JB Pritzker, Governor, State of Illinois

Loan Repayment Processes

Repaying a student loan is a responsibility that must be taken seriously. Fulfilling this commitment will help establish a borrower's credit rating, allowing them to borrow in the future for things such as a car, a home or continued education.

Financial aid administrators need to be familiar with the repayment process, the borrower's rights and responsibilities (which are documented in the Borrower's Rights and Responsibilities Statement that is included as pages 6-13 of the MPN form), and the options available to borrowers who experience financial difficulty. Remember, even if students do not graduate, enjoy their classes, or find the job they anticipated they are still responsible for repaying their loans.  Encourage students to stay in touch with their lender. It is the student's responsibility to let the lender know if anything changes with the student's personal circumstances that would impact loan repayment. 

Following is a summary of the steps involved in the repayment process. This information focuses on Federal Stafford, Federal SLS and Federal PLUS loans. For information regarding Federal Direct Loans, refer to the Direct Loan portion of the Library that is located in the FSA Partner Connect – Knowledge Center

Federal Stafford Loans

Step 1: Loan Enters Repayment Status

The loan changes to repayment status when the student drops below half-time enrollment by:

  • graduating,
  • withdrawing,
  • not taking enough classes, or
  • not satisfactorily completing enough classes.

Step 2: Borrower Completes Exit Counseling

Students are required to complete an exit interview when the federal student loan changes to repayment status. Many schools utilize Mapping Your Future for fulfilling this requirement.

Step 3: Grace Period Begins

Before the first loan payment is due, the student is given time to find a job and get their finances together. This is referred to as the grace period.

The grace period:

  • begins the day the student drops below half-time enrollment status,
  • lasts six months, and
  • is available to subsidized and unsubsidized Federal Stafford loan borrowers.

For subsidized Federal Stafford loans, the federal government continues to pay the interest during the grace period.

Unsubsidized Federal Stafford loan borrowers are responsible for payment of the interest from the first day funds are disbursed. The student can either:

  • pay the interest on a monthly basis,
  • pay the interest on a quarterly basis, or
  • allow the interest to accrue and be capitalized into the principal balance of your their loan. Payment begins following the grace period.

Step 4: Repayment Terms Are Established

A variety of repayment options are available to borrowers when a loan enters repayment status. Once the repayment option is selected and shortly before the borrower's grace period ends, the student will receive a repayment disclosure from the lender. The lender will send a repayment schedule of how much the student owes, the amount of interest the student will pay during the repayment period, the amount of the monthly payment, when payments are due, and how long it will take to pay the loan in full.

Unable to Make Payments

If the student is unable to make monthly payments, they should contact the lender immediately to avoid default by considering alternative repayment options. Additionally, depending upon the circumstances the student may qualify for loan deferment, forbearance or forgiveness.

Federal Supplemental Loans for Students (SLS)

The Federal Supplemental Loans for Students (SLS) program was combined with the unsubsidized Federal Stafford loan program on July 1, 1994. No new SLS loans were made after July 1, 1994.

Federal PLUS Loan

For Federal PLUS loan borrowers, the first payment is due within 60 days of the final disbursement of the loan, unless a deferment is obtained. There are certain times when the borrower may qualify for a deferment of payment of principal. The borrower is always responsible for the payment of the interest. With various repayment options available, the borrower should contact the lender/holder of the loan(s) for more information.