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Choosing the Best Repayment Plan for You

A number of repayment options are available for your Federal Direct Loans and any loans you still may have under the Federal Family Education Loan (FFEL), or Stafford Loan, program. Here’s a quick rundown (click on the plan names for more information):

The Standard Repayment Plan applies to all FFELs and Direct Loans. You’ll pay a fixed amount each month until your loans are paid in full, and you have up to 10 years to repay. If you can handle higher monthly payments, you'll repay your loans more quickly, saving on interest over the long term.

With the Graduated Repayment Plan, your payments start out low and then increase, generally every two years. The length of your repayment period will depend on the total amount you owe when your loans go into repayment. This plan is available to all Direct and FFEL borrowers, even parent PLUS borrowers. If you expect your income to increase steadily over time, this plan may be right for you.

Under the Extended Repayment Plan, you'll still have minimum monthly payments, but you may take up to 25 years to repay your loans. Your payments may be fixed or graduated. To qualify, you must have borrowed a minimum of $30,000. The length of your repayment period will depend on the total amount you owe when your loans go into repayment. This plan applies to all FFELs and Direct Loans, even parent PLUS. Remember that the longer your loans are in repayment, the more interest you’ll pay over time.

The Income-Based Repayment Plan (IBR) applies if you meet certain financial hardship conditions. IBR sets an upper limit on the amount you must pay each month. Your required monthly payment is capped at an amount that’s intended to be affordable. Monthly payments are adjusted each year based on income and family size. After repaying with this plan for 25 years and if you meet other requirements, the remaining balance of your loans will be cancelled. Parent PLUS loans don’t qualify for IBR.

The Pay As You Earn Repayment Plan is a new program that applies only to Federal Direct Loans. It’s similar to IBR, except that the remaining balance of your loan will be cancelled when you repay for 20 years and meet other requirements.

In 2015, the Revised Pay As You Earn (REPAYE) payment plan was established as a new income-driven repayment plan. This option allows you to cap your monthly loan payment at just 10 percent of your discretionary income.

Income-Contingent Repayment Plan (ICR) is for Direct Subsidized and Unsubsidized Loan borrowers only. Although ICR is designed for low-income borrowers, you may qualify for this program if you don’t qualify for IBR. Each year, your monthly payments will be calculated on the basis of your adjusted gross income, family size, and the total amount of your Direct Loans. You’ll have 25 years to repay your loans under this plan.

The Income-Sensitive Repayment Plan (ISR) is similar to ICR, but it’s for the FFEL program only. Payments are based on a percentage of your monthly income.

If you are unsure which repayment options your loans are eligible for, visit the National Student Loan Data System to see whether you borrowed under the Direct Loan program or the Federal Family Education Loan program. On June 30, 2010, the FFEL program was retired, so if your federal loans were issued after that date, they are either through the Direct Loan Program or through the Federal Perkins Loan Program.

The Federal Student Aid website offers different repayment calculators so you can compare each of the different plans and see which is best for you.

Contact your loan servicer for additional information about your loans and options to assist you during repayment.

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