Different Student Loan Repayment Plans

Going for student loan consolidation is only the first step, you need to know which payment plan suit you the best so that you can manage your loan properly. The student loan consolidation comparison below will show you the features of the different plans available.

1. Simple repayment plan

This gives you a fixed monthly repayment for a loan period up to 10 years. If you are looking forward to settle your loan as early as possible, you should think about this.

2. Extended repayment plan

What if you have other priorities to attend to and you simply can't take out so much money every month? This repayment plan helps you to extend the repayment period to 12 - 30 years and you can also enjoy lower interest rate with this repayment plan.

It might sound a relief to extend your payment with a lower interest rate but when you really do the math, you are actually paying more with this plan. This is because loan agencies have to cover back their cost (low interest rate) by extending the loan period.

3. Graduated payment plan

This plan was designed to start off with lower payment but increases gradually every 2 years. The graduated payment plan shares the same loan period as extended repayment plan and your minimum monthly repayment must be at least $25 or the interest rate offered.

This plan was built for young graduates with lower current income. Its logic is that you will enjoy more income when you work longer in the market. Some believe that this is a riskier plan as you need to constantly monitor your financial situation. Sometime you even need to do a projection for your income in the coming months. If you are unconfident about your future financial situation, it is best that you consider other repayment plans.

4. Income contingent repayment plan

This repayment plan is suitable for you if you have a family and you are a direct loan borrower. Your repayment period will be spread to 25 years and at the end of the loan period, any remaining loan balance will be discharged.

With this repayment plan, your repayment is calculated base on your total student loan, annual income and your family size. And your monthly minimum payment is $5.

5. Income sensitive repayment plan

This repayment plan is similar to income contingent repayment plan with 10 years loan period.

As you can see, there are more things to take into consideration when you are consolidating your student loan. Be it federal or private student loan or choosing among the different repayment plan, you need to look into your need and capabilities before you sign the paper.

You can manage your finance,

Michael W.