Student Debt Resource

1: Understanding Your Student Loans 

/ Student Debt E-book

It is important to understand the basics of student loans and the types of loans available. The types of student loans you borrow will affect your eligibility for borrower protections and debt relief programs such as income-driven repayment plans and Public Service Loan Forgiveness. Refer to this chapter when making decisions about borrowing and loan consolidation. 

Private Loans vs. Federal Loans 

Law school can be financed entirely from federal loans (Stafford and Grad Plus). Financing a law school education this way will give the borrower numerous additional protections do not come with private loans. Private loans should be a last resort option. 

Private or commercial loans are given out by lenders and are not associated with the federal government. Private and commercial lenders include banks, credit unions, state agencies and schools. Additionally, these types of loans generally come with the following stipulations: 

  • You may be required to make payments while in law school.  
  • They may have variable interest rates as high as 18 percent. 
  • Require excellent credit or a cosigner. 
  • Do not have loan forgiveness plans. 
  • Often have limited repayment options. 

On the other hand, federal loans are provided by the Department of Education and serviced by private companies. Depending on the type of federal loan, these loans generally include the following: 

  • Fixed interest rates and tax-deductible interest 
  • Offer forbearance and deferment options,  
  • Rarely require a co-signer or excellent credit 
  • Can be consolidated with other federal loans 
  • Can be forgiven in certain circumstances 
  • Offer various repayment options, including options for payments based on income.  

Federal loans include Stafford (now referred to as Direct), Grad PLUS and Parent PLUS, Perkins, FFEL, and Consolidations Loans. Let’s talk about a few of these federal loans in a little more detail.  

Direct Subsidized Loan: This type of loan is available only for those getting an undergraduate degree. It is given out in varying amounts, and is dependent on financial need. Students can borrow up to $23,000 in Subsidized Stafford Loans over the course of their undergraduate program. This includes up to $5,500 in the first year, $6,500 in the second year, and up to $7,500 in each subsequent year. These loans had fixed interest rates, of 2.75 percent for loans taken out for the 2020-2021 school year. (A new fixed rate is determined every year.) These loans require enrollment in an undergraduate program at least half time. Finally, you pay no interest on your Direct Subsidized Stafford Loans under three conditions: 

  • You must be in school at least half-time 
  • During your grace period. 
  • During a period of deferment.  

Direct Unsubsidized Loan: This loan is available for those paying for a law school education. You can borrow up to $20,500 per year, but no more than $138,500 total. This $138,500 lifetime borrowing limit includes amounts you may have borrowed in Subsidized Stafford Loans while pursuing your undergraduate degree. Unlike Subsidized Stafford Loans, these loans do not require that you show financial need, however, interest does accrue unless you pay it while you are enrolled in school, during grace periods, or in periods of forbearance or deferment. Finally, these loans require you to be enrolled in school half-time and have a current fixed interest rate of 2.75 percent for undergraduate borrowers and 5.314.3 percent for graduate and professional borrowers for the 2020-2021 school year.  

Perkins Loans: Perkins Loans are federal loans that can be used to pay for law school. These loans have fixed interest rates of 5 percent. Unlike other federal loans where the lender is the Department of Education, the lender for Perkins Loans is your individual law school. Perkins Loans allow you to borrow up to $8,000 annually, and up to $60,000 over your lifetime. Perkins Loans have no origination fees, a 9-month grace period, and generous cancellation provisions. For example, a Peace Corps member can have up to 70 percent of their Perkins Loans principal and accrued interest forgiven.  

Be aware however, that under federal law, the authority for schools to make new Perkins Loans ended on Sept. 30, 2017, and final disbursements were permitted through June 30, 2018. As a result, students can no longer receive Perkins Loans. Finally, you cannot repay Perkins Loans under the Income-Driven Repayment (IDR) plans (unless you consolidate them into a Direct Consolidation loan) and Perkins Loans do not qualify for Public Service Loan Forgiveness.  

Grad PLUS Loans: Grad PLUS Loans occupy a crucial spot in the lives of those attempting to fund law school via loans. Grad PLUS Loans allow you to borrow the full cost remaining after you have maxed out free money (scholarships and grants), Direct Unsubsidized Loans, and Perkins Loans. Grad PLUS Loans have a fixed interest rate of 5.30 percent for the 2020-2021 school year, no annual or lifetime borrowing limits, rather large origination fees (over 4 percent) and, unlike other federal loans, require a credit check.  

Note: You should, and must, max out other federal financial aid options before applying for and receiving Grad PLUS Loans.  

Unlike credit checks for private loans, you qualify for Grad PLUS Loans as long as you do not have an “adverse credit history.” You can receive an adverse credit history simply by being late on your bills. The Department of Education states that an adverse credit history results due to: 

  • Bankruptcy, repossession, foreclosure, wage garnishments or tax liens in the past five years
  • Unpaid collection accounts
  • Contracts terminated due to default
  • Student loans being charged-off
  • Current accounts being 90 days or more behind

However, a determination of an adverse credit history does not mean that you cannot receive Grad PLUS Loans. You can appeal this decision. To do so, you must document to the Department of Education’s satisfaction that you have an adverse credit history due to extenuating circumstances.  

Documenting extenuating circumstances can be tricky. However, the Department of Education does provide some guidance by laying out a list of examples of extenuating circumstances for various situations. This list is by no means conclusive but is certainly instructive. A few items on the list include:  

  • For a charged off account, collection account, or a current account that is more than 90 days late, extenuating circumstances could include: evidence that the account has been paid in full, evidence that a repayment arrangement has been made, evidence that charged off student loans have been consolidated, evidence that the debt was charged off in bankruptcy, and evidence that debt is no longer in default.  
  • For wage garnishments, extenuating circumstances could include evidence that garnishment has been released.  
  • For repossessions, extenuating circumstances could include evidence that the financial agreement associated with the repossessed asset has been paid in full or that you have entered into a repayment arrangement.  

The full list can be found here. 

Note: The Department of Education does not consider unemployment, by itself, to be an extenuating circumstance. However, evidence of unemployment often serves as a contributing factor in documenting the appropriate extenuating circumstances.  

In the event that you are unsuccessful in documenting extenuating circumstances, you will also be able to acquire an endorser. As long as your endorser does not have an adverse credit history, you will be able to get your Grad PLUS Loan. It should be noted that the endorser will not be able to document extenuating circumstances. While the endorser will be required to repay your Grad PLUS Loan in the event you do not, if you ever consolidate your Grad PLUS Loans into a Direct Consolidation Loan, your endorser will be removed from liability. This can often be a selling point in the event you have a potential endorser who is reluctant.  

Note: You will be required to undergo a credit check for each Grad PLUS Loan you receive (usually no more than once a year). Thus, in the event you continue to possess an adverse credit history, you will be required to document extenuating circumstances or acquire an endorser for each separate Grad PLUS Loan.  

Important note for borrowers who took out loans before July 1, 2010.  

Your federal student loans may originate from one of two major federal student loan programs: the Federal Family Education Loan (FFEL) Program or the Federal Direct Loan Program. Loans from the FFEL Program were issued by private banks and lending institutions like Sallie Mae but are still federal student loans because they are guaranteed by the government. Federal Direct Loans are federal student loans issued directly by the U.S. Department of Education. Congress discontinued the FFEL Program as part of the Health Care and Education Reconciliation Act of 2010 and no subsequent loans were allowed under the program after June 30, 2010.  

Your eligibility for repayment plans and loan forgiveness will be limited if you possess loans from the FFEL program. For example, you can only access one Income-Driven Repayment plan and do not qualify for Public Service Loan Forgiveness. If you wish to qualify for these programs and have loans from the FFEL program, you will need to consolidate your loans into the Federal Direct Loan Program. 

Fixed v. Variable Interest Rates 

Private loans typically have variable interest rates, while all federal loans have fixed interest rates that are determined annually. Fixed Interest Rates remain at the same percentage of your loan. Variable Interest Rates change as the market interest rate changes. Variable interest rates often start out lower than fixed rates, but often increase well above fixed interest rates in a short period of time. For example, the current fixed rate for Grad PLUS Loans is 5.30 percent while the average variable rate for private education loans is 1.04 to 12.40 percent.  

Note: For a few borrowers with very good credit, a high salary and the financial ability to repay their loans on an accelerated schedule, these variable interest rates may provide some opportunity to save money in the short term. 

Interest Rates for Direct Loans First Disbursed on or After July 1, 2020

Loan Type Borrower Type Loan first disbursed on or after 7/1/2020 – and before 7/1/2021
Direct Subsidized Loans Undergraduate 2.75%
Direct Unsubsidized Loans Undergraduate 2.75%
Direct Unsubsidized Loans Graduate or Professional 4.30%
Direct PLUS Loans Parents and Graduate or Professional Students 5.30%

Origination Fees 

Anytime a discussion of federal loans occurs, it is important to discuss origination fees. An origination fee is defined as: “an up-front fee charged by the Department of Education for processing a new loan application for a federal loan.” Due to these fees, the amount of money your educational institution will receive will be less than the amount you borrow. However, as the Department of Education notes, “you are responsible for repaying the entire amount you borrowed and not just the amount you received.” The amount of these fees vary by federal loan type. Presently, these fees can range from one to over four percent for new loans.  

An example of how origination fees can affect your borrowing potential:  

Nancy No-Fees is starting law school. Nancy fills out an application to borrow $35,000 in Direct PLUS Loans. Her loan will be disbursed January 25, 2017. This means her origination fee is 4.236 percent. While Nancy requested $35,000, her law school will only receive $33,517.40 to put toward the cost of Nancy’s legal education. This means that Nancy will have to pay back an additional $1482.60 on this single loan, just in fees. 

Loan Type Borrower Type Loan Fee
Direct Subsidized Loans and Direct Unsubsidized Loans On or after 10/1/2020 and before 10/1/2021 1.057%
Direct Subsidized Loans and Direct Unsubsidized Loans On or after 10/1/2019 and before 10/1/2020 1.059%
Direct Plus Loans On or after 10/1/2020 and before 10/1/2021 4.228%
Direct Plus Loans On or after 10/1/2019 and before 10/1/2020 4.236%

Master Promissory Note (MPN) 

The Master Promissory Note (MPN) is the document you sign in order to receive a federal loan from the Department of Education. An MPN is not required for each federal loan you receive. The same MPN can be used for up to ten years for Unsubsidized Stafford Loans, and for Grad PLUS Loans. This means all Unsubsidized Stafford Loans in a ten-year period use the same MPN while all the Grad PLUS Loans in a ten year period use another.  

Note: If you require an endorser for a Grad PLUS Loan, you must fill out a separate MPN for each loan requiring an endorser, even if the endorser is the same for all loans.  

The MPN is extremely important and should be read in full. All the terms and conditions of your federal loans is laid out in the MPN, and includes but is not limited to the following: 

  • Interest rates, and how interest is calculated, when interest accrues and capitalizes;  
  • Deferment/forbearance options, and what repayment plans are available; 
  • Loan cancellation provisions, information on loan acceleration and default 
  • Loan fees, how the loan proceeds may be used, and how loan disbursement will occur; 
  • What happens if payments are late; 
  • Protections for military personnel, options for loan discharge, how loan proceeds can be used; 
  • Your promise to repay (even if you cannot find employment, did not finish your degree, and/or are not satisfied with educational quality received).  

Filling out the MPN 

You can submit a hard copy MPN or fill out the MPN online. The electronic MPN is filled out by going to Additionally, is where you may go to get a hard copy of the MPN. In either case, you will need an FSA ID and password. If you do not possess an FSA ID and password, you can acquire one at For reference purposes, a sample MPN can be found here. 

You will be asked to provide information about yourself and your school, as well as three references, and confirm that you have read the terms of the MPN, and lastly, sign the MPN. 

You can submit a hard copy MPN by mailing it to: 

U.S. Department of Education 

P.O. Box 5692 

Montgomery, AL 36103-5692 

Once the MPN has been submitted, you will receive a disclosure statement. The disclosure statement provides information on when your loan will be disbursed, fees deducted prior to disbursement, and information about you and your school. Additionally, the disclosure statement will lay out how you may cancel your loans prior to disbursement. Just like with the MPN, you should read the disclosure statement in full.  

Note: You will receive a disclosure statement for each separate federal loan, even if you are not required to sign a new MPN.  

What are the COVID-19 Emergency Relief Measures? 

On March 20, 2020, the office of Federal Student Aid began providing the following temporary relief on federally held student loans:  

  • suspension of loan payments,  
  • stopped collections on defaulted loans, and  
  • a 0% interest rate. 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law, extending the above relief measures through Sept. 30, 2020, which then again was extended through August 31, 2022. 

On Jan. 20, 2021, the COVID-19 emergency relief measures were extended through at least Sept. 30, 2021.  On March 30, 2021, the measures were expanded to federal student loans made through the Federal Family Education Loan (FFEL) Program that are in default. On August 6, 2021, the U.S. Department of Education announced a final extension of the student loan payment pause until January 31, 2022. In April, 2022, it was extended once more until August 31, 2022. 

The pause includes the following relief measures for eligible loans: 

  • a suspension of loan payments 
  • a 0% interest rate 
  • stopped collections on defaulted loans 

Delinquency and Default 

Choosing a federal loan with more protections, over a private loan with less protections can be the difference between paying your loans on time, and having your loans being placed in a delinquent or default status.  

When a current borrower fails to make required monthly payments on student loans, the loan first becomes delinquent and then later goes into default. A loan becomes delinquent the day after payment is due. A delinquency is reported to major credit bureaus after 90 days. Once the delinquent student loan has been late for 91 days (for private loans) or 270 days (for federal loans), the loan is considered to be in default.  

If you default on your federal loans, the government can seize tax refunds, garnish your wages, and take a portion of Social Security payments – all without a court order – and you will lose eligibility for new student loans and grants. Private lenders’ collection powers are not as strong, but their collections process is persistent (and often harassing). 

Note: On March 20, 2020, the office of Federal Student Aid stopped collections on defaulted federally-held loans in response to the COVID-19 pandemic. The COVID-19 emergency relief measures were later expanded to federal student loans made through the Federal Family Education Loan (FFEL) Program that are in default.  These provisions will be in effect through August 31, 2022. 

If you default on either your private or federal loans, it affects your credit and could prevent you from securing a credit card, car loan, mortgage, apartment or job. You may even lose your professional license. You are likely to face these consequences if you go into default because the extremely high standard and complex procedure required to receive bankruptcy protections for student loans, makes it an unfeasible option for many federal and private loan borrowers. 

As a result, eligibility for federal relief and forgiveness programs like income-driven repayment plans and Public Service Loan Forgiveness, and protections such as fixed interest rates, deferment and forbearance, are vital safeguards for student loan borrowers who will be repaying their loans for at least ten years and often longer. A law student who must borrow beyond the Stafford Loan limits (currently $20,500 annually) should utilize Grad PLUS Loans to pay for their education, rather than relying on private loans. 

Curing Default 

On April 6, 2022, the Department of Education announced that borrowers with paused loans receive a “fresh start” on repayment by eliminating the impact of delinquency and default and allowing them to reenter repayment in good standing. If you were in student loan delinquency or default before the Covid-19 pandemic, the “fresh start” would rehabilitate your student loans and place you in good standing when the Student Loan Pause ends on August 31, 2022. Read the announcement here. 

Being in default is a scary thing. Garnished wages. Persistent phone calls. Damaged credit. However, there are steps for both private and federal loans that can allow the borrower to restore their loans to a current status. If you find yourself in default on your federal loans, you can make your loans current again through one of four pathways: 

One: Repay all of the unpaid loan balance immediately.

Two: Consolidate your loans. This option allows you to cure your default status on your loans by consolidating your defaulted loans into a Federal Direct Consolidation loan. However, this loan must be repaid under the PAYE, REPAYE, IBR or ICR plans. (See the discussion on Income-Driven Repayment Plans in Chapter 3.)

Three: Enter into loan rehabilitation. Loan rehabilitation involves entering into an agreement with the Department of Education to cure the default status on your loans. You will make a separate loan rehabilitation agreement for each loan that is in a default status. Access the U.S. Department of Education Loan Rehabilitation form here.

Under the rehabilitation agreement you must do the following: 

  • Make nine payments within ten consecutive months. These monthly payments will automatically be 15 percent of your discretionary income. However, in the event that such a payment is not affordable to you, you can fill out a Financial Disclosure for Reasonable and Affordable Rehabilitation Payments form. This form will allow your payments under the rehabilitation agreement to be as low as $5, based on the details provided about your financial situation.  
  • Make payments no later than 20 days after the due date for each payment.  

Loan rehabilitation has many perks: 

  • Once five payments have been made according to the loan rehabilitation agreement, all wage garnishments are cancelled.  
  • Once nine payments have been made according to the loan rehabilitation agreement: (1) the default status is removed from your loans; (2) you regain access to deferments, forbearances, IDR plans, and loan forgiveness; (3) any record of your loans being in default are removed from your credit report with all three major credit reporting agencies; and (4) your access to more federal financial aid is restored.  

Note: A loan can only be rehabilitated once during the life of the loan.

Four: Have your student loans discharged in bankruptcy. Bankruptcy is the only solution that can be used for getting private loans out of default. Federal loans can also use this option. While this is not an easy task, it is a possible one. The standard you must meet to have student loans discharged in bankruptcy is proving that your student loans are causing you an undue hardship. This requires proving to a federal court all of the following:

 (1) That the debtor cannot maintain a minimal standard of living for him/herself and his/her dependents if forced to repay student loans. A minimal standard of living means that the borrower must have: 

  • shelter that is furnished, heated, cooled, and pest-free;  
  • basic utilities such as electricity, water, and natural gas;  
  • food and personal hygiene products;  
  • clothing and footwear; (5) access to a way of cleaning clothing;  
  • access to a vehicle (including money to pay for registration fees, gasoline, routine maintenance and unexpected repairs) for the purpose of traveling to work, stores and medical care providers;  
  • health insurance, including the ability to pay the required copays and/or deductibles and 
  •  the ability to provide oneself with a source of recreation.  

As one court put it, “a minimal standard of living mandates that a borrower not live in poverty…in order to qualify for a discharge of their student-loan obligation.” 

(2) The presence of additional (and exceptional) circumstances that suggest the borrower will maintain an inability to repay their student loans for an extended period of time. Circumstances can include a disability, old age, large number of dependents, evidence that physical health makes it impossible for the borrower to work, or evidence showing a “total foreclosure of job prospects in the area of training.”  

(3) That the debtor has made good faith efforts to repay the loans. Courts often look at six factors when determining whether one made a good faith effort to repay their student debt: 

  • Was the debtor’s failure to repay a student loan obligation truly because of factors beyond reasonable control? For this factor, courts often consider things like whether or not the borrower took part in IDR plans, forbearance/deferment options, or other potential payment arrangements offered per their student loan agreements.  
  • Has the debtor realistically used all resources to repay the debt? 
  • Is the debtor using his/her best efforts to maximize earning potential? This factor weighs in favor of the borrower if the borrower can prove that they have attempted to find work and/or are working in a position within their educational field/vocational profile that would allow them to maximize their earning potential.  
  • How long after the loan first became due did the debtor seek to discharge the debt? Courts have held that a bankruptcy discharge that is filed less than a year after student debt repayment initially begins would cause this factor to weigh against the borrower.  
  • What is the overall percentage of the student loan debt as compared to the borrower’s overall debt? Unfortunately, with regards to this factor, courts rarely discuss it.  
  • Has the debtor obtained any tangible benefit from the student loan obligations? This factor will almost always weigh against a borrower who has received college credit and/or a college degree in exchange for the educational debt borrowed. However, in the event that the student was unable to receive credit and/or degree (for example, say the university closed due to engaging in fraudulent practices), this factor would weigh in favor of the borrower.  

A few additional points about student loan discharge via bankruptcy: 

  • Every federal circuit uses this test for determining whether student loans can be discharged in bankruptcy except the Eighth Circuit, which uses the “totality of the circumstances test.” This test looks at future financial resources, reasonably necessary expenses and any other relevant facts in order to determine whether your student debt qualifies for discharge in bankruptcy.  
  • Because there exists a strong presumption against the ability to discharge student loans in bankruptcy, failure to prove any one factor results in the borrower failing to prove the existence of an undue hardship.  

Deferments and Forbearances 

Sometimes, it can be hard to maintain your student loan payments. The benefit of federal loans is that the federal government offers options for current borrowers who are behind on their payments. Two available options are deferments and forbearances. Deferments and forbearances can be used to prevent a delinquent loan from going into default. They can also transform a loan in delinquent status to current status, and give the borrower additional time to pay due to various life circumstances. When certain requirements are met, such as being enrolled in school or becoming permanently disabled, a deferment or forbearance allows a borrower to delay making payments on student loans.  

Note: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law, suspending payments on federally held student loans in response to the COVID-19 emergency.  The payment suspension is considered an “administrative forbearance.”. The COVID-19 administrative forbearance will be in effect through January 31August 31, 2022. 

What is a Deferment? 

A deferment is a period during which repayment of principal and interest of federal student loans is delayed. Deferments are available for the following federal loans: 

  • Federal Perkins Loans 
  • Direct Loans/Federal Stafford Loans 
  • Direct PLUS Loans 
  • Direct Consolidation Loans 
  • FFEL Loans 
  • FFEL PLUS Loans 
  • FFEL Consolidation Loans 

Interest does not accrue during a deferment on Direct Subsidized Loans/Subsidized Federal Stafford Loans, the subsidized portion of Direct Consolidation Loans, or the subsidized portion of FFEL Consolidation Loans and Perkins Loans. However, interest does continue to accrue on all other federal loans. 

To qualify for a deferment, the current borrower must meet one or more of the following criteria: 

  • Be enrolled at least half time in school 
    • During a half-time period, deferment is available as long as the current borrower remains enrolled at least half time. This includes the summer between school years.  
  • Be enrolled in a graduate fellowship program, or approved rehabilitation program for the disabled.  
    • Deferment is available as long as the current borrower is enrolled in the eligible fellowship or rehabilitation program.  
  • Be unemployed or unable to find full-time employment.  
    • The borrower must register with a public or private employment agency (if one is available within 50 miles), make at least six attempts every six months to locate full-time employment, and accept full time employment regardless of whether or not the borrower feels overqualified for the employment.  
    • Full-time employment is employment of at least 30 hours a week, lasting three months or more.  
    • The deferment is available for up to three years. This time can be used all at once or spread throughout the repayment period of the loan.  
  • Participation in the Peace Corps 
    • The deferment is available for up to three years. The current borrower must remain an active member of the Peace Corps program.  
  • Active military service duty during a war, military operation, and/or national emergency.  
    • The deferment is available as long as the current borrower remains on active duty during an eligible military event.  
  • Experiencing an economic hardship 
    • To prove an economic hardship, the current borrower must show that (1) Eligibility for a state or federal public assistance program, such as food stamps or (2) earnings are no more than 150 percent of the federal poverty rate, despite working more than 30 hours a week.  
    • The deferment is available for up to three years but requires an annual recertification of the economic hardship.  

Note: Additional protections are available for federal loans that were disbursed before July 1, 1993. These include being a working mother, being on parental leave, being temporarily disabled, engaged in public service or working as an educator in an area where there is a teacher shortage. Information on these deferment opportunities can be found by contacting your loan servicer.  

What is Forbearance? 

A forbearance allows a current borrower of federal student loans to suspend repayment of loan principal and interest, in the event that the current borrower does not qualify for a deferment. No payments are due while loans are in forbearance, but interest will continue to accrue on all your federal loans. A forbearance can only be received for up to 12 months. Forbearances are available for the following federal loans: 

  • Federal Perkins Loans 
  • Direct Loans/Federal Stafford Loans 
  • Direct PLUS Loans 
  • Direct Consolidation Loans 
  • FFEL Loans 
  • FFEL PLUS Loans 
  • FFEL Consolidation Loans 

A forbearance can be discretionary or mandatory. A discretionary forbearance can be granted by your loan servicer at any time, but the decision is the loan servicer’s to make. A discretionary forbearance can be requested based on (1) financial hardship, (2) natural disaster (90 days), and/or (3) illness.  

Mandatory forbearances by law must be granted by the loan servicer, and can be requested for any of the following reasons:  

  • The current borrower is enrolled in a medical or dental residency program.  
    • The residency program must be required in order for the borrower to begin their profession.  
  • The monthly payment due by the current borrower is more than twenty percent of the borrower’s gross monthly income.  
    • This is considered an administrative forbearance and the length of the forbearance is usually only until the loan servicer is able to place the borrower within a more affordable repayment plan. 
  • The current borrower is enrolled in AmeriCorps or Peace Corps.  
  • The current borrower is an activated member of the National Guard, but not eligible for a military deferment.  

A forbearance must be requested directly through the current borrower’s loan servicer. A forbearance is renewable as long as the current borrower remains eligible.  

Note: While a forbearance or deferment can seem ideal for those struggling to make monthly payments, consider using an Income-Driven Repayment (IDR) plan as an alternative. An IDR plan allows monthly payments for student loans based on your income, so in the event a reduction in your income affects your ability to make monthly payments, an IDR plan can be a helpful option. The monthly payments can be as low as $0. If you qualify for such reduced monthly payments, you should consider the option before opting for forbearance or deferment, because your loan payments (even $0 payments) count toward loan cancellation and Public Service Loan Forgiveness, while periods of forbearance and deferment (with the exception of the COVID-19 forbearance and hardship deferments, which do count toward loan cancellation) generally do not. Furthermore, IDR plans can be better when it comes to interest accrual, as certain IDR plans allow the government to pay off part of your interest, which forbearance does not have. Visit Chapter 3 for more information on IDR plans.  

Keep Track of Your Loans 

If you are a current borrower, it is important to know the specific types of loans you have borrowed so that you are able to determine what you need to qualify for federal programs like income-driven repayment plans and Public Service Loan Forgiveness. 

To learn what loans you are eligible for, or what loans you currently have, follow these easy steps.  

  • Go to the
  • Click on “Log-In”
  • Enter your FSA ID and password. If you do not have an FSA ID and password, click “create an account”. Follow the instructions to set up your FSA ID and password.
  • Once you log in, hover over your name in the top right corner. Select “My Aid” from the dropdown menu. The Loan Breakdown will display the type of loan, whether the loan is a Direct or FFEL loan, the balance, disbursed amount, outstanding principal, outstanding interest, total amounts for each type of federal loan you possess, and the loan date

Note: will only provide information about federal loans. Information about private loans can be found by contacting the lender or checking your credit report.  

Loan Consolidation 

When law school is over, you may find yourself juggling multiple federal loans. In this situation, a federal consolidation loan may be helpful. A consolidation loan may allow you to lower your monthly payment while repaying on an extended schedule. Plus, a federal consolidation loan provides continued access to many of the protections given by individual federal loans, such as a fixed interest rate, income driven repayment options, loan cancellation, and even Public Service Loan Forgiveness.  

Note: In the past, federal consolidation loans may have been obtained through FFEL lenders or through Federal Direct, therefore your consolidation loan may be from either program. Any federal consolidation loan borrowed after June 30, 2010, will be Federal Direct Consolidation Loans. 

The Department of Education allows existing federal student loans to be consolidated into one loan via a Direct Consolidation Loan. When loans are consolidated, the existing individual loans are paid off and the current borrower will make one payment on the consolidation loan beginning within 60 days after the loan is disbursed. This loan will have a fixed interest rate. This interest is calculated using the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest one-eighth of 1 percent. This interest rate has no cap. It costs you nothing to consolidate via a Direct Consolidation Loan, and there is no credit check.  

Total Loan Debt Repayment Period
$0-$7,500 10 years
$7,500-$10,000 12 years
$10,000-$20,000 15 years
$20,000-$40,000 20 years
$40,000-$60,000 25 years
$60,000 or more 30 years


Repayment periods under the Standard or Graduated Repayment plans for consolidation loans vary according to the amount of your outstanding federal loans that exist at the time you apply for a Direct Consolidation Loan.  

Note: Under the IDR plans (REPAYE, PAYE, IBR, and ICR), payment is over a maximum of 20 or 25 years, depending on the plan regardless of the amount of outstanding federal loans you have at the time of consolidation.  

With interest rates, Federal Direct Consolidation Loans use a weighted average interest rate.  

A weighted average interest rate ensures that when the interest rates on your new consolidation loan is the same as the interest rates on your earlier loans. 

Example: Andy has two loans. One loan is for $10,000 at 6 percent and the other loan is for $15,000 at eight percent. To calculate Andy’s weighted interest rate, we do the following: 

Step 1. Multiply each loan amount by its interest rate to obtain the loans weight factor.  

$10,000 x .06 = $600 

$15,000 x 0.08 = $1,200 

Step 2. Add the weight factors together.  

$600 + $1200 = $1,800 

Step 3. Add the loan amounts together to obtain the total loan amount.  

$10,000 + $15,000 = $25,000 

Step 4. Divide the total from Step 2 by the total from Step 3.  

$1,400 / $25,000 = 0.072 

Step 5. Multiple the number from Step 4 by 100. Add a percent sign.  

0.056 x 100 = 7.2 percent 

Step 6. Then round the number from Step 5 to the nearest 1/8 percent 

7.2 percent rounded to the nearest 1/8 percent is 7.25 percent. This would be Andy’s fixed rate for his consolidation loan.  

Federal Loans Eligible for Consolidation 

The following federal loans are eligible for consolidation:  

  • Direct Subsidized Loans 
  • Direct Unsubsidized Loans 
  • Subsidized Federal Stafford Loans 
  • Unsubsidized Federal Stafford Loans 
  • Direct PLUS Loans 
  • All loans from the Federal Family Education Loan (FFEL) Program (except for FFEL Spousal Consolidation Loans) 
  • Federal Perkins Loans 

Note: It is important to know that a Direct Consolidation Loan restarts the clock for ALL forgiveness programs. For example, the Public Service Loan Forgiveness plan requires the current borrower to make 120 payments (in addition to other criteria discussed later) in order to have their loan balance forgiven. So a borrower who consolidates their existing loans into a Direct Consolidation Loan still has to make 120 payments on the Direct Consolidation Loan, regardless of how many payments the borrower had made on the separate loans prior to the consolidation.  

Consolidating FFEL Loans 

FFEL Loans, including FFEL Consolidation Loans (except FFEL Spousal Consolidation Loans) can be consolidated into a Direct Consolidation Loan in order to take advantage of Public Service Loan Forgiveness and the PAYE, REPAYE, and ICR plans (all loan benefits only available for Direct Loans).  

Consolidating Parent PLUS and Perkins Loans 

Parent PLUS and Perkins Loans generally are only eligible for programs like income-driven repayment plans and Public Service Loan Forgiveness when part of a Direct Consolidation loan. 

Borrowers of Parent PLUS Loans who entered repayment on or after July 1, 2006 are eligible to consolidate into a Direct Consolidation loan. However, that loan is only eligible for ICR, not for IBR, PAYE, or REPAYE. Thus, consolidating a Parent PLUS loan and enrolling in ICR is the only path to Public Service Loan Forgiveness for borrowers with Parent PLUS Loans.  

NOTE: Borrowers who include non-Parent PLUS loans in a Direct Consolidation loan that includes Parent PLUS Loans will also only be eligible for ICR plan. Consolidate your Parent PLUS Loans separately if it will be advantageous for you to enroll in an income-driven repayment plan other than ICR for your non-Parent PLUS Loans. You can read about major differences between these plans in Chapter 3. 

Federal Perkins Loans include their own cancellation provisions for different professions and categories of public service that may be more advantageous than Public Service Loan Forgiveness; you may be able to defer payments while you are performing service that qualifies for Perkins cancellation. These provisions will be lost if you consolidate your Perkins Loan. Therefore, while you will need to consolidate Perkins Loans for those to be eligible for an income-driven repayment plan or Public Service Loan Forgiveness, you always should consult with the school from which you obtained a Perkins Loan to find out whether you qualify for Perkins cancellation before consolidating. 

Private Loans and Loan Consolidation 

Private loans cannot be consolidated into a federal direct consolidation loans. However, private consolidation loans are often available by private lenders. For more information on these, contact your lender or an outside private institution of your choice. These loans are typically linked to factors like your credit score and present income but may help lower your existing monthly payments. More information on private lenders offering consolidation loans can be found here.  

Total Education Loan Indebtedness Maximum Repayment Periods
Less than $7,500 10 years
$7,500 to $9,999 12 years
$10,000 to $19,999 15 years
$20,000 to $39,999 20 years
$40,000 to $59,999 25 years
$60,000 or more 30 years
How to Consolidate Your Loans 

(1) Go to 

(2) Log in with your FSA ID and password. If you do not have an FSA ID and password, you can acquire one at 

(3) Select the “Manage Loans” option from the top menu. 

(4) Select “Consolidate My Loans”   

(5) Click “start” on the next screen.  

(6) Read the “Instructions for Completing Federal Direct Consolidation Loan Application and Promissory Note..” A copy of those instructions can be found here 

(7) Provide the personal information required on the application. You will be asked to provide your full name (Item 1), any former names (Item 2), social security number (Item 3), date of birth (Item 4), permanent address (Item 5), telephone number (Item 6), email address (Item 7), driver’s license information (Item 8), employer information (Item 9), and work phone number (Item 10).  

(8) Provide contact information for two references (Items 11-12) who have known you for at least three years, and live at separate addresses (does not live at your address), and live in the United States.  

(9) Provide information on the loans you desire to consolidate. All of your existing federal loans are populated automatically, but you can opt-out of having any individual federal loans consolidated.  

A few reminders when deciding which loans to consolidate: 

  • Consolidating FFEL loans make them eligible for Public Service Loan Forgiveness and participation in all the income-driven repayment plans (normally, FFEL loans can only participate in the IBR plan).  
  • If you consolidate a Parent PLUS Loan, you must repay this loan under the ICR plan in order for payments on the new consolidation loan to count toward PSLF.  
  • You can never consolidate a spousal FFEL Consolidation Loan into a Direct Consolidation Loan.  
  • Consolidating Perkins Loans will result in the Perkins-specific loan protections (including cancellation provisions) being forfeited on those loans.  
  • If you are consolidating a loan that is in a default status, the new consolidation loan must be repaid under the IBR, ICR, REPAYE or PAYE plan.  
  • You can consolidate a single Direct Federal Loan, FFEL Federal Loan, Direct Consolidation Loan, or FFEL Consolidation Loan (excluding spousal consolidation loans) into a Direct Consolidation Loan in order to (1) participate in Public Service Loan Forgiveness, (2) remove your loan from a default status, or (3) remove your loan from a default aversion status.  
  • Previous payments made on loans being consolidated and not the newly formed Direct Consolidation Loan will not count toward (1) the number of years of repayment required for loan cancellation under the IBR, PAYE, ICR or REPAYE plans or (2) the 120 qualifying payments required for Public Service Loan Forgiveness.  
  • Accrued interest on all loans consolidated become capitalized, as the accrued interest on the loans consolidated adds to the new principal of the consolidation loan.  

(10) Once you have decided on what loans you want to consolidate or not consolidate (Items 13-16), then you can decide whether you want to forfeit any existing grace period remaining on the individual federal loans you are desiring to consolidate (Item 17). Under law, once individual loans are consolidated, you lose any remaining portion of the grace period on those loans. However, in the event you want to retain your remaining grace period(s) on individual loans, fill out Section 17. This will result in the processing of your Direct Consolidation loan application being delayed for approximately thirty days prior to the end of the grace period(s).  

Note: Leaving Item 17 blank will result in your application being processed immediately and the automatic forfeiture of remaining individual grace period(s).  

(11) Provide information on any loans you decided not to include in your Direct Consolidation Loan (Items 18-22).  

Note: Loans included in Items 18-22 are still used to determine the length of the repayment period under the Standard and Graduated plans for your Direct Consolidation Loan. This means that the total outstanding loan balance (on both consolidated and nonconsolidated loans) determines repayment period.  

(12) Next, you must select your repayment plan. If you desire to enroll in the Standard, Graduated, or Extended repayment plans, fill out and sign a Repayment Plan Request: Standard Repayment Plan/Extended Repayment Plan/Graduated Repayment Plan. If you desire to enroll in the PAYE, REPAYE, IBR, or ICR plans, fill out and sign an Income-Driven Repayment (IDR) Plan Request form.  

(13) Finally, you must read and sign the MPN.  

(14) Once the MPN and corresponding repayment request form have been filled out and signed, the Direct Consolidation Loan application can be submitted for processing. Processing of the application takes 30-60 days. You must continue to make any payments due on your individual loan(s) during this processing period. In the event you cannot make these payments, your loan servicer is obligated to provide you with a 60-day forbearance period during which no payments are required.  

(15) Once the application has been processed, your loan servicer will provide you with a payment schedule. Your first payment will be due in 60 days or less.  

(16) Congratulations! You now have a Direct Consolidation Loan.