student loan information center

understand repayment options you have repayment options. that’s one of the most important things to remember when you are in loan repayment. in loan repayment, you join millions of other federal student loan borrowers and they all have different stories. abe is a single professional with $25,000 in federal loans with interest rates under 5%. he’s heard a lot about the standard repayment plan, because it’s, well, the standard. it’s the repayment plan that his loans automatically entered. for abe, standard repayment has some really nice features. his monthly payment of $260 is fixed for the next 120 months. after 10 years of making this payment,

abe’s federal student loan will be paid off. he’ll pay less interest if he makes 120 consecutive payments. like all federal loan repayment plans, there is no penalty for early repayment. beatrice is very similar to abe but chose to live by herself in an expensive apartment close to the office. she graduated with around $22,500 in loans, but with rent and other bills, the monthly $235 payment with the standard plan seems very difficult to manage. she opts for the graduated repayment plan. her monthly payment is reduced to $133 per month for the next two years. with graduated repayment:

payments start small, could be interest-only at first, and increase every two years repayment is still based on 120 payments the lowest the payment will be is still enough to cover the monthly interest the highest the payment will reach is 3 times greater than the initial monthly payments in this plan, she’ll pay a little more in interest than with standard repayment. ben has over $40,000 in federal student loans. but prefers to pay his loans over a 25-year plan. it lowers his monthly payment and he doesn’t mind paying more interest in exchange. ben chose the extended repayment plan. this repayment plan is only an option for borrowers

with over $30,000 in federal loans and some restrictions may apply. clara has decided to take a different path than the others. she graduated with a mixture of subsidized and unsubsidized loans totaling nearly $30,000. listening to a call to serve others, clara joins the peace corps. she requests economic hardship deferment. with deferment, she doesn’t have to make monthly payments. however, her unsubsidized loans will continue to accrue interest while the interest on her subsidized loans may be paid by the department of education. deferment can be granted when a student borrower returns to school, files for economic hardship (including joining

the peace corps), is unemployed, or is on active duty in the military. if any of these situations arise during repayment, contact your loan servicer to request a deferment. similar to deferment, forbearance can give you a break if you have a financial hardship, illness, or other qualification. forbearance is for borrowers who did not qualify for a deferment. with forbearance, you may be able to stop making payments or reduce your monthly payment for up to 12 months. interest continues to accrue on your subsidized and unsubsidized loans. our final borrower doug is feeling pinched. the birth of twins coupled with

a recent cut in hours at work has left him very worried about his student loan payment. fortunately for doug there are repayment plans that can help. income-based repayment, also known as ibr, pay as you earn, income-contingent repayment, and revised pay as you earn are plans that help people lower their monthly federal loan payment. for ibr and pay as you earn, borrowers need to show a partial financial hardship based on: the annual amount due under standard repayment, adjusted gross income, and the poverty guideline for your family size in the state where you live. you can stay in the ibr or pay as you earn plan even if you no longer

have a partial financial hardship, but your monthly payment will increase. there is, a cap on the monthly payment amount which is based on what you would pay under the standard plan at the time you enter the ibr or pay as you earn plan. for revised pay as you earn, borrowers do not need to show a partial financial hardship, but their payments are still based on their adjusted gross income and poverty guidelines for their family size and state of residence. as your income grows, so will your monthly payments under this plan and there is no cap on how much that can be. with income-contingent repayment, you do not need to show a financial hardship, but your monthly payment is based

on your income. with this plan, you’ll pay the lesser of: 20% of your discretionary income or what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income. just remember: you must apply every year even if your situation doesn’t change. repayment terms are 20 to 25 years, depending on your plan and the year you applied for your loan. if you make the monthly payments, but still have a balance at the end of the term, it is forgiven. however, you may need to pay income tax on the dollar amount that is forgiven. because the term is longer than the standard repayment plan, more interest will accrue.

pro tip: stay in annual contact with your loan servicer if you enroll in one of these plans. in the meantime, remember,you have a lot of options when it comes to repayment.