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Repayment Plans

Standard Repayment Plan

Procedure: This plan will ask you to pay at least $50 for up to a decade as a fixed payment plan. This is any client’s default plan.

Advantages: Your loan will be paid quickly (finished within 10 years) and with less interest.

Disadvantages:The monthly payments necessary in this repayment plan is generally higher than the payments that must be made in other repayment plans.

Suitable Applicants: Any possible client who can pay for higher payments.

Graduated Repayment Plan

Procedure: Your payments begin low but receive an increment. This increase typically occurs every two years.

Advantages: Your loan will still be paid off within ten years of the loan’s retrieval.

Disadvantages: This loan will give you a greater total interest as opposed to the interest that you will receive from the Standard Repayment Plan.

Suitable Applicants: This plan is for clients who are not able to afford higher regular payments and are sure that their income will soon increase.

Extended Repayment Plan

Procedure: This uses characteristics of the Standard Plan, like choosing to use fixed payments, and that of the Graduated Plan, such as opting to increase your payments as time passes. Eligibility depends on being a new borrower (Oct. 7, 1998), and having an outstanding Direct Loan or FFEL loan worth greater than $30,000.

Advantages: You will be given more time for your repayment, and you can pay in smaller doses as opposed to the Standard Plan.

Disadvantages: Repayment with this plan can reach up to 25 years. In this manner, you will be led to pay for a longer duration and with far greater total interest.

Suitable Applicants: Clients who will accept paying greater through their repayment for the ability to lower their monthly payments.

Income-Based Repayment (IBR)

Procedure: Your income will be the basis for your payments. The calculation will ask for up to 15% of your income, and will be recalculated per year according to your income and family demographics. Eligibility will depend on having a partial finance issue.

Advantages: The payments for this plan are much lower than the Standard Plan. If your loan has not been fully paid after 25 years of counted payments, you may also have your loan forgiven. Working in the government will allow you to have parts of your loan forgiven. Finally, if your payments don’t cover the interest, the government will pay for the interest for up to three years.

Disadvantages:Greater total interest will be paid for through this plan, and income tax may be asked from you with relation to any forgiven debt. Your payments may be adjusted only after a thorough and updated income report. Failure to supply any of the necessary information in time may automatically place you as a client following the Standard Plan.

Suitable Applicants:Any client looking for better affordability when it comes to their repayments, especially those with loans that have been out sized.

Pay as You Earn Repayment (PAYE)

Procedure:This plan is very similar to the income-based repayment plan, however it calculates for your necessary repayment using only 10% of your income. Again, this calculation includes your income and the size of your family, and an existing financial issue.

Advantages:The payments for this plan are much lower than the Standard Plan. If your loan has not been fully paid after twenty years of counted payments, you may also have your loan forgiven. Working in the government will allow you to have parts of your loan forgiven after ten years.

Finally, if your payments don’t cover the interest, the government will pay for the interest for up to three years from the date you begin your payments. No interest is added unless your financial issue has been solved. When this situation arises, the amount of interest that may be placed on your debt can only reach ten percent of your initial loan. Your interest is capitalized depending on your loan terms. Your loan may be more expensive if its capitalization occurs more often.

Disadvantages:You can only be eligible for PAYE if you are a new borrower (October 1, 2007) and received a disbursement (October 1, 2011). As opposed to a ten year plan, this plan will cause you to pay more. You should provide income certification next year, and you may need to pay income tax after a loan’s forgiveness.

Suitable Applicants: The Pay as You Earn Repayment plan is targeted towards all newly graduated students that are looking to make sure that their payments are low.

Income-Contingent Repayment Plan

Procedure:Your loan amounts, adjusted gross income and family size are used as basis for your payments and may change according to your income. You may prefer to pay 20% of your discretionary income or pay a certain amount based on a twelve year plan times a percentage factor. The repayment that will be followed will be according to which of the two choices will be less.

Advantages:You will be paying less than that in a Standard Plan. You may also be eligible to forgiveness if you have not paid your loan after 20 years of counted payments.

Disadvantages:Income documentation is necessary, and you may have to pay income tax after having your debt forgiven. Also, you may have to pay more than in a shorter plan. If your payments do not include interest yet, the interest is capitalized annually. This procedure is done until your balance is up to 10% higher than your principal loan. This rule excludes interest during forbearance or deferment.

Suitable Applicants:Clients are eligible for this plan if they cannot apply for IBR or PAYE since they do not have financial hardship, but prefer affordable payments.

Income-Sensitive Repayment Plan

Procedure:Your annual income is the basis of your payments. If you do not qualify for the Income-Contingent plan, you may use this repayment plan as an alternate.

Advantages:Your monthly payment must be greater than or the same as the interest your loan receives, but you may choose the percentage of your payment (only between 4-25 percent).

Disadvantages:This plan can only be used for five years. Afterwards you must choose a different plan. This type of repayment plan can easily increase the amount of time you spend to repay your loan, increasing your total payments.

Suitable Applicants:This is for clients who wish to have a little freedom in paying for their debt and at the same time have low income.

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