You must make payments on your loan even if you do not receive a bill or repayment notice.

Payment Application

Except during periods of repayment under an Income-Based Repayment Plan, payments made on a Direct Unsubsidized Loan will be applied:

• First to late charges and collection costs,
• Then to interest, and
• Then to the principal amount of the loan.

During periods of repayment under an Income-Based Repayment Plan, payments will be applied:

• First to interest that is due,
• Then to fees that are due, and
• Then to the principal amount.

Prepayment

You may prepay all or any part of the unpaid balance on your loans at any time. There is no penalty if you make loan payments before they are due, or pay more than the amount due each month.

After you have begun repaying your loans, any extra amount you pay in addition to your regular required monthly payment will reduce your outstanding principal balance, as long as accrued interest and any outstanding fees are paid.

If you do not specify which loans you are prepaying, your Federal Loan servicer will determine how to apply the prepayment in accordance with applicable laws and regulations.

Repayment Incentives

A repayment incentive is a benefit that is offered to encourage you to repay your loan on time.

• One repayment incentive is the automatic payment withdrawal option. With this option, your bank automatically deducts your monthly loan payment from your checking or savings account. You will receive a 0.25 percent interest rate reduction while you repay under automatic withdrawal option.
• Your Federal Loan servicer can provide you with more information on repayment incentive programs that may be available.