Is your student loan payment becoming a burden to your monthly budget?
If so, then you are not alone.
The nation’s total student loan debt continues to spiral out of control.
In a recent column, Washington Post Columnist Michelle Singletary commented on the financial strain student loans are having on recent college graduates:
“This is what we know about student loans: At more than $1 trillion, they have surpassed credit cards as the largest source of outstanding consumer debt other than home mortgages.”
If you are struggling to make your student loan payment each month, the good news is that there are programs available to fit into your budget!
Recent changes to government rules allow six options for federal student loan repayment.
Knowing which repayment plans you are eligible for may help you find a plan that better fits your budget and long-term financial goals.
Note that not all federal borrowers are eligible for every type of repayment plan, so be sure to check here to make sure that your particular loan is eligible for the plan that most appeals to you.
Paying Off Student Loans With These 6 Pay Off Options
Standard Repayment Plan
Under this plan, you will pay a fixed amount of at least $50 each month for 10-30 years based on your total education indebtedness. This plan may result in lower total interest paid when compared to repayment under one of the graduated plans.
Graduated Repayment Plan
Under this plan, you will pay a minimum payment amount at least equal to the amount of interest accrued monthly for up to 10 to 30 years based on your total education indebtedness. Your payments start out low and then increase every two years.
Extended Repayment Plan (Options 3 & 4) – To qualify for this plan, your Direct Loan balance (your new Direct Consolidation Loan Amount plus other Direct Loans) must be greater than $30,000. Your plan options are:
Fixed Monthly Payment Option
Under this plan, you will pay a fixed amount of at least $50 each month for up to twenty-five years. Repayment under this plan will result in lower total interest paid when compared to graduated plans with similar terms.
Graduated Monthly Payment Option
Under this plan, you will pay a minimum payment amount of at least $50 or the amount of interest accrued monthly, whichever is greater, for up to 25 years. Your payments start out low and then increase every two years. Repayment under this plan may provide lower initial monthly payments, although the total interest paid may be greater when compared to plans with similar terms with fixed payments.
Income-Based Repayment Plan
Monthly payments are based on annual Adjusted Gross Incomes, family size, and you must be experiencing a partial financial hardship to initially select this plan. Monthly payments are adjusted annually to reflect inflation, family size, and partial financial hardship.
Income-Contingent Repayment Plan
The ICR Plan gives you the flexibility to meet your obligations without causing you financial hardship. Monthly payments are based on annual Adjusted Gross Incomes, loan balance, and family sizes.
There are additional programs for those who work in the public sector, such as teachers, police/ law enforcement, City, County, State, nonprofit organizations, etc.
Each has its own criteria but most follow the same basic principles as the Income-Based Repayment Plan and the Income-Contingent Repayment Plan.
Need help trying to figure out what the best option is for you? Give our certified credit counselors a call at (888) 686-4040.