Loan Repayment Options

Standard Repayment

With the standard plan, you'll pay a fixed amount each month until your loans are paid in full. Your monthly payments will be at least $50, and you'll have up to 10 years to repay your loans.
The standard plan is good for you if you can handle higher monthly payments because you'll repay your loans more quickly. Your monthly payment under the standard plan may be higher than it would be under the other plans because your loans will be repaid in the shortest time. For the same reason - the 10-year limit on repayment - you may pay the least interest.

Extended Repayment

To be eligible for the extended plan, you must have more than $30,000 in Direct Loan debt, but you have 25 years to repay it. Under the extended plan you have two options: for fixed or graduated payments. Fixed payments are the same amount each month you are in repayment, as with the standard plan, while graduated payments start low and increase every two years, as with the graduated plan below.
This is a good plan if you will need to make smaller monthly payments. Because the repayment period will be 25 years, your monthly payments will be less than with the standard plan. However, you may pay more in interest because you're taking longer to repay the loans. Remember that the longer your loans are in repayment, the more interest you will pay.

Graduated Repayment

With this plan your payments start out low and increase every two years. The length of your repayment period will be up to ten years. If you expect your income to increase steadily over time, this plan may be right for you. Your monthly payment will never be less than the amount of interest that accrues between payments. Although your monthly payment will gradually increase, no single payment under this plan will be more than three times greater than any other payment.

Income-Based Repayment Plan (IBR) 

This is a new repayment plan for Direct Loans, except parent Direct PLUS Loans or Direct Consolidation Loans that repaid parent PLUS loans. Under this plan, your required monthly payment is capped at an amount that is intended to be affordable based on your income and family size.  (payments are capped at 15% of the discretionary income) To initially qualify for the IBR Plan, you must have a partial financial hardship. You are considered to have a partial financial hardship if the monthly amount you would be required to pay on your eligible loans under a Standard Repayment Plan with a 10-year repayment period is more than the monthly amount you would have to repay under the IBR Plan. If you repay under this plan for 25 years and meet other requirements, you may have any remaining balance of your loan(s) forgiven. F

Pay As You Earn (PAYE)

This is another new repayment program offered to students.  With PAYE, payments are limited to ten percent of the discretionary income which makes payments lower than the IBR plan payments.  In addition to that, the unpaid interest that will capitalize each year is limited to 10% of the principal amount that was borrowed.  Once the maximum amount of interest has capitalized, it will continue to accrue interest, but it will not capitalize.  Just like the IBR Plan, students must be exhibiting a partial financial hardship in order to qualify.

Revised Pay As You Earn (REPAYE)

The REPAYE repayment plan is similar to the PAYE repayment plan because your payments are based on the amount you earn, rather than the amount you borrowed.  With the REPAY plan, borrowers are able to cap their payments at ten percent of their discretionary income. After 20 years of eligible payments, the remaining balance may be forgiven.

For more information on Direct Loan repayment options, contact your loan service provider  



Other Repayment Options  


A deferment is a period of time during which your lender suspends regular payments. Deferments are granted for specific situations and have certain time limitations. There are different requirements for different types of loans and different lenders. Know what your lender requires! While in school some lenders require a new deferment form each term and some each new school year. A deferment may only be granted if you request it and if you provide the proper documents to prove your eligibility. Interest does not accrue on subsidized loans during deferment periods but does accrue on unsubsidized loans. Accrued interest is usually added onto the principal (capitalized) the day after a deferment period ends.  


If a borrower is willing but financially unable to make the required payments on a loan, he or she may request that the lender grant forbearance. Forbearance is the temporary cessation of payments, allowing an extension of time for making payments, or accepting smaller payments than were previously scheduled. Interest will continue to accrue, even during the period of forbearance; the borrower is always responsible for repayment of accrued interest charges. The borrower must request forbearance in writing.  

Loan Consolidation 

A direct consolidation loan allows you to combine loans from more than one lender or service and/or from more than one federal program into one service through the Direct Loan Service Center. There are substantial benefits to the Direct Consolidation program over the old FFELP Consolidation program. Examples of the benefits include “locking into” an interest rate instead of each loan having an annual variable interest rate, having only one servicer to deal with for most federal loans, deferment during in-school periods ( for student enrolled at least 1/2 time). Multiple repayment plans are also available under the direct consolidation program. Information can be obtained in the Medical Student Affairs office or by contacting the Direct Loan Servicing Center, 1-800-848-0982. Loan consolidation may be a viable option to reduce your monthly payment during residency when your income is relatively low. However, it may do so at the expense of a longer repayment period that increases the amount you repay over the life of the loan. You should not pursue in-school loan consolidation if you borrowed under the Stafford loan program prior to July 1, 1993. It is always a good idea to consult someone in the Financial Services office before applying for consolidation.  

Delinquency & Default 

A loan in repayment becomes delinquent whenever a scheduled payment has not been made by the due date. The lender is required to send at least two (2) written notices or collection letters to the borrower within the first 30 days of the delinquency in an attempt to re-establish payments. During days 31 through 60, the lender must attempt to contact the borrower by telephone. If the borrower cannot be contacted by telephone, at least 2 forceful collection letters must be sent, warning the borrower that the loan may be assigned to the guarantee agency, resulting in damage to the borrower’s credit and possible litigation. During each 30-day period from day 61 through day 150, more attempts to contact the borrower by telephone or letter must be made. A final demand letter is sent between day 151 and day 180; 30 days are allowed following the final demand letter before the default claim is filed. Lenders may not file a default claim with the guarantor of the loan unless the delinquency has persisted for:

  • 180 days for a loan repayable in monthly installments; or
  • 240 days for a loan repayable in less frequent installments.

A claim is filed by the lender after all attempts at collection have failed and the loan has gone into default. The guarantor or insurer of the loan is obligated to pay the principal balance plus accrued interest to the lender. Once the claim has been paid, the defaulted loan then becomes the property of the guarantee agency, which then continues to pursue collection. These public agencies have various collection methods open to them that do not exist for the commercial lender. Within the past few years, the Federal government has been authorized to (a) garnishee Federal salary checks for defaulters in public service, and (b) report loan defaults to credit bureaus and other agencies that serve as repositories for individual credit histories. State governments, in some instances, have secured authority to offset defaulted loan amounts against State income tax refunds due an individual defaulter. The reauthorization legislation of 1986 also requires guaranty agencies, eligible lenders, and subsequent holders of loans to enter into agreements with credit bureaus to exchange information regarding student borrowers. The Technical Amendments of 1987 also allow eligible institutions to enter into arrangements with holders of delinquent loans for the purpose of providing information regarding a borrower’s location or employment or for the purpose of assisting the holder in helping borrowers avoid default.

If you encounter problems during the repayment period, the cardinal rule is communicate with the lender to see what arrangements are available to keep the loan out of the delinquent and the default category.