Student Loan Repayment Options
A standard repayment plan is a plan for non-consolidated loans. This plan has fixed payments for no more than 10 years, which is generally the shortest term. Having the shortest repayment plan will save you money because you will pay less interest over the life of the loan. Of course, this means your monthly payment will be higher than if your payments were spread out over a longer-term.
A graduated repayment plan starts with lower monthly payments that increase every two years. This plan also usually has a 10-year repayment term. This plan is good if you are wanting to pay off your loans fast but need to build your income to manage larger payments. This way, you can start with lower payments, then pay more each year as you progress in your career.
An extended repayment plan allows you to extend your repayment length out to as much as 25 years. You can still have a fixed payment or a graduated-payment that increases over time. Your monthly payment will be lower, but you will end up paying much more in interest over the life of the loan.
A revised pay-as-you-earn repayment plan is an income-driven payment option, meaning your annual income determines the amount of your monthly payment. This particular plan sets your monthly payment at 10% of your discretionary income. The repayment term is 20 years if all of your loans are from your undergraduate degree. There’s a safety net here because if for some reason your income decreases, your monthly payment also decreases. Also, this plan is eligible for student loan forgiveness if you are in a qualifying field. It does, however, require you to submit income documentation every year, which can be a hassle. And of course, your payment amount increases if your income increases. Sounds fair, but keep in mind that sometimes when your income increases, so do your other expenses!
A pay-as-you-earn repayment plan is also an income-driven repayment plan. The main difference is that your monthly payment will never be more than the standard repayment option. That way if your income increases your monthly payment amount will be capped. This plan is good for those with high loan amounts.
There are also other options with different features, so do your research and talk to your loan servicer before deciding what plan is the best fit for you.
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