College diplomas will soon be awarded to the Class of 2014. May college graduates are reminded that the grace period on their federal student loans will end in November with first payments due soon after.

Grads are encouraged to review their loan repayment options and their rights and responsibilities as borrowers now. The New York State Higher Education Services Corporation (HESC), the State’s financial aid agency that helps people pay for college, offers guidance in preparation for repayment at its website, HESC.ny.gov.

Keep Track of Your Loans
Know who holds your federal loans and how much you owe. The National Student Loan Data System (NSLDS) provides a full history of your federal student loans, including your loan balances, names and addresses of your loan holders and colleges attended. Get a free credit report, especially if you have private student loans. The report displays all your private loans and credit card debt, if any. AnnualCreditReport.com is the only official website to get your free annual credit report. HESC’s loan tracker can help you keep an accurate record of your loans, both federal and private. Keep copies of your master promissory notes (MPN) and other important paperwork together.
 
Review the available repayment plans
Your loan servicer will send information about repayment options before the grace period ends; you can select a plan that’s right for your financial situation. Generally, you'll have from 10 to 25 years to pay your loan, depending on the repayment plan you choose:

 Standard Repayment
Available for Federal Direct and FFEL program student loans, you’ll pay a fixed amount each month until your loans are paid in full. The minimum monthly payment for this option is $50 and the loan must be repaid within ten years. This is the most cost effective plan as it minimizes the amount of interest you will have to pay.

Extended Repayment
Extended Repayment is for Direct and FFEL student loan borrowers who owe more than $30,000 in outstanding loans. Payment amounts are either fixed or graduated and can have a maximum repayment period of 25 years. This is a good plan if you need to make smaller monthly payments. Because the repayment period is 25 years, your monthly payments will be less than the Standard Repayment plan, but you’ll pay more for your loan because the interest accumulates over a longer repayment period.

Graduated Repayment
Available for Direct and FFEL program loans, Graduated Repayment starts out with low payments that increase every two years. If you expect your income to increase steadily over time, this plan might be right for you. Although your monthly payment will gradually increase, no single payment under this plan will be more than three times greater than any other payment.

Options to Reduce Federal Loan Payments
If you have difficulty making ends meet while making your federal student loan payments, there are four income-based options available:

• •  Income Based Repayment (IBR) for Direct and FFEL program loans;
  • Pay As You Earn Repayment for Direct loans only;
  • Income Contingent Repayment (ICR) for Direct loans only;
  • Income Sensitive Repayment for FFEL loans only.

Keep in mind, anytime you lower payments and extend the repayment period, you pay more interest. The plans offer 10, 20 or 25 year repayment. Payments are determined annually, based on current income and family size. Some plans allow a portion of the remaining balance to be forgiven after a period of on-time payments, but you may have to pay federal income tax on the amount forgiven.

Repaying Your Perkins Loan
Perkins Loan repayment options are not the same as those for Direct or FFEL program loans; these loans are made directly from the college or university you attended. Check with your school for Perkins Loans repayment options.

 Take time now to review all of your repayment options at the Federal Student Aid Repayment Estimator so you’ll have a plan before you begin repayment, especially if you are planning a major purchase, such as a car or leasing an apartment.

Keep in Touch
Remember to notify your lender in writing if you change your name, address or phone number, so that important notifications and information can be sent to you.

What if You Can’t Pay?
Unemployment, illness or other circumstances may create repayment problems, but ignoring your student loans will create a more serious situation later.

If you fail to pay on time, your loan is delinquent. If you stay delinquent, your loan defaults and the entire balance is due. Don’t let payment problems get out-of-hand…work with your lender at the first sign of difficulty. You may be able to lower your payments, request a request a deferment or forbearance, or consolidate your loans. Learn more about your options at HESC.ny.gov.

Federal Student Loan Tax Information
The Student Loan Interest Deduction provides up to $2,500 tax deduction for the interest you pay on qualified student loans. If you paid $600 or more in student loan interest on a qualified student loan, your servicer will send a Form 1098E Student Loan Interest Statement.

In general, loan balances that are forgiven under the Income Based Repayment (IBR), Income Contingent (ICR), Pay As You Earn Repayment plans, and some other loan forgiveness programs may be considered as income and may be subject to federal and/or state income taxes. Consult your student loan servicer or a tax professional for details.

Managing your student loan intelligently is an important step in meeting your obligations, establishing a good credit history and safeguarding your financial future.

About HESC: HESC is New York State’s student financial aid agency that helps people pay for college and a national leader in providing need based grant and scholarship award money to college-going students. At HESC’s core are programs like the Tuition Assistance Program (TAP), numerous state scholarships, federal college access grants and a highly successful College Savings program. HESC puts college within the reach of hundreds of thousands of New Yorkers each year through programs like these and through the guidance it provides to students, families and counselors. In 2012-13, HESC helped more than 342,000 students achieve their college dreams by providing more than $979.4 million in grants, scholarships and loan forgiveness benefits, including $931 million awarded through the Tuition Assistance Program (TAP).