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Repayment Options
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Here are several options available that may help you manage your student loan payments. You should check with your lender to find options available to you. The following explanations may help you decide which is the right path for you! Keep in mind that you want to keep your payments realistic so you won't miss any payment in the shortest amount of time! |
Prepayment
Prepayment is when a borrower make payments toward the loan before payments are due. This can reduce your total cost of borrowing because most private student loans allow you to make payment of a part or your entire loan before the scheduled payment. This can be done anytime during the life of the loan.
Standard Repayment
Under this plan you will pay a fixed monthly amount for up to 10 years. The reapyment period may be shorter depending on the amount of the loan. There is a minimum monthly payment of $50.
Graduated Repayment
Unlike the standard and extended repayment plans, this plan starts off lower payments and gradually increases every two years. Depending on the amount of the loan the repayment period can be anywhere between 12 to 30 years. The monthly payment must also be at least $25.The advantage of this repayment plan is that it allows you have a lower payment when your income might be lower while you change or start a new career.
Income Sensitive Repayment
An Income Sensitive Repayment plan sets the monthly payment based on your annual income and the balance of your loan. Payments will be adjusted up or down as your income rises or falls. All payments must at least equal the interest accrued on the loan between scheduled payments.The advantage of this repayment plan is that it allows you tie your payments to the income that you are earning. If your income goes up, your payments go up. If your income goes down, your payments go down.
Extended Repayment
This plan is simular to the standard repayment plan, but allows the loan terms to be extended from 12 to 30 years. Extending the repayment period reduces the amount of each payment. Be aware that extending your repayment period will also increase the total amount of interest paid for the life of the loan.Changing Repayment Plans
Changing repayment plans is a good way to manage your loan debt when your financial circumstances change. For example, you can usually lower your monthly payment by changing to another repayment plan with a longer term to repay the loan. There are no penalties for changing repayment plans.
As a result in a change in legislation, some of the repayment plans being offered to William D. Ford Federal Direct Loan borrowers have changed. The Standard, Extended and Graduated Repayment plans will no longer be made available to any new borrowers entering repayment after 09/10/2007.
Existing borrowers (borrowers who have already entered repayment on one or more of their loans prior to 9/10/07) and who have one of the grandfathered plans already assigned to their loans will remain on those plans. In addition, subsequent loans that book for that borrower will be placed on the same grandfathered repayment plan.
To learn more about different repayment options click HERE!
