Repayment Programs

Repayment Programs

Note that there are Student Loan Repayment options available to you upon consolidation of Federal Student Loans.  Each option has its set of benefits.  When we explain these options, you may find it helpful to choose one repayment plan over another. The final decision is yours. you will know which option fits your financial needs best.

Repayment Programs:

  • Standard Repayment
  • Graduated Repayment
  • Income Contingent Repayment
  • Income Based Repayment
  • Pay As You Earn
  • Revised Pay As You Earn

Standard Repayment

In the Standard Repayment plan, the payment on your loan is calculated based on the loan amount and term length, similar to most loans. 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 for you if:

  • You want to pay off your loan as soon as possible, and have less than 30 years left to pay
  • You do not qualify for an Income Based Repayment plan because you have a higher income
  • Your loan amount is small enough that you do not want to extend the amount of years you have the loan

The Standard Repayment plan allows you to pay off your student 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.  Often, people that do not qualify under the Income Reduction plans do not see a reason to consolidate into a Standard Reduction plan because payments can be often similar to current payments.

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:

Graduated Repayment Plan

The Graduated Repayment plan you pay interest on the loan for the first 2 years.  After 2 years, payments will increase, and it will increase every 2 years thereafter.  The amount of payments will be the same as for the Standard Repayment plan, which is based on your outstanding student loan amount. Borrowers will typically payback significantly more in interest and principle under this plan.

The Graduated Repayment plan might be a good option for you if:

  • The Income Based plans do not make sense for you, you do not qualify for them due to higher income.
  • You want lower payments now, with slight increases every two years until the loan is paid off.
  • You have a job that you plan to stay with that will give you regular pay raises in order to be able to afford the increase in amount due every two years without causing a financial hardship.

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 Forgiveness Bill 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

Income Contingent Repayment Plan

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:

  • There is a financial hardship and you are unable to make the payments
  • You do not believe there will be increased income in the future, but you want to be eligible for student loan forgiveness.  Under this type of plan, it is unlikely for the loan to be paid off, so the loan balance will be forgiven


Income Based Repayment Plan

The Income Based Repayment plan is often the most beneficial plan for Student Loan Forgiveness program.  If you qualify for the Income Based Repayment Plan and your monthly payment is $0, your interest for the first 3 years is forgiven.  If your payment is not $0, and is less than your regular monthly payment, then the difference in interest paid versus interest accrued is forgiven.  Usually, the Income Based Repayment Plan offers the lowest payment option for students facing 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:

  • If there is a financial hardship, you are unable to make payments
  • You qualify for a $0 payment, or a payment less than the accruing interest on the loan.  This allows the interest to be forgiven on the first three years after being accepted to this plan
  • You do not believe there will be increased income in the future, but you want to be eligible for EduLoan Docs.  Under this type of plan, it is unlikely for the loan to be paid off, so your loan balance will be forgiven

The calculation for the Income Based Repayment is:

PMT = AGI – (Poverty Line * 150%) = Y ( Y * .15) / 12

If you would like to know your Income Based Repayment can be, please call us.