Before borrowing you should determine how much you can afford to borrow and how you are going to manage your loan debt once you begin repayment. Explore other financial aid options before borrowing.
Determining a manageable debt level is based on two estimates:
- How much you will borrow
- How much you will earn once you complete school.
A general rule states that your maximum student loan payment should not exceed 10% of your gross first year salary. Planning ahead will protect you from the serious consequences of defaulting on your loan payments. This results in detrimental effects on your credit rating for at least seven years, loss of repayment and deferment options, possible seizure of federal and state income tax refunds, referral to a collection agency, legal action and garnishment of wages.
Plan your budget carefully and borrow only what you need. Your loan payments will increase as your loan balance does. The following tables are useful in estimating your required repayment. The estimated monthly payments and total interest charges are based on the standard 10 year repayment plan with a 6% interest rate. Information on graduated and income-sensitive repayment options is available from your lender. These figures are estimates only; specific questions about loan repayment should be directed to your lender. Students with Federal Direct Loans questions should contact the Federal Direct Loan Servicing Center at 1-800-848-0979.
Federal law requires the government to report loan information and the subsequent monthly payment information to credit bureaus. A borrower has the right to prohibit a credit bureau from using information in the borrower's credit record in connection with any credit or insurance transaction not initiated by the borrower. The borrower may exercise this right by calling 1-888-567-8688, Option 2. Students with additional questions may contact Direct Loan Borrower Services at 1-800-848-0979.
Minimum Gross Annual Income Needed to Meet 10% Rule
|Loan Debt @ 6%||Income Needed|
|less than $5,000||$6,661|
|Undergraduate Estimated Federal Direct UnSubsidized @ 6%|
|Year in School||Amount Borrowed||Estimate of Capitalized Interest||Loan Balance|
|First (1-29 HRS)||$2,625||$706.09||$3,331.09|
|Second (30-59 HRS)||$3,500||$684.66||$4,184.66|
|Third (60-89 HRS)||$5,500||$695.71||$6,195.71|
|Fourth (90+ HRS)||$5,500||$337.50||$5,837.50|
|Graduate Estimated Federal Direct UnSubsidized @ 6%|
|Graduate School Year||Amount Borrowed||Estimate of Capitalized Interest||Loan Balance|
The following table illustrates the estimated repayment under a standard repayment plan for students who borrowed the maximum annual unsubsidized loan amount each year of a four year undergraduate course of study. The graduate amount reflects unsubsidized loans of $8,500 per year for a two year course of study.
This is an estimate only.
Actual interest capitalized depends on disbursement dates, number of disbursements, the variable interest rate, and the frequency of capitalization. Capitalized interest is either added to the balance of the loan or paid by the borrower quarterly.
|Summary of Unsubsidized Loan Repayment
for Undergraduate and Graduate Student
|Estimate of Capitalized Interest||$2,423.96||$1,596.78|
|Monthly Payment 10 Years||$217.03||$206.46|
|Interest 10 yr Repayment Period||$6,495.22||$6,178.81|
Estimated Federal Direct SubSidized Repayment Amounts @ 6%
(SubSidized loans have the interest paid by the U.S. government during enrollment and six months grace period)
|Total Borrowed||# Payments||Monthly Repayments||Interest Charges||Total Repaid|
|** Minimum Monthly Payment|