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Update Your Stale Student Loan Payment Plan

Not satisfied with the student loan payment plan you got right out of school? We don’t blame you. You picked that plan to fit your situation after your grace period ended, but time can change things. Since then, you may have gotten married, started a family, or had a huge shift in your financial situation.

Your student loan repayment plan may have gone stale but there’s good news: it’s not set in stone. You can take advantage of new or different ways to pay. Instead of risking delinquency or default, you can explore other payment plan options.

While private student loan repayment plans will vary depending on your lender, you’ve got clear options when it comes to federal student loans. There are four main types of payment plans for federal student loans: standard, graduated, extended, and income-based.

Payment Plan Types

Standard Payment Plan

If you’re looking to minimize interest and pay off your student loans as quickly as possible, a standard repayment plan might be best for you. This option entails fixed payments for a repayment period of 10 years unless you have consolidated loans (10 to 30 years). For those who want to save money over time by paying off their loans quickly and not falling prey to high student loan interest rates, the standard plan is ideal.

Not able to pay that fast? Then you may opt for an extended plan or income-driven plan.

Graduated Payment Plan

If you have a solid plan to work your way up to a higher income over time, then a graduated payment plan could be a good option for you. The plan entails lower payments at first. These payments start slowly increasing every two years for up to 10 years unless you have consolidated loans. The graduated plan works best for borrowers whose income is too high for income-based repayment plans.

The biggest downside to the graduated repayment plan? You’ll pay more over time with this plan than with the standard plan. Near the beginning of your repayment on this plan, most of your payments will be going straight to interest instead of paying off the principal. Also, it’s generally not a qualifying plan if you’re seeking Public Service Loan Forgiveness (PSLF).

Extended Payment Plan

If 10 years doesn’t work for you, you could find some relief in an extended payment plan. This plan generally offers lower monthly payments than the standard and graduated repayment plans, but with a shorter repayment term of 25 years. The payments on this plan can be either a fixed or graduated amount as well.

Income-Based Repayment Plan

Paying off a loan quickly isn’t possible for everyone. With income-based repayment plans, your obligations aren’t fixed, but dependent on factors such as:

On an IBR plan, your monthly payments will be either 10 or 15 percent of your discretionary income depending on when you received your first student loans. The payments will never be more than you would pay on a standard plan.

An IBR plan also might be your best route to student loan forgiveness. One forgiveness option is to save more money by qualifying for PSLF while on an IBR plan. Your other option is to pay on your IBR repayment plan until your remaining student loan debt is forgiven. Any outstanding student loan balance will be forgiven if you haven’t repaid your loan completely in 20 or 25 years depending on when you received your first loans.

And IBR plans are only one type of income-driven repayment plan. Similar plans include the income-contingent repayment plan (ICR), pay as you earn repayment plan (PAYE), revised pay as you earn repayment plan (REPAYE), and income-sensitive repayment plan. It’s important to note that not all income-driven repayment plans are available for all federal loan types. For example, Parent PLUS loans don’t tend to be eligible for IBR, PAYE, or REPAYE plans.

We can help you find the lowest income-based repayment plan allowed by your servicer, if that’s your objective.

Want to get an estimate of what your monthly payment amount could be on an IBR plan? Check out our Income-Based Repayment Calculator.

Choosing (and Switching) Between Plans

What may work for you today may not work for you in three years or even six months from now. That’s why loan borrowers can change or switch their student loan payment plan throughout the loan’s lifetime. Typically, borrowers can switch from one plan to another once per year, but you may be able to switch more often if your servicer deems it necessary.

While you can check with your loan servicer to change plans, they typically don’t offer up options in your best interest. We do.

Our Student Loan Advisors can explain how to switch between each plan and the best time to do it. And if you don’t qualify for a repayment plan you want, we can investigate your student loans and see if loan consolidation or refinancing might help you access a better payment plan. We’ll work with your financial and life situation to help guide you, all with your goals in mind.
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