What Are Your Student Loan Repayment Options?
Your federal student loans have benefits that allow you to lower your student loan repayment, postpone your payments, or, in certain cases, have your loans forgiven. Consolidating your Federal Student Loans gives you a few different Student Loan Repayment options. These options give you the flexibility to change how you repay your loans as your life changes. This can be especially helpful if you’re ever faced with unemployment or a health or financial crisis.
I make enough to afford my monthly payment—
If you can afford your payments, standard/level repayment may be your best option. You’ll pay your loan off the fastest and pay the least amount of interest over time. In the standard student loan repayment plan, the payment on your loan is calculated like any normal loan payment, based on the size of the loan and also the term of the loan. The term is always based on the size of the loan, in which case you can use the chart below. Depending on your income and family size, the standard repayment plan can be a good option for you if
- You want to pay off the loan as soon as possible and currently have less than 30 years left on the term
- You do not qualify for an income-based repayment plan because of your higher income.
- Your loan amount is small enough where you can be paying a minimal amount over a short period rather than extending it for an additional X amount of years.
I’m making money, but not quite enough
Extended and graduated repayment plans allow you to pay less now and later. Just remember that the longer you take to pay back your loan, the more interest it will accrue, costing you more in the long run. The graduate repayment plan is similar to the standard repayment plan in its calculation, but the major difference is that for the first few years under the graduated plan you are only paying interest on the loan. For this reason, the graduated plan, in the beginning, is always less than the standard repayment plan. You start off only paying interest on the loan and after every two years, your payment increases. The term of the loan is the same as the standard and is based on your loan amount. You may want to choose the graduated plan if:
- Your income is high enough where the Income Based reprograms do not make sense for you, or you may not even qualify for them
- You want to have a slightly lower payment right now, knowing that your payments will slowly increase every two years until the loan is paid off.
- You expect your current job to have normal and regular pay raises and expect to be able to pay the increase of the payment every couple years without it putting undue hardship on yourself and your family.
I’m not making enough to cover my monthly expenses
Depending on your income, a payment that could be as low as $0/month might be the right option for you. Learn more about income-driven repayment plans, including how to apply. Just remember that the longer you take to pay back your loan, the more interest it will accrue, costing you more in the long run. The Income Contingent Repayment plan uses a couple of income based factors to determine what your payment will be during your Student Loan Repayment. The Income Contingent Repayment plan calculates your payment two different ways, and then gives you the lower of the two payments. One calculation is your Adjusted Gross Income(AGI) over the poverty line for your family size, multiplied by 20% for an annual payment (divide by twelve for a monthly payment). Click Here to learn how to qualify
I can’t keep track of my payments and due dates
If you have multiple federal student loans with different monthly payments and due dates you can consolidate your loans. Consolidation combines multiple federal loans into a single loan with a fixed interest rate and a single monthly payment and provides a longer repayment period, which can reduce your monthly payment. Learn more about consolidation.
My loans are in default and threatening wage/tax garnishment
You need to contact a Guidance Counselor right away before it’s too late! They can help you walk to get out of default and back on track. If not, you can have up to 25% of your income taken plus your tax return through garnishments. They will help you consolidate as consolidating your Federal Student Loans gives you a few different Student Loan Repayment options. These options give you the flexibility to change how you repay your loans as your life changes. This can be especially helpful if you’re ever faced with unemployment or a health or financial crisis.