Student Loan Repayment Options

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Explains the repayment plans offereed for federal student loans.

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  • Generally, refinancing / consolidating your existing debt to a lower interest rate can lower your monthly payments. There are a number of private student lenders that offer better rates (between 2%-3%) than Federal aid , and come with a number of other benefits, like mentorship, a private community of investors and borrowers, and career advice. Check out this article for some of the best refinancing options out there: http://achievelending.com/blog/handsdown-the-best-banks-to-refinance-student-loans-with Achieve Lending is the world's first search engine for student loans, and it can help you compare your options and choose the best one. It takes less than 30 seconds to get started.
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Student Loan Repayment Options

  1. 1. The Direct Loan Program offers several loan repayment plansdesigned to meet the needs of almost every borrower.This program allows you to choose your repayment plan and toswitch your plan if your needs change.
  2. 2. Once you graduate or drop below half timeenrollment you will enter repayment on the studentloans that were borrowed.Typically your first payment is due 6 months afteryou cease to be enrolled at least half time, whetheryou graduate, drop classes or withdraw from school.
  3. 3. Your Direct Loan servicer will automaticallyassign you to the standard repayment plan.However, other options are available upon request.
  4. 4. Standard RepaymentWith the standard plan, youll pay a fixed amount each monthuntil your loans are paid in full. Your monthly payments will be atleast $50, and youll have up to 10 years to repay your loans.The standard plan is good for you if you can handle highermonthly payments because youll repay your loans more quickly.Your monthly payment under the standard plan may be higherthan it would be under the other plans because your loans will berepaid in the shortest time. Additionally, under this plan you maypay the least amount in interest.
  5. 5. Extended RepaymentTo be eligible for the extended plan, you must have more than $30,000 inDirect Loan debt and you must not have an outstanding balance on a DirectLoan as of October 7, 1998. Under the extended plan you have 25 years for repayment and two paymentoptions: fixed or graduated. Fixed payments are the same amount eachmonth, as with the standard plan, while graduated payments start low andincrease every two years.This is a good plan if you will need to make smaller monthly payments.Because the repayment period will be 25 years, your monthly payments willbe less than with the standard plan. However, you may pay more in interestbecause youre taking longer to repay the loans. Remember that the longeryour loans are in repayment, the more interest you will pay.
  6. 6. Graduated RepaymentWith this plan your payments start out low and increaseevery two years. The length of your repayment period willbe up to ten years.If you expect your income to increase steadily over time, thisplan may be right for you. Your monthly payment will neverbe less than the amount of interest that accrues betweenpayments. Although your monthly payment will graduallyincrease, no single payment under this plan will be morethan three times greater than any other payment
  7. 7. Income-Based Repayment (IBR)Under this repayment plan your required monthlypayment is capped at an amount intended to beaffordable based on your income and family size.
  8. 8. Income Contingent RepaymentThis plan gives you the flexibility to meet your Direct Loan obligations without causingundue financial hardship.Each year, your monthly payments will be calculated on the basis of your adjusted grossincome (AGI, plus your spouses income if youre married), family size, and the totalamount of your Direct Loans. Under the ICR plan you will pay each month the lesser of: • the amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or •20% of your monthly discretionary incomeIf your payments are not large enough to cover the interest that has accumulated on your loans, theunpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent ofthe original amount you owed when you entered repayment. Interest will continue to accumulate butwill no longer be capitalized.The maximum repayment period is 25 years. If you havent fully repaid your loans after 25 years (timespent in deferment or forbearance does not count) under this plan, the unpaid portion will bedischarged. You may, however, have to pay taxes on the amount that is discharged.
  9. 9. For additional information visit: www.studentaid.ed.govContact your loan servicer in order to change your repayment plan from the standard repayment plan if needed.

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