Explore student loan repayment options
Federal student loans offer a financial lifeline for many students, who might otherwise have a difficult time paying for a college education. The U.S. Department of Education makes student loan repayment as simple as possible.
A student borrower can repay a Direct Subsidized Loan or Direct Unsubsidized Loan one of four ways, while a Direct PLUS Loan borrowers may choose from three options
Here’s a brief overview of four student loan repayment options:
- Standard Repayment Plan: Requires fixed monthly payments (at least $50) over a fixed period of time, up to 10 years. The length of the repayment period depends on the loan amount. This plan usually produces the lowest total interest paid because the monthly payment is higher and the repayment period is shorter than under the other plans. (This plan is available for Direct Subsidized Loan, Direct Unsubsidized Loan and Direct PLUS Loan borrowers.)
- Extended Repayment Plan: Allows loan repayment to be extended over a period from generally 12 to 30 years, depending on the amount borrowed. Payment is a fixed amount, but usually the monthly payment will be less than the amount under the Standard Repayment Plan. While lower monthly amounts may make repayment more manageable, a borrower will usually pay more in interest over the payback period. (Available for Direct Subsidized Loan, Direct Unsubsidized Loan and Direct PLUS Loan borrowers.)
- Graduated Repayment Plan: Allows payments to be low at first and increase generally every two years. The monthly payments must be at least half, but may not be more than one-and-a-half, of a payment under the Standard Repayment Plan. The repayment period varies from 12 to 30 years, depending on the total amount borrowed. (Available for Direct Subsidized Loan, Direct Unsubsidized Loan and Direct PLUS Loan borrowers.)
- Income Contingent Repayment Plan: Determines monthly payments on adjusted gross income (AGI) and the total amount of the Direct Loans. As personal income rises or falls each year, repayment amounts will be adjusted accordingly. Required monthly payments will not exceed 20 percent of an individual’s discretionary income. (Discretionary income equals your AGI minus an amount based on the poverty level for a family’s size.) The plan’s repayment period will not exceed 25 years. After 25 years, any unpaid amount will be discharged, but the borrower will still pay taxes on the discharged amount. (Available only for Direct Subsidized Loan and Direct Unsubsidized Loan borrowers.)
Source: U.S. Department of Education
