How to Calculate FAFSA Repayments

FASFA stands for the Free Application for Federal Student aid. It is the first part in the process for obtaining grants and federally backed student loans for attending institutions of higher learning. This application accounts for income and assesses the availability of government aid. Although grants are free and do not require repayment, federally backed student loans must be repaid after graduation. The Federal Student Aid website offers several methods to assist students in calculating FAFSA repayments.

Instructions

1

Talk to a financial aid adviser about repayment options. A plethora of student loan repayment choices is available after graduation. Payments can made monthly over short terms. Other options include longer extended payment plans, a graduated plan with payments gradually increasing, and income-based plans.

Graduates with federal student loans could select a standard repayment program and calculate interest and principal payments using the amortization calculator available on the Federal Student Aid website. Example: a Stafford Loan of $30,000 at 6.8 percent interest, paid over 120 months. In this scenario, the initial payments would be $345.24 per month. Total payments--including principal and interest--would be $41,428.80.

Although it is impossible to know, years before graduating, what type of repayment plan will be most suitable, knowing the options helps students decide on a plan that seems most feasible.

2

Use the financial aid calculators on the Federal Student Aid website to determine repayment scenarios. These calculators make it easy to decipher and calculate monthly repayment scenarios for all types of repayment options. They also display an amortized schedule of payments and fixed interest rates for student loans.

The good news for graduates is that they don't need a magic formula or a pen and paper strategy to figure student loan payments. All of the necessary information about repayment scenarios and terms is clearly spelled out through the resources on the Federal Student Aid website (see Resources section). This makes calculating repayment simple and stress-free for all available scenarios, and it gives graduates an uncomplicated way to quickly figure out loan amounts, payments and resources.

It is important to note that although interest rates are variable and can change over time, the interest rate for any government student loan is secured. Once the loan is originated, its terms are locked in. Therefore, even if rates go up several percentage points after graduation, the student pays the rate that was in effect the date he received the loan.

3

Revisit the financial aid office a few weeks before graduation to discuss repayment plans and options for student loans. At this juncture, most students will have some job prospects lined up over the upcoming months, and they will be better equipped to discuss repayment plans and scenarios. Because most degree programs require a two- to four-year commitment, it is best to revisit repayment once graduation is imminent. At this point, the student can recalculate his loans and amortization schedule based upon job prospects and up-to-date scenarios.

Once a repayment plan is selected, the interest is calculated using the data provided on the Federal Student Aid website or directly from a financial aid adviser at the college.