Understanding Total Education Loan Indebtedness

How total student loan debt affects eligibility for federal repayment plans.

Defining “total education loan indebtedness”

“Total education loan indebtedness” refers to the total amount of debt you incurred for your education. It’s the sum of:

• Your Federal Direct Consolidation Loan debt
• Other federal loans you have that weren’t eligible for consolidation
• State loans
• Private student loans

Also called “total education indebtedness” for short, it determines how many payments you make on standard or graduated repayment plans. Basically, the higher your total student loan debt is, the longer the term extends on your repayment plan.

What total education indebtedness means for repayment

Total education loan indebtedness can be a bit confusing because it includes debts that aren’t eligible for federal repayment plans.  For instance, you can never use federal repayment plans to consolidate private student loans. However, these loans can be included when you calculate your total education loan indebtedness as you qualify for those plans.

It’s important to note that total education loan indebtedness only really applies when you have a Federal Direct Consolidation Loan that you want to include in a federal repayment plan. What’s more, your total education loan indebtedness cannot exceed the amount of your Direct Consolidation Loan. With that in mind, total education loan indebtedness may not necessarily equal the total current student loan debt you have.

How total education loan indebtedness works

Total education indebtedness only comes into play if:

1. You used a Direct Consolidation Loan to consolidate some or all of your federal student loans.
2. You apply for a standard or graduated repayment plan that will include that Direct Consolidation Loan

If you meet those two requirements, then you calculate total indebtedness. It’s equal to the amount of your Direct Consolidation Loan plus all of your other education debts. Even debts that aren’t eligible for federal repayment get factored into the total. However, the amount of other debt cannot exceed an amount equal to your Direct Consolidation Loan.

So if you have a Direct Consolidation Loan of $30,000 then your total education loan indebtedness cannot exceed $60,000.

Why total education indebtedness matters

#1:  It’s the government’s way of giving you a break

Basically, this is the federal government’s way of acknowledging that high volumes of debt are difficult to manage. If you have a consolidation loan plus other student debt, then you may be limited in funds available for repayment. As a result, you can qualify for a longer term on a standard or graduated repayment plan. A longer term means lower monthly payments. In other words, it’s easier to manage debt repayment in your budget.

#2: It affects your ability to qualify for extended repayment plans

Both the standard and graduated repayment plans for federal student loans have an extension option. The extension increases the term from 10 years to 25 or 30 years, depending on your total current student loan debt.

If you want to use an Extended Repayment Plan: You can extend the term to up to 25 years as long as your total education indebtedness is over $30,000 but does not exceed $40,000.

If you want to use an Extended Graduated Repayment Plan: You can extend the term to up to 30 years if your total education indebtedness exceeds $60,000.

#3: It makes the application process less straightforward

One of the most important points about this concept is that you can expect it to complicate your application process. The more complex your loan mix is, the harder it is to navigate the application on your own. We recommended that you consult an expert if you’re not sure of what you’re doing.