Loan Repayment Question and Answers

Question 1

The subsidized loan's outstanding interest is covered by the federal government while...

Accepted Answer

All of the above

Answer

For subsidized federal student loans, the government pays the interest that accrues during specific periods to help borrowers manage their debt. These periods include while the student is enrolled in school at least half-time, during the grace period after leaving school, and during periods of approved deferment. This benefit significantly reduces the total amount borrowers have to repay.

Question 2

When the borrower has applied the following to his or her federal student loan, the government will cover any outstanding interest for the first three years on a subsidized federal student loan:

Accepted Answer

Income-Based Repayment

Answer

Under the Income-Based Repayment (IBR) plan, the federal government provides an interest subsidy for subsidized loans. If your monthly IBR payment doesn't cover the accrued interest, the government will pay the remaining interest for up to three consecutive years from the date you began IBR. This helps prevent your loan balance from growing due to unpaid interest while you're making reduced payments based on your income.

Question 3

Which payment plan with the servicer will apply to the account if a student doesn't respond to a letter from the servicer warning that the IBR on his or her account will expire in 45 days and a new plan is necessary when the IBR is about to expire?

Accepted Answer

Standard Repayment Plan

Answer

If a borrower on an Income-Based Repayment (IBR) plan fails to recertify their income and family size or doesn't choose a new repayment plan before their current IBR period expires, the loan servicer will typically default them to the Standard Repayment Plan. This ensures that payments continue, but it can result in a significantly higher monthly payment than the IBR plan, as it's not based on income.

Question 4

True/False: A student's repayment strategy is subject to alter once a year.

Accepted Answer

True

Answer

Borrowers of federal student loans generally have the flexibility to change their repayment plan once a year, or even more frequently depending on the specific circumstances and plan types. This allows students to adjust their repayment strategy to better suit their current financial situation, such as switching from a standard plan to an income-driven plan if their income decreases. It's important to contact your loan servicer to explore available options.

Question 5

True or False: To be eligible for the Graduated Repayment Plan, a student must be a graduate student.

Accepted Answer

False

Answer

The Graduated Repayment Plan is available to all federal student loan borrowers, regardless of whether they are undergraduate or graduate students. This plan starts with lower payments that gradually increase over time, typically every two years, and is designed for borrowers who expect their income to rise over their repayment period. Eligibility is not tied to graduate student status.

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Loan Repayment Question and Answers