Office of Student Financial Services

Managing Student Loan Debt After MCLA

When you graduate, withdraw/take a leave of absence, or drop below half time (<6 credits for undergraduates, <5 for graduates), your loan servicer is notified and you enter repayment. To prepare you when this happens, Student Financial Services will send you important information to your MCLA email. This information includes your cumulative loan borrowing, who your loan servicer is, and other requirements you need to complete, such as Exit Counseling.

While it can be stressful and intimidating knowing that your loans are coming due, there are many resources available to help you manage your debt. This page is an overview of some of the most important topics of student loan repayment. 

StudentAid.gov offers "Repaying Your Loans" guidebook that is available here.

Exit Counseling

All federal student loan borrowers must complete mandatory Exit Counseling. You must complete Exit Counseling even if you are taking a leave of absence and plan to return next semester. This requirement goes over your rights, responsibilities, and gives you information about paying back your loans. This information is extremely important.

You will have a hold on your record at MCLA until you complete this, which would prevent you from getting transcripts or re-enrolled. 

Certain state loan programs may require their own Exit Counseling. You will be notified by Student Financial Services if you have that requirement. 

Grace Period

For federal student loans (subsidized and unsubsidized), you enter repayment once you graduate, leave school, or drop below half-time. Once you enter repayment for your federal loans for the first time, you will have a 6 month grace period before you are required to make payments. This time allows you to get financially prepared. Your loan servicer will be able to tell you when your grace period ends and often include this information on their statements to you.

Please note:

  • Once you fully use your 6 month grace period, it is gone and you will not be allowed another grace period.
  • If you enter your grace period and re-enroll in school at least half-time before the grace period ends, your grace period will reset back to 6 months once you re-enter repayment.

Many private loans do have a grace period while others require payments immediately after your enrollment ends. While less common, some private lenders require payments while you're enrolled. You should contact your private loan servicer if you have questions about grace period and payments.

Repayment options

When your federal student loan enters repayment, you will be placed on the Standard Repayment Plan, but there are many options for repayment available. You can review these repayment plans below. You must contact your loan servicer in order to be placed on a different repayment plan. Many loan servicers allow you to select a new repayment plan online by logging in.

The repayment plans below do not apply to private loans. However, many private student loan borrowers offer assistance and their own repayment plans. You will need to contact your private loan servicer in order to learn what repayment options are available to you. If you have a mix of federal loans and private loans, you can place your federal loans on a different repayment plan and work with your private loan servicer regarding your private loan balance.

Payments are fixed to ensure that your federal loans are fully paid off within 10 years. When you enter repayment, this is the plan you will be on.

Visit StudentAid.gov for more information on Standard Repayment.

Payments are lower in the beginning and increase (typically every 2 years) to an amount that will fully pay off your federal loans within 10 years.

Visit StudentAid.gov for more information on Graduated Repayment.

If you have more than $30,000 in federal debt, payments are either fixed or graduated to an amount that will fully pay off your loans within 25 years.

Monthly payments will be lower than the Standard or Graduate Repayment Plans, but borrowers will pay more over time.

Visit StudentAid.gov for more information on Extended Repayment.

Monthly payments will be 10% of your discretionary income and recalculated on an annual basis. You must recertify income and family size each year to remain on the plan, even if nothing has changed.

Any outstanding balance on the federal loan will be forgiven* if not paid in full after 20 years (if all loans are from undergraduate study) or 25 years (if any loans were from graduate/professional study).

Visit StudentAid.gov for more information on REPAYE.

*You may have to pay income tax on any amount of student debt that is forgiven.

Monthly payments will be either 10% or 15% of your discretionary income (depending on when you received your first loans), but your payments will never be higher than what they would be on the Standard Repayment Plan. You must have a high debt relative to your income to qualify for this plan.

You must recertify income and family size each year to remain on the plan, even if nothing has changed. Any outstanding balance on your federal loan will be forgiven* if not paid in full after 20 years or 25 years, depending on when you received your first loans.

Visit StudentAid.gov for more information on IBR.

*You may have to pay income tax on any amount of student debt that is forgiven.

Your monthly payment will be the lesser amount of either:

  • 20% of your discretionary income, OR
  • the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted based on your income

You must recertify income and family size each year to remain on the plan, even if nothing has changed. Any outstanding balance on the federal loan will be forgiven* if not paid in full after 20 years.

Visit StudentAid.gov for more information on the ICR plan.

 *You may have to pay income tax on any amount of student debt that is forgiven.

 

FORBEARANCE & DEFERMENT

If you are in a situation where you are unable to make payments on your federal student loans, you can temporarily stop/reduce your payments in two ways:

  • Forbearance allows you to temporarily stop or reduce your payments on your student loans, but interest will accrue. You may be required to make interest payments during a period of forbearance. Read more on forbearance here.
  • Deferment allows you to temporarily stop making payments on your federal loans. Interest may accrue on some of your loans depending on the program. Deferment is typically much harder to be approved for than forbearance. Your loan servicer may require extra documentation in order to review your request. Read more on deferment here.

Non-payment of your federal loans will not put you in a period of forbearance or deferment. You must apply for forbearance or deferment from your loan servicer. Many loan servicers allow you to apply for either online by logging in.

Forbearance/deferment do not apply to private loans. However, many private student loan borrowers offer temporary relief based on financial hardship. You will need to contact your private loan servicer in order to learn what options are available to you. If you have a mix of federal loans and private loans, you can request to have your federal loans in forbearance/deferment and work with your private loan servicer regarding your private loan balance.

Consolidation & REFINANCING

Consolidation combines multiple federal student loans into one federal student loan. Instead of paying each month on different loans with varying interest rates, the one loan has one fixed interest rate. This is usually the average of all your rates. Consolidation is sometimes used to get loans out of default. While consolidation can be helpful to you by reducing your monthly payment and granting more time to repay, you can lose some borrower benefits. Read more about pros and cons of federal loan consolidation here.

Refinancing is the act of purchasing a new loan to pay off other loans. This is done typically if you can get a lower interest rate than what you are currently paying on your student loans. Refinancing could be especially beneficial to private loan borrowers with higher interest rates. Similar to consolidation, instead of paying different loans each month, you make one monthly payment to your new lender. The rates for refinancing are either variable or fixed and are based on credit. There is a competitive market for refinancing with many lenders available. However, if you refinance your federal student loans, you can lose some federal benefits, such as different repayment plans.  Read more about pros and cons of student loan refinancing here.

If you are thinking of consolidation or refinancing, you should talk to your loan servicer(s) and/or an accountant. Consolidation and refinancing aren't right for everyone, but can be very helpful to some individuals. 

delinquency & default

If you have missed payments, will miss payments, or are having trouble making payments, you should reach out to your loan servicer immediately to avoid delinquency and defaulting on your loans. Delinquency and default have serious financial ramifications.

For federal student loans, delinquency and default have the following timeline:

  • Day After Your First Missed Payment: Your payment is past due and now considered delinquent. Late fees will apply and interest is still accruing.
  • After 90 Days: Your loan servicer reports your information to three major credit reporting agencies. This will negatively affect your credit score. Read more about understanding your credit score (and why it matters) here.
  • After 270 Days: Your federal loan is in default. When your student loans are in default, your full loan amount is due, plus fees. You forfeit federal benefits such as deferment/forbearance, various repayment plans, and eligibility for future financial aid. Tax refunds and wages may be garnished and you may owe legal/collection fees. Read more about the other consequences of default here. 

If you're in default on your federal loans, it is possible to get out through loan consolidation or loan rehabilitation. If you are in default, completing consolidation or rehabilitation will be the first step in helping your credit recover. Read more about consolidation and rehabilitation here. 

Private loans are typically considered in default after 120 days or three missed payments. Private loan servicers will also report to credit reporting agencies and have similar consequences as federal loans. Read more about federal and private loan default here.

Student Financial Services strongly encourages you to reach out to your loan servicer to avoid default. Most loan servicers are willing to work with you to avoid default.

Forgiveness

For federal borrowers, forgiveness/cancellation/discharge of your loan means that you are no longer required to pay the remaining balance on your loan. There are different requirements for these programs, most of which require payments over a certain number of years. Often, forgiven debt is considered taxable income by the IRS. 

These are the most common types of loan forgiveness:

Read more on federal loan forgiveness and other types of loan forgiveness/cancellation/discharge here.

***ATTENTION: On Oct. 6, 2021, the U.S. Department of Education (ED) announced a change to PSLF program rules for a limited time as a result of the COVID-19 national emergency. Students with qualifying employment who have made student loan payments may apply to have any prior payment count as a qualifying payment toward forgiveness. If you believe you have qualifying public service employment, apply by October 31, 2022. Read more on the new PSLF Limited Waiver Opportunity here.

 Private student loans do not qualify for forgiveness programs.  Read more on tips for paying back your private loans here.

Questions? Contact Us!

If you have general questions about your student loans or are unsure of who your loan servicer is, you can contact Student Financial Services. For more specific inquiries such as repayment options or your loan statement/loan payment amount, you will need to contact your loan servicer.

Student Financial Services
413.662-5219
FinAid@mcla.edu