The burden of paying back federal college loans is made easier thanks to a variety of repayment plans tailored to fit students' different financial situations. Repayment terms can range from 10 to 20 or more years.
Here are seven types of federal college loan repayment plans to consider:
1. Standard — Standard repayment plans don’t depend on a person’s income. They usually require equal monthly payments for 10 years. The low interest rates help to pay off loans faster than using other plans, NerdWallet reports. Applicants may also refinance the loans at lower interest.
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2. Graduated — Graduated repayment plans start out with lower payments that then increase every two years, according to the Department of Education. People who expect to see an increase in their income might choose this plan.
3. Extended — For those looking for lower monthly payments, the extended repayment plan allows paying back loans over a longer period of time.
4. Revised Pay as Your Earn (REPAYE) — These plans are available to all borrowers of federal loans, regardless of income, NerdWallet notes. The monthly payments are capped at 10 percent of a person’s discretionary income, but combined income will be determined for married borrowers. There are 20-year plans for undergraduate student loans and 25-year plans for graduate student loans.
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5. Pay as You Earn (PAYE) — Borrowers usually have lower monthly payments than with other plans, but qualifying is based on family income. Monthly payments are capped at 10 percent of discretionary income. Like REPAYE plans, the remaining balance is forgiven at the end of the loan term.
6. Income-based Repayment (IBR) — Monthly payments are based on a percentage of a person’s discretionary income. All federal loans are eligible for these repayment plans. New borrowers can have repayment plans for 20 years while the repayment period is 25 years for all others, according to Student Loan Hero. The plan features lower monthly payments, but borrowers may pay more in interest over the years.
7. Income Contingent Repayment (ICR) — The ICR plans are based on family income and size and are 20 percent of a person’s discretionary income, according to Student Loan Hero. It is easier for people to qualify because of no eligibility requirement. Borrowers are eligible for loan forgiveness, which could be considered taxable income.
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