Repaying student loans FAQs
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What's the difference between deferment and forbearance?
Deferment means that payments on your loans are being postponed until a later date. Forbearance means that not only are your loan payments postponed, but the interest that accumulates during the postponement will get paid.
Since the education award doesn't work on all student loans, how can I make sure mine are covered?
National service legislation defines "qualified student loan" as a loan backed by the federal government under Title IV of the Higher Education Act (except PLUS Loans to parents of students), or under Titles VII or VIII of the Public Health Service Act. In addition, you may use your education award to repay a student loan made by a state agency, including state institutions of higher education. Education awards cannot be used to repay any other type of loan, even if the loan was obtained for educational purposes. You can use your education award to repay defaulted student loans, as long as the loans meet the definition of "qualified student loan."
I have more than one loan. Which one(s) should I focus on with my education award?
With everything else being equal, you may wish to pay off the loan with the higher interest rate first. "Unsubsidized" student loans gather interest while you're in school and are generally less favorable than "subsidized loans," so you may want to pay off any unsubsidized loans first. Perkins Loans are generally thought of as having the best terms in the student loan family; if you have Perkins Loans, you may wish to pay them off last.
Should I consolidate my loans?
You may want to consider this if you can get a better interest rate by consolidating one or more "old" student loans. Important points to keep in mind:
- Make sure the "new" consolidated loan is a qualified student loan. Otherwise, you will not be able to use your education award to pay for it.
- If you are consolidating during your service year while your loans are in forbearance (basically, being postponed), make sure you work with the National Service Trust (1-888-507-5962) at every step of the process. When you have finished the terms of your service, the Trust will pay the interest that accrued on your loans during your service year. If you consolidate (pay off your old loans and create a new loan) midyear, the Trust may not be able to pay your interest for you.
- Read the fine print. When you take out a new student loan, make sure you know all the fees before you agree to the terms. If there is a $500 origination fee on a $1,000 loan, it might not make financial sense–even if the new loan has a more favorable interest rate.
