Student Loan Repayment Plans: Different Types Of Plans Available

When you take out student loans to help you to afford higher education, you don't usually have to start repaying them until after you leave education. You can get in school deferrals while you continue at university; even if you stay on to do post graduate courses. After you graduate, you will get a grace period, which varies from around six to nine months depending on the type of loan you have, to allow you time to get a job and establish yourself in a position to be able to afford regular monthly repayments. You will then be expected to stick to a repayment plan until the loan is paid of, otherwise you risk damaging your credit rating, paying late payment fees, or at worst, defaulting on your loan.

There are several options in terms of repayment plans, and you will have to repay your loan within between ten and twenty-five years depending which types of plans you are eligible for and how much you would like to repay each month. Some of the most common repayment plans include:

Standard Student Loan Repayment Plan

The standard student loan repayment plan will have your loans paid off in ten years or under, and you will pay a fixed amount every month for that period. Repayments are at a minimum of $50 per month, so if you don't owe very much you can clear your student debts in an even shorter period. The advantage of this plan is that by paying off the loan in the shortest possible time you will end up paying less interest overall on your loan. It is a good option if you don't owe very much in student loans or have a good income where you are comfortable making high repayments from the start.

Extended Student Loan Repayment Plan

This is a plan where you repay either fixed or graduated repayments over the course of a maximum of 25 years. It is designed for people who owe a large amount in student loans, and you will only be able to get this plan if you owe over $30,000 in a given type of loan, Direct or FFEL. If you owe $35,000 in Direct loans and $7000 in FFEL loans then you will be eligible to repay the $35,000 using an extended plan, but not the other $7000, which you will have to pay back using a different type of repayment plan in a shorter time.

Graduated Student Loan Repayment Plan

This is another plan where you repay your debt in ten years or under, but the monthly amount increases every two years. This is a great option if you are embarking on a career post college where there is a clear route of progression, so you are expecting your income to rise over time. It allows you to enjoy low repayments when you are starting out in your work life, but still lets you pay off your loan in a reasonably short amount of time, avoiding extra interest accrual.

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