It’s not uncommon for borrowers to select a repayment without truly understanding what they are signing up for. This page reviews the repayment plans for federal student loans.
Standard Repayment Plan
- Payments are set at a minimum of $50/month.
- You make payments over a period of 10 years.
Eligible Loans:
- Direct Subsidized and Unsubsidized Loans
- Subsidized and Unsubsidized Federal Stafford Loans
- all PLUS loans
The Standard Repayment allows borrowers to pay less interest because they are paying the loan back over a shorter period of time. Unfortunately, in this current climate most borrowers cannot afford this option because they simply have too much student loan debt.
Graduated Repayment Plan
- Student loan payments are lower at first and then increase (generally every two years).
- Borrowers make payments over a period of 10 years.
Eligible Loans:
- Direct Subsidized and Unsubsidized Loans
- Subsidized and Unsubsidized Federal Stafford Loans
- all PLUS loans
Under the Graduated Repayment Plan, the borrower will end up paying more than they would had they selected the Standard Repayment option.
Extended Repayment Plan
- Payments may be fixed or graduated
- Borrowers have 12-25 years to repay their student loan
Eligible Loans:
- Direct Subsidized and Unsubsidized Loans
- Subsidized and Unsubsidized Federal Stafford Loans
- all PLUS loans
Important Notes:
- A Direct Loan borrower must have more than $30,000 in outstanding Direct Loans to be eligible
- FFEL borrower, you must have more than $30,000 in outstanding FFEL Program loans to be eligible
- For both programs, you must be a new borrower as of Oct. 7, 1998.
Borrowers that select an Extended Repayment Plan will pay more than individuals that select the Standard Repayment Plan because the loan is pay over a longer period of time.
Income-Based Repayment Plan
- A borrowers maximum monthly payments will be 15 percent of discretionary income, the difference between your Adjusted Gross Income and 150% of the poverty guideline for your family size and state of residence (conditions apply)
- A borrower will make payments for up to 25 years
Eligible Loans:
- Direct Subsidized and Unsubsidized Loans
- Subsidized and Unsubsidized Federal Stafford Loans
- all PLUS loans made to students
- Consolidation Loans (Direct or FFEL) that do not include consolidated PLUS loans made to parents
Important Notes:
- You must have a partial financial hardship
- If you have not repaid your loan in full after making the equivalent of 25 years of qualifying monthly payments and 25 years have passed, any outstanding balance on your loan may be canceled
Income-Contingent Repayment Plan
- Payments are calculated each year and are based on your annual income, family size, and the total amount of your Direct Loans for up to 25 years
Eligible Loans:
- Direct Subsidized and Unsubsidized Loans
- Direct PLUS Loans made to students
- Direct Consolidation Loans
Important Notes:
- If you are married, your spouse’s income is included
- If you do not repay your loan after 25 years under this plan, the unpaid portion will be forgiven
- You may have to pay income tax on the amount that is forgiven
Income-Sensitive Repayment Plan
- The monthly payment is based on annual income
- Payments change as income changes
- Payments are made over a 10 year period
Eligible Loans:
- Subsidized and Unsubsidized Federal Stafford Loans
- FFEL PLUS Loans made to students
- FFEL Consolidation Loans that do not include a PLUS loan made to parents