Student Loan Repayment Options

Written by Nicole Madison
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You may wonder what student loan repayment options will be available to you if you decide to consolidate a federal student loan. FFEL consolidation loan borrowers generally have four repayment options: the standard plan, graduated repayment plan, income-sensitive repayment plan, and the extended repayment plan. Thoroughly review each payment plan to determine which plan best fits your financial needs.

Examining Student Loan Repayment Options

If you choose the standard plan, you will repay a fixed amount each month. Your minimum payment will be at least $50 per month and you will be given up to 10 years to repay your loan. Because you will repay your loan in a shorter amount of time, your monthly payments will be higher than they would be under the other payment plans. However, of all the student loan repayment options, this plan enables you to pay the least amount of interest over the life of your loan and serves to reduce your total loan costs.

If you choose the graduated repayment plan, your payments will start out low and increase in stages. Initially, each payment will be equal to, at the very least, the amount of interest accrued on the loan between payments. Your monthly payments, under this plan, will never be more than three times greater than any other scheduled payment amount. Like the standard plan, you are generally expected to repay the loan within 10 years.

Another option, the income-sensitive repayment plan allows borrowers to make payments in amounts adjusted annually based on the borrower's yearly income. Under this plan, your monthly payments increase or decrease, in conjunction with your income. With this plan each monthly payment must, at minimum, equal the interest accrued on the loan between scheduled payments and cannot be more than three times the amount of any other scheduled payment amount.

The extended repayment plan allows borrowers to repay their loan over an extended amount of time of up to 25 years. Payments, under the extended plan, are either fixed or graduated. Because you are stretching your loan repayment period out over a longer amount of time, you will pay more interest under the extended plan in the long run.


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