Navigating the ins and outs of student loans can seem overwhelming, but don't worry, we're here to help simplify things for you. These FAQs will empower you with the knowledge you need to make smart choices and manage your student loans effectively.
Q: What types of student loans are there?
A: There are two types of loans: Federal and Private.
Federal student loans are provided by the government and have set terms and conditions defined by law. They offer benefits such as fixed interest rates and income-driven repayment plans, which are not typically available with private loans.
On the other hand, private loans are offered by private organizations like banks, credit unions, and state-affiliated entities. The lender determines the terms and conditions, and they are generally more expensive than federal loans.
These are the Federal loan types:
Direct Subsidized Loan:
Available to undergraduates with demonstrated financial need. These are need-based loans (based on financial need), where the government is responsible for paying the interest when the student is in school or during deferment periods.
Direct Unsubsidized Loan:
Available to undergraduates, graduate students, and professional students without financial need. These loans are not based on financial need, and the borrower is responsible for all accrued interest from the time the loan is disbursed.
PLUS Loan:
Available to parents of dependent undergraduates, graduate students, and professional students. PLUS loans have a fixed interest rate and require a credit check. Parents take out these loans on behalf of their children, and repayment must begin immediately without a grace period.
Direct Consolidation Loans:
Loans that allow you to combine eligible federal student loans into a single loan with one loan servicer, simplifying repayment.
Q: What type of loan do I have?
A: You can find out whether your loan is federal or private by following these steps:
Check the top of your federal loan promissory notes, applications, and billing statements. These documents usually mention the name of the federal loan program at the top. Federal loan programs include the William D. Ford Federal Direct Loan Program, the Federal Perkins Loan Program, and the Federal Family Education Loan (FFEL) Program.
Log in to StudentAid.gov using your FSA ID (account username and password). Under your name, select "My Aid." The My Aid section displays information on federal loan and grant amounts, outstanding balances, loan statuses, and disbursements.
Q: What is the difference between subsidized and unsubsidized loans?
A: Subsidized loans are available to students with financial need, and the government covers the interest while the borrower is in school or during deferment periods.
Unsubsidized loans, on the other hand, are not based on financial need, and the borrower is responsible for all interest accrued throughout the loan period.
Q: What are the consequences of defaulting on a student loan?
A: Defaulting on a student loan can have serious consequences, including damage to credit scores, wage garnishment, and legal actions. It is important to explore available options, such as deferment, forbearance, or income-driven repayment plans, to avoid defaulting on student loans. Defaulted loans are not eligible for income-driven options.
Q: What is the grace period for student loans, and how does it work?
A: The grace period is a period of time after graduation, withdrawal from school, or dropping below half-time enrollment when borrowers are not required to make loan payments. Understanding the length and conditions of the grace period allows borrowers to plan for future loan repayment obligations.
Q: Can I refinance or consolidate my student loans?
A: Refinancing or consolidating student loans involves combining multiple loans into a single loan with potentially new terms and interest rates. Exploring refinancing or consolidation options can help borrowers simplify their repayment process or potentially obtain more favorable loan terms. However, refinancing your loans means you lose federal benefits.
Q. What factors should I consider when choosing a student loan repayment plan?
Federal loans offer flexible repayment plans tailored to your income and financial situation. Selecting an appropriate repayment plan is influenced by factors such as your career path, current income, and long-term financial objectives
Plan | Monthly Payment | Term | Best for |
Standard | Fixed payments | 10 years | Paying the least interest |
Graduated | Starts low, increases over time | 10 years | Expecting income growth |
Extended | Fixed or graduated | Up to 25 years | Larger loan balances |
Income-Driven (IDR) | % of your discretionary income | 20–25 years | Low or variable income |
Q: What is an income-driven repayment plan, and how does it work?
A: Income-driven repayment plans are designed to make loan payments more manageable based on borrowers' income and family size. These plans typically cap the monthly payment at a certain percentage of the borrower's discretionary income, potentially providing more affordable repayment options.
Q. What income-driven repayment (IDR) plans are available for student loans?
The available IDR plans include:
o SAVE Plan (previously known as REPAYE)
o Income-Based Repayment (IBR)
o Income-Contingent Repayment (ICR)
o Pay As You Earn (PAYE), which is limited to certain borrowers based on eligibility criteria.
Q. How can borrowers lower their monthly payments under Income-Driven Repayment (IDR) plans?
Improving Borrower Conditions Under Income-Driven Repayment (IDR) Plans
Several factors influence a borrower’s experience with Income-Driven Repayment (IDR) plans, potentially reducing monthly payments, limiting interest accrual, and accelerating progress toward loan forgiveness. These variables play a critical role in optimizing the repayment process:
Lowering Monthly Payments
IDR plans calculate monthly payments as a percentage of discretionary income. Borrowers can reduce their payments under certain conditions:
o Income Level: A lower reported income results in reduced payment amounts, as payments are directly tied to income.
o Family Size: Larger households increase the portion of income exempt from payment calculations, thereby lowering the payment amount.
o Tax Filing Status for Married Borrowers: Borrowers who are married and file taxes separately may benefit under specific IDR plans, such as Income-Based Repayment (IBR) and Pay As You Earn (PAYE), which might only consider the individual borrower’s income
Q. What are the advantages and disadvantages of Income-Driven Repayment (IDR) plans?
Advantages of IDR Plans
IDR plans are particularly beneficial for borrowers with limited income or those pursuing careers in public service. Payments are calculated based on income and family size, ensuring affordability, with some borrowers qualifying for payments as low as $0. These plans also open pathways to forgiveness, with remaining balances forgiven after 20–25 years of qualifying payments, or as few as 10 years under the Public Service Loan Forgiveness (PSLF) program. The SAVE Plan, for instance, provides accelerated forgiveness for smaller loan balances (≤$12,000). Additionally, IDR plans like SAVE eliminate or subsidize unpaid interest, preventing balance growth. Borrowers experiencing income fluctuations can recertify their information to adjust payments, adding a layer of flexibility during financial challenges.
Disadvantages of IDR Plans
Despite their benefits, IDR plans may extend the repayment timeline to 20–25 years, leading to higher total interest payments compared to the Standard 10-Year Plan. Borrowers should also prepare for the possibility of a taxable event on forgiven debt after 2025, as forgiveness under IDR plans may result in a large tax bill unless extended tax exemptions are enacted. Annual recertification of income and family size is mandatory, and certain loan types, such as Parent PLUS Loans, require consolidation into a Direct Loan to become eligible for IDR. These factors highlight the importance of careful consideration before opting for this repayment structure.
Q. Who is eligible for Income-Driven Repayment (IDR) plans?
Eligibility for IDR depends on the type of federal student loan. Borrowers with Direct Loans, including Direct Subsidized and Unsubsidized Loans, Grad PLUS Loans, and Direct Consolidation Loans, qualify automatically. However, FFEL and Perkins Loans must first be consolidated into a Direct Loan. Private student loans remain ineligible for IDR, and Parent PLUS Loans are limited to the Income-Contingent Repayment (ICR) plan upon consolidation.
Q: What is the Gabriel Money Student Loan Aid?
A: Gabriel Money Student Loan Aid is an engine that finds you the best Income-driven repayment plans (IDR) available for your income and family size.
Q: What info do I need to get started with my Student Loan Aid?
We will ask for details about your income and some basic family information. This enables us to analyze your student loan portfolio comprehensively and fill out the form on your behalf.
Q: How is my enrollment processed?
Due to the high volume of enrollments, we have seen that some servicers take up to 2–4 weeks to respond. You can always reach out directly to your servicer to ask for an update or log in to your servicer to check on the status of your application. Be sure to check the Messages Center as well.
Q: How long does it take to go into effect?
The new plan typically takes effect within two weeks of submission. Setting up autopay with your servicer is recommended to ensure timely payments under your new plan.
Q: How can I check the status of my application?
Please log in to your servicer and view your messages for the most up-to-date information on your application.
Q: What about taxes?
Be aware that, under current law, forgiven loan amounts after 2025 are subject to taxation. Taxes on forgiven loans are due the year after forgiveness. We'll inform you about potential tax implications when you select a new plan.
Right now, the current waiving of tax bills is temporary, and these benefits are due to expire after 2025.
Q: How do I stay up to date?
With the high volume of enrollments, we recommend you log into your servicer(s) once a week following enrollment to check for messages in your inbox. Your servicer(s) may reach out to update you on your enrollment status or to ask for additional information to process your enrollment, etc.
Q: What do I need to know when enrolling in an IDR- Income-driven repayment plan for my Student loan?
When you enroll in an IDR-Income-driven repayment plan for your Student loan, you need to annually recertify your plan by updating information about your income and family size. You must submit your information, even if it has not changed from the previous year.
Q. What happens if I miss the deadline to recertify my Income-Driven Repayment (IDR) plan?
Missing your annual recertification deadline can lead to significant financial consequences. Even if your income hasn't changed, failing to submit your updated information on time will result in:
Higher Monthly Payments – Your payment will no longer be based on your income and will revert to the standard 10-year plan amount, which is often much higher.
Interest Capitalization – Any unpaid interest may be added to your loan principal, increasing the total balance and the amount of interest you’ll pay over time.
Loss of Progress Toward Forgiveness – Although your forgiveness timeline does not restart, any months without income-based payments may not count toward loan forgiveness under IDR or the Public Service Loan Forgiveness (PSLF) program.
Need to Recertify Again to Resume Lower Payments – You can update your income and family size at any time to return to income-based payments. However, until you recertify, you’ll be responsible for the higher standard payment.
To avoid these complications, it's crucial to submit your recertification on time each year. The sooner you recertify, the better!
Pro Tip!!
If your income decreases—whether due to a job change, reduced work hours, or other financial shifts—you don’t have to wait until your annual recertification date.
You can submit updated income information anytime to lower your monthly payment sooner, and we can help you with that! Just go to the homepage of your Gabriel Money app, click on the “See your Plan” button in the Student Loan Aid banner, and then click “Update Now”.
This flexibility can be a game-changer during financial hardship, helping you manage loan payments more effectively. Don't wait—take advantage of this option whenever needed!
Q: How many IDR enrollments can I submit?
A: You can submit an IDR enrollment through our service or directly with Federal Student Aid (FSA). However, if you begin the process with us and later switch to FSA, your application may be flagged for manual review, potentially delaying the processing time.
For the fastest experience, stick with Gabriel Money. We got you!