender or servicer as soon as possible. The lender or servicer may be able to help if you seek assistance before you are late making a payment.
• When you graduate, withdraw, or drop to less than half-time enrollment, you must give your school your expected permanent address, the name and address of your expected employer, and the address of your closest relative. Your school will forward this information to your guarantor, lender, or loan servicer.

Repaying Your Student Loan
 
Once you've established your budget, choose the student loan repayment plan that works best for you. The various repayment options are described below. You will need to contact your lender or servicer if you want to repay your loans under any plan other than standard repayment.
 
If all or a portion of your loans were borrowed through the Federal Direct Loan Program, you may want to contact the Direct Loan Servicer at (800) 848-0979 or http://www.dlservicer.ed.gov/ .

Standard Repayment

Under the standard repayment plan, you repay your student loan in equal monthly installments over a period that cannot exceed 10 years (120 monthly payments). Your minimum monthly payment will not be less than $50 and may be greater depending on the total amount you borrowed. Although the maximum repayment term is 10 years, your loan may be repaid in fewer than 10 years, depending on the loan balance. The standard repayment plan is the one your lender or servicer will assign to you unless you select a different repayment plan.

Loan Amount	Monthly Payment Amt.	Total Amount Paid
$15,000	120 payments @ $184	$22,078

Peak: A standard repayment plan has a predictable payment schedule, ensures the quickest payoff, and minimizes your total interest costs.

Pitfall: If you have several high-balance loans, your monthly payments might be too high to fit within your budget. If that is the case, you should consider other repayment plans, deferment or forbearance, or loan consolidation.

Graduated Repayment

If standard repayment requires payments higher than you can afford, you should consider a graduated repayment plan. Your monthly payment will begin low and increase gradually over time. There is no minimum monthly payment, but your payment must be high enough to cover the interest accruing each month.

Loan Amount	Beginning Monthly Pmt.	Ending Monthly Pmt.	Total Amount Paid
$15,000	$126	$282	$23,637

Peak: You might find your initial payments more affordable under a graduated plan. Similar to the standard plan, the graduated plan has a predictable payment structure.You also may choose a repayment period shorter than the maximum allowed to reduce your total costs.

Pitfall: The total amount you pay over the life of your loan will be higher than the amount you would pay under a standard repayment plan because lower initial principal payments result in higher interest costs. Also, your monthly payment amount will increase even if your income does not.

Income-Sensitive Repayment

With an income-sensitive plan, your monthly payments are low initially and increase as your income rises. Your lender or servicer will work with you to set up a schedule that reflects your current income and prospects for future earnings. Your monthly payments will be based on your monthly gross income and total loan balance. Your income must be certified every year to determine your new loan payment amount.

Peak: Under the income-sensitive plan, your payments are structured and revised to reflect changes in your income, making initial payments affordable to your current situation. Your lender or servicer will calculate the payment amount based on your current income and loan balance.

Pitfall: Reducing your monthly payment amounts in the early years of repayment and extending the repayment period increases overall interest costs. Because of this, the income-sensitive repayment plan may be the most expensive option for repaying your loan.

Extended Repayment

The extended repayment plan may be an option depending on the loan program under which you borrowed and the amount you owe on your loans when you enter repayment.The extended plan is available to Federal Direct Loan Program borrowers and to Federal Family Education Loan Program borrowers who borrowed for the first time on or after October 7, 1998, and owe more than $30,000 in principal and accrued interest.

Loan Amount	Monthly Payment Amt.	Total Amount Paid
$30,000	$225	$81,137

Peak: Extended repayment lowers your monthly payments over a longer period of time and has a predictable payment schedule.

Pitfall: The interest paid over a 30-year period is more than three and a half times the amount that would be paid under a standard 10-year repayment plan.