Finding the best repayment plan for your student loan
Updated on December 4, 2019
If you are a college graduate, you must start repaying your student debt as soon as possible. You have probably gone through the different repayment plans the federal government has put in place. However, to find the right one, you need to assess your financial needs, financial goals, and other factors. These plans include:
1. The Standard Repayment Plan where the payments remain fixed for the entire period of repayment.
2. The Graduated Repayment Plan, where you can start with lower payments but gradually increase the payments as the loan matures.
3. The Extended Repayment Plan, where you are allowed to extend your repayment term by up to 25 years. Also, you can decide on either fixed or graduated payment during the period.
4. Revised Pay as You Earn Repayment Plan (REPAYE). It allows you to pay 10% of your discretionary income. They calculate the difference between your household income and 150% percent of the poverty guideline – also, they review it every year for adjustment.
5. Pay as You Earn Repayment Plan has similarities to the REPAYE, although the major difference is that the payments can increase as your income increases. The payments will never be set higher than your estimated repayment in the 10-year standard student loan repayment plan.
The federal government allows up to seven different plans you can use to repay your loans. However, with constant demands from life, you may not be comfortable with the current plan. You can decide to change the plan and opt for one that will cost you less and stay within your budget. Before you decide which plan to choose, you need to think about your financial goals as well as your life goals.
Consider some of these before you make your mind.
– Do you need to lower your monthly payments?
If you are looking to reduce the monthly payments, go for the income-driven repayment plans. They will typically reduce your payments, though keep in mind with some plans that the payment will be reviewed upward in the years to come, regardless of your income at the time.
– Do you want a lower interest rate?
If you want to get lower interest, stick to the standard repayment plan. The government enrolls all graduates in this loan repayment plan. This plan means you make equal monthly payments for ten years, therefore you can make your payments faster and at a low interest rate.
Finding the right repayment amount may assist you in repaying your loans as you achieve your financial and life goals. Contact StudentLoanify for more information.