So, you are beyond the need for a deferment or forbearance in your student loan payments and now you are looking for a long-term solution to paying your student loan balance. Most of your federal student loans offer several options for repayment depending upon your circumstances. Some are considered “traditional” and others are considered “income-driven” or IDR.
The traditional repayment plans include:
Standard Repayment Plan
This plan provides for fixed monthly payments over a period of time up to 10 years. You pay less interest under this program than others due to the fixed payment and shorter term.
Graduated Repayment Plan
This plan also pays your student loan over a 10-year period but starts your payments lower than the Standard Plan. Your initial payment will at least cover the interest due and then your payment will increase every 2 years. You pay more interest over the term of the loan but your payments are more affordable when you are first starting out into the world.
Extended Payment Plan
While the extended payment plan has a threshold of $30,000 (that can be done in a semester!), you get up to 25 years to pay the balance and can choose from a fixed or graduated rate. While your monthly payment is lower than the other traditional plans, the interest you pay over the term of the loan is higher.
The Department of Education offers several useful tools for deciding which plan is best for you. One of the most important of these tools is the Loan Simulator which will analyze your situation and offer information regarding which option is best for you. We will explore Income-Driven Repayment Plans in our next blog. In the meantime, if you need assistance with any of these programs, contact us. We give second chances on Second Street.