Federal Loan Repayment Options
The federal Direct Loan program offers various repayment plans. For details, please read the information below which was excerpted from The Student Guide 2012-2013, published by the U.S. Department of Education.
The Standard Repayment Plan: A Standard Repayment Plan with a fixed annual repayment amount paid over a fixed period of time not to exceed 10 years.
The Graduated Repayment Plan: Paid over a fixed period of time not to exceed 10 years. With this plan, your payments start with a relatively low amount and then increase, generally every two years.
- The Extended Repayment Plan: With a fixed annual or graduated repayment amount to be paid over a period not to exceed 25 years. If you’re a FFEL borrower, you must have more than $30,000 in outstanding FFEL Program loans to be eligible for this plan. If you’re a Direct Loan borrower, you must have more than $30,000 in outstanding Direct Loans This means, for example, that if you have $35,000 in outstanding FFEL Program loans and $10,000 in outstanding Direct Loans, you can choose the extended repayment plan for your FFEL Program loans but not for your Direct Loans. Your monthly payment will be lower than it would be under the Standard Plan, but you’ll ultimately pay more for your loan because of the interest that accumulates during the longer repayment period.
Income Driven Repayment Plans
- Income-Based Repayment (IBR) Plan: The Income-Based Repayment Plan became available July 1, 2009. To qualify for the IBR Plan, you must have a partial financial hardship. Under this plan, during any period when you have a partial financial hardship, your required monthly payment amount will not exceed 15 percent of the difference between your adjusted gross income and 150 percent of the Federal Poverty Guideline amount for your family size and state. For assistance in calculating potential monthly payments under this plan, please see the IBR calculator. You are considered to have a partial financial hardship if the amount you would be required to repay on your eligible student loans under a Standard Repayment Plan with a 10-year repayment period is more than the amount you would be required to repay under the IBR Plan. If you repay under this plan and meet certain other requirements over a 25-year period, any remaining balance on your loans may be canceled. Contact the Direct Loan Servicing Center (for Direct Loans) or your FFEL lender (for FFEL Program loans) for more information about the IBR Plan.
- Pay As You Earn Repayment Plan: Monthly payments are 10% of discretionary income, the difference between your adjusted gross income and 150% of the poverty guideline for your family size and state of residence (other conditions may apply). You must also prove partial financial hardship. Additionally, you must be a new borrower on or after October 1, 2007, and must have received a Direct Loan disbursement on or after October 1, 2011. If you repay under the Pay As You Earn Plan and meet certain other requirements over a 20-year period, the unpaid portion may be forgiven. You may have to pay tax on the amount that is forgiven.
- Income-Contingent Repayment Plan: With an income-contingent plan, payments are calculated each year based upon your adjusted gross income, family size, and your total Direct Loan borrowing amount. If you repay under this plan and meet certain other requirements over a 25-year period, the unpaid portion may be forgiven. You may have to pay tax on the amount that is forgiven.
- Income-Sensitive Repayment Plan (FFEL Loans only): With an income-sensitive plan, your monthly loan payment is based on your annual income. As your income increases or decreases, so do your payments. The maximum repayment period is 10 years. Ask your lender for more information on FFEL Income-Sensitive Repayment Plans.
Please note that for private loans, repayment options will vary according to lender.