Navigating Federal Student Loan Repayment Programs

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If you’ve borrowed thousands of dollars in federal student loans from the government, you might be stuck with a hefty student loan payment and a loan balance that just never seems to shrink!

Don’t worry: you’re not alone…and you may not be as stuck as you think.

You have several choices when it comes to your federal student loan repayment options, some of which could significantly reduce your monthly student loan payment.

Here’s the list of Federal Student Loan Repayment options:

Standard Repayment Plan (Up to 10 Years)

Under a standard repayment plan, you simply pay what you owe on a regular schedule. Your monthly loan payments are based on your loan’s minimum payment amount and the schedule set by your loan servicer. Typically, most federal student loans have a 10 year repayment term. This means your monthly payments are designed to repay your loans in 10 years after starting repayment.

Remember: you can pay more than the minimum on your student loans to get rid of your debt faster and avoid paying additional interest.

Graduated Repayment Plan (Up to 10 Years)

With a graduated repayment plan, your monthly payments are lower at first and then increase over time, more specifically, every 2 years. Like the extended repayment option, you’ll pay more for your loan over time, but your monthly payments will be more manageable today.

Extended repayment (Up to 25 Years)

An extended repayment plan is just how it sounds and will extend the life of your loan repayment for up to 25 years. Because you’re spreading your loan out across a longer period of time, your monthly payments are lower than the standard repayment plan. At the same time, extending the timeline of your student loan repayment means you’ll accrue more interest and pay more over the long term.

Income-based Repayment Plan (Up to 30 Years)

Your monthly student loan payments under this plan is based on your income, which could provide you with more flexibility for how you repay your debt if you’re not earning a lot of money today. You’ll pay more for your loan over time versus a standard repayment plan, but you may be able to have some of your loans forgiven if you make consecutive payments for an extended period of time (usually 10 years or more).

Pay As You Earn Repayment Plan (Up to 20 Years)

This program, also known as PAYE, caps your monthly payments at 10% percent of your discretionary income. Also, your monthly payments will change as your income changes. After 20 years of successful payments, any remaining balance will be forgiven. Keep in mind, whenever your student loans are forgiven you will need to pay income tax on the forgiven amount.

Deferment (Up to 3 Years)

Deferring your student loans means that you temporarily postpone your loan payments. Deferment is usually granted for situations like returning to school, unemployment, disability or military service. During a deferment period, your loan balance on subsidized loans does not accrue interest; you will however accrue interest on any unsubsidized federal loans.

Forbearance (Up to 12 Months)

If you can’t make your scheduled loan payments, but don’t qualify for a deferment, your loan servicer may be able to grant you a forbearance. Forbearance is a temporary postponement or reduction of your student loan payments. If your loan is in forbearance, your debt balance will increase as it continues to accrue interest.

Public Service Student Loan Forgiveness (At least 10 Years)

Debt forgiveness? Sounds too good to be true… But this is a legitimate option for some borrowers. If you work in the public sector, you could have a good chance of having your student loans forgiven. Depending on the type of loan you have, when it was taken out and the amount of time you work in the public sector, a percentage of your federal student loans may be forgiven for each year of completed public service. Public service employment includes work with the government, nonprofit organizations, military service, Peace Corps and other public service organizations.

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Published in Federal Loan Servicing, Federal Student Loan Refinancing, Federal Student Loan Repayment, Federal Student Loans, Public Service Loan Forgiveness

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  • Mahiyar Osaanlu

    @jeffrey_trull:disqus I have an easy but very important question to ask . I’m in an IDR repayment plan for my department of education Student loans , and since I had No income I was issued a $0 dollar payment until my Due date in April 2017 , now I have just received a notice that I need to re-certify my income with a deadline in late march.

    . Now if I recertify right now , will I still have my 0 dollar monthly due for Feb, March, April as it was scheduled before , or servicer processes the new IDR calculation right away effective immediate and make me pay according the new calculation for new dollar amount even for Feb, march , April that I had 0 dollar under my current schedule ?? In another words will the servicer process the re certification effective after my Current repayment schedule ( May) , or servicer makes it effective right away after processing it and ask to make a payment according to your new calculation beginning Feb ?
    So my question is , will the recertification affect my current remaining payments under my current remaining schedule once processed, or it will be processed for after the current schedule ?

    Another thing that raised my eye browse is that my Annual Re-certification anniversary is in Late April according nslds , so why are they having a deadline for me in late march ? giving me only exactly 59 days from the day I received the re-certification notice and the deadline( I thought they should give you a notice 90 days before deadline ) and will the deadline for recertification always be the same each year as long as I remain in the same plan ?

    Please let me know. Thanks