Student loan debt in America surpassed $1 trillion dollars.
Over 85 percent of all student loans are part of the federal government’s student loan programs, with the remaining 15 percent provided by private lenders.
Here are nine rights you need to know regarding your student loans:
- You have the right to get loan counseling. In fact, federal law requires loan providers to spell out the terms of their loans and student borrowers are required to complete entrance and exit counseling before and after they get government-backed loans.
- You have the right to contact your loan servicer at any time. This provision applies to both federal and private loans.
- If your loans are federally-backed, you have the right to apply for different types of repayment plans, including: Standard Repayment (10-year term); Extended Repayment (10- to 30-year term); Graduated Repayment (payments are increased every two years); Income-Based Repayment (IBR) for low income borrowers who demonstrate a "partial financial hardship" – based on 15 percent of your discretionary income; Income Contingent Repayment (ICR), which factors income, but has no partial financial hardship income threshold; and Pay as You Earn Repayment, capped at 10 percent of your discretionary income, based on your income and family size.
- You have the right to apply for a temporary suspension of monthly payments of principal and, in some cases, interest on your federal loan payments during periods of short-term financial difficulty. This includes deferment (three-year limit) and forbearance (five-year limit). The difference between a deferment and forbearance is who pays the interest. The interest on a subsidized loan that is in deferment will be paid by the government. However, the borrower must pay the interest on an unsubsidized loan during a deferment and on all loans during forbearance.
- You have the right to have your loan cancelled because of a school closing while you were in attendance; improper certification regarding your ability to benefit from college; identity theft; death; total and permanent disability; and unemployable status due to a military service condition if you are a veteran.
- If your loan is federal, you have the right to apply for public service loan forgiveness. You must be employed full-time for 10 years in a public service job, such as police, fire, EMT, government, military, public education, public health, social work, public interest law, public librarian, or at a 501(c)(3) organization.
- You have the right to consolidate your federal loans after graduation in order to reduce your payment amounts. The interest rate on a federal consolidation loan is the weighted average of the interest rates on the original loans, rounded up to nearest 1/8th of a point and capped at 8.25 percent. You may also consolidate private loans and the new rate will be based on your current FICO (credit) scores. Federal and private student loans cannot be consolidated together.
- You have the right to deduct your student loan interest from your federal income tax liability.
- You have the right to pay off your loans early without incurring a penalty.