Option 1: Standard Plan
This is the default plan if you don’t choose one of the other options. It is designed so borrowers can be debt-free in a decade or less.
Monthly Payments
A fixed amount of $50 or more.
Repayment Period
10 years or less. However, if you combine multiple loans, this can increase to up to 30 years.
Advantages
Shorter repayment period means you’re likely to pay less in interest overall.
Disadvantages
Higher monthly payments could strain your budget.
Option 2: Income-driven Plan
If you can’t afford the standard option, you may qualify for a plan based on your income and family size.
Monthly Payments
10% to 20% of discretionary income.
Repayment Period
20 to 25 years.
Advantages
Lower payments free up more income for essentials. If you meet specific criteria, you may eventually qualify for loan forgiveness.
Disadvantages
The longer repayment period means you could spend more money overall. If you qualify for loan forgiveness, you may owe income tax on the amount forgiven.
Option 3: Extended Plan
This plan is for those with large loan balances. You must have at least $30,000 in outstanding federal student loan debt to use it.
Monthly Payments
Either a fixed amount or graduated, where payments increase over time.
Repayment Period
Up to 25 years.
Advantages
This plan helps people who struggle with high monthly payments due to a large balance.
Disadvantages
The extended time frame means you may pay more interest in the long term.
Remember
You can change your repayment plan at any time by talking with your loan servicer. Carefully consider your options, though, as your choices can have a significant impact on your finances.
