Loan repayment options
Stafford- and PLUS-loan borrowers can choose from several flexible options for paying back their education loans:
Standard repayment
This option provides a fixed monthly payment of at least $50 over a period of up to 10 years.
Graduated repayment
Monthly payments start low and increase over time. Graduated repayment may be a good choice for borrowers who currently have limited income but expect higher earnings in the future. Unless borrowers consolidate several federal education loans, the maximum repayment term under this option is 10 years. Total interest costs are higher under this option than with level repayment.
Income-based repayment
You may qualify for this new repayment option if your loan payments during the year exceed 15 percent of your "discretionary" income. Under this plan you may limit your payments to 15 percent of your "discretionary" income. In addition, your payments may be less than accruing interest, you may qualify to pay back your loans over a period of up to 25 years and you may qualify for forgiveness of any remaining amount you owe after 25 years of payment. Income-based repayment is not available for parent PLUS loans or consolidation loans that repaid parent PLUS loans.
Income-sensitive repayment
You can use this option to repay loans issued under the Federal Family Education Loan Program.
Payments can be adjusted up or down annually to account for changes in a borrower's income. The minimum payment must be enough to cover accruing interest. The repayment period of 10 years can be extended to 15 years under a special forbearance provision. Total interest costs will be higher with this option than with level repayment.
Income-contingent repayment
If you have Direct Loans -- except for parent PLUS loans -- you can tie your monthly payments to your income. Payments can be less than accruing interest and you may qualify for forgiveness of any remaining loan balance after 25 years of repayment.
Extended repayment
If you had no outstanding federal student loans as of Oct. 7, 1998, or paid off your outstanding loans before receiving a new loan after Oct. 7, 1998, then extended repayment can provide a repayment period of up to 25 years on your Federal Family Education Loan Program loans if your FFELP loan balance exceeds $30,000, and your Federal Direct Loans if your Federal Direct Loan balance exceeds $30,000.
Borrowers may choose to make payments over this extended period under a standard or graduated schedule. Because payments are stretched over a longer term, total interest costs will be significantly higher than under the other repayment plans.
Deferment
If you are unemployed, facing certain economic hardships, on active duty in the military, or returning to school for additional studies, you may qualify for a deferment. Borrowers who meet the qualifications and submit the required documentation are entitled to defer principal payments, in the case of unemployment or economic hardship, for up to a total of three years during the term of their loans. There is no maximum time limit for an in-school deferment or for deferment for certain types of military service.
Forbearance
If you don't meet the standards for deferment but still need payment relief, you may appeal to your lender or loan servicer for forbearance. Forbearance permits a borrower to reduce or postpone payments or extend the time for making payments, usually at the discretion of the lender. Forbearance requests typically are granted for periods of up to 12 months.
Questions?
Contact your loan servicer or the holder of your loans for more information about loan-repayment options. If you don't know who services or holds your loans, use the National Student Loan Data System Student Access website.
