Saturday, December 21, 2019

This plan requires you to pay a

This plan requires you to pay a lower monthly payment, but extends the term of your loan to a maximum of 25 years. You can select a fixed or graduated payment schedule. This plan requires you to pay much more interest over the life of your loan. Only those that received loans after 1998 and have more than $30,000 in outstanding Direct Loans are eligible for this plan. If you have a high loan balance and need to make lower payments over a longer period of time, this plan may be right for you.

If you select the Graduated Repayment Plan

If you select the Graduated Repayment Plan, your monthly payments will start out smaller, and then slowly increase as time goes by. Usually, your payments will increase every two years. You will end up paying more overall with this plan because your loan’s principal will decrease more slowly at first which results in more interest being assessed. This plan’s term is typically 10 years (between 10 and 30 for consolidated loans). If you make a lower amount of income now, but expect to gradually increase your earnings as time goes on, this plan could be right for you.
Summary:
  • Payments start small, increase every two years
  • A slightly higher overall cost
  • A 10-year term

These are the four income-driven repayment plans:

These are the four income-driven repayment plans:
  • Revised Pay as You Earn Repayment Plan (REPAYE)
  • Pay as You Earn Repayment Plan (PAYE)
  • Income-Based Repayment Plan (IBR)
  • Income-Contingent Repayment Plan (ICR)
Income-Sensitive Repayment Plan: Only those holding loans from the Federal Family Education Loan (FFEL) program are eligible for this program. The FFEL program has been discontinued and no new FFEL loans have given out since 2010. This plan is somewhat of an outlier, as the FFEL program was funded by a partnership of the federal government and private banks. This means that the exact details of this repayment plan can vary depending on who owns your loan and what your situation is.

There are two major types of repayment plans and one outlier:

There are two major types of repayment plans and one outlier:
Traditional: There are three available repayment plans of this type: standard, graduated, and extended. They are traditional in the sense that they do not require an application, and they don’t change based on your personal situation.
Income-Driven: There are four income-driven repayment plans for Federal Direct Loans. Each plan is similar, in that the amount of your payment is affected by how much income you earn, and they all require you to fill out an application to determine if you are eligible. Each plan has slightly different eligibility requirements and term lengths, but they all offer loan forgiveness (more on that in a minute). While not the right fit for everyone, there are many people that can see their payments reduced to a manageable amount under these programs.

Repayment Plans

Repayment Plans

Choosing a repayment plan is a very important part of paying off your student loans. Choosing a plan that is too ambitious could lead to defaulting on your loans, while choosing a plan that stretches out your payments over too long a period of time can result in paying more interest than necessary. A good plan will strike a balance between those two extremes. Utilize the knowledge you gain in this section to choose the plan that’s right for yo

This plan requires you to pay a

This plan requires you to pay a lower monthly payment, but extends the term of your loan to a maximum of 25 years. You can select a fixed o...