Tips that Will Make You a Guru in Student Loan Repayment
So you’ve graduated college- great! Welcome to the world of student loan debt. What you’ve got is what you’re stuck with…or is it?
Student loan repayment plans have many different options so believe it or not, it is possible to find a plan that works for you and your lifestyle. However, when considering these payment plans, it is important to consider what kind of loan you have (federal or private) and what you are looking to get out of a repayment plan- is it lower monthly payments? Do you want to pay your loans faster? Do you want to consolidate your loans? All of these are things to consider when deciding which plan is right for you.
Federal student loans tend to be much more flexible with modifying payments from changing monthly payments, number of years, or even potentially pausing your payments if you have a valid reason to do so. If you are trying to change your payment plan, it is important to call your loan provider to discuss your options and get advice as to which plan would work best for your specific situation.
Standard Repayment Plan
Most people choose the standard repayment plan which is what they are automatically enrolled in. This plan requires you to pay fixed monthly payments of at least $50 dollars for up to 10 years. People on this loan will pay off their loan faster and therefore have less interest but it may not be feasible if you cannot afford those high monthly payments.
Graduated Repayment Plan
Graduated Repayment plans tend to work better for those who may not make a lot of money right out of college. The payments start out low and then increase every two years. While your loan still does get paid off within 10 years you still end up having to pay more interest over the lifespan of your loan versus the standard repayment plan.
Extended Repayment Plan
The difference between the other plans and this plan is that the repayment window is up to 25 years versus 10 years. Borrowers have the option of creating fixed monthly payments or increasing them over time. To be eligible for the plan, you must have more than $30k in direct loans or federal family education loans borrowed after October 7, 1998.
If none of these plans work for you then there are various income-based payment options such as Income-Based Repayment, Pay As You Earn Repayment, Income-Contingent Repayment Plan, and the Income-Sensitive Repayment Plan. Each plan has different need-based requirements along with different pros and cons.
For those who go to graduate school, you may want to consider other options such as deferment or forbearance which you could potentially be eligible for. That is something to discuss with your loan provider.
Do you have tremendous student loan debt and need help? Want more tips on how to make headway in paying off your student loan debt? Leave a comment below or give us a call today!