There are a few Student Loan Repayment options available to you when you consolidate your Federal Student Loans. Each of these options have their benefits. After explaining when it might be helpful to choose one repayment plan over another, we let you make the final decision as to which option best fits your financial needs, both now and in the future.
The four repayment plans are:
In this plan, the payment on your loan is calculated based on the size of the loan and the term of the loan, the same as any normal loan. The term (amount of months to pay the loan off) is based on the amount of the loan. Use the chart below to determine the length of time you will have to pay based on the amount you owe.
The Standard Repayment plan might be a good option for you if:
The Standard Repayment plan allows you to pay off your loans quicker if you are making full payments, on time, each month. You will incur and pay less interest than on the Graduated Repayment plan. A lot of the time, people that do not qualify under the Income Reduction plans do not see a reason to consolidate into a Standard Reduction plan because their payments can be nearly the same.
In the future, if you have a financial hardship, you can call Student Loan Care and we will change your repayment status from Standard to an Income Based Repayment plan. This will let you have a payment based on your income, instead of the standard formula. This will keep you from going into default on your loans. Sometimes, your payment could be as low as $0. This is not a deferment or a forbearance. You would have a $0 payment while the hardship lasted, and the term would continue to tick away. This is where the forgiveness comes into play. Once your term is up, your loan will be completely forgiven, which is one of the biggest benefits of this program.
|Standard and Graduated Repayment Plan Repayment Periods|
|Total Education Indebtness||Repayment Period May Not Exceed|
|Less than $7,500||10 years|
|$7,500 – $9,999||12 years|
|$10,000 – $19,999||15 years|
|$20,000 – $39,999||20 years|
|$40,000 – $59,999||25 years|
|$60,000 or more||30 years|
The calculation for the Standard Repayment Formula is:
The main difference between the Graduated Repayment plan and the Standard Repayment plan is that with the Graduated Repayment plan, you only pay interest on the loan for the first two years. After two years, the payments will increase, then will increase every two years thereafter. The amount of payments will be the same as for the Standard Repayment plan, which is based on your outstanding loan amount.
The Graduated Repayment plan might be a good option for you if:
The total amount of money that you will pay on the loan will be more than a Standard Repayment plan, which is one of the main disadvantages of the Graduated Repayment plan. This is due to only paying interest for the first two years, then only paying small amounts to the principle, gradually increasing as the loan payment goes up. If at any time during the loan you lose your job, or have a decrease in income, Student Loan Care can have your repayment plan changed to meet your current financial needs. Your loan term will still go down, and at the end of the term after making your payments on time every month, the remaining balance will be forgiven.
The calculation for the Graduated Repayment plan is:
PMT=(Loan Amount * Interest Rate)/12
If your income is not that high, you might qualify for the Income Contingent Repayment plan that is based on a couple of income factors. This payment plan calculates the payment two different ways. Your payment will be the lower of the two options.
The first payment is calculated by taking your Adjusted Gross Income and subtracting the poverty line for your family size, then multiply this figure by 20% for an annual payment. Divide this payment by 12 to get your monthly payment amount. The way this plan is calculated does not take your loan amount into consideration.
PMT = ((AGI – Poverty Line) * 20%) / 12
The second payment is calculated using your loan amount, as well as your income and a constant multiplier set by the federal government. Again, the lowest payment is the payment that you will make on the Income Contingent Repayment plan.
The Income Contingent Repayment plan might be a good option for you if:
The Income Based Repayment plan is sometimes the most beneficial plan in the Student Loan Forgiveness program. If you qualify for this repayment plan due to a financial hardship, and your monthly payment is zero, your interest for the first three years is forgiven. If your payment is not zero, but is less than your regular monthly payment would be, then the difference in the interest paid versus the interest accrued is forgiven. Usually, this repayment plan offers the lowest payment option for students with a financial hardship. Your payment amount will never go above 15% of your adjusted gross income above the poverty line for your family size. If you are married, and file a joint Income Tax return, your spouses’ student loan debt can be accounted for when figuring out your payment. This lowers your payment amount due.
The Income Based Repayment plan might be a good option for you if:
The calculation for the Income Based Repayment is:
PMT = AGI – (Poverty Line * 150%) = Y ( Y * .15) / 12
If you would like to know what your Income Based Repayment could be, please call us.