Higher Ed Utah

When you first enter into repayment on your federal student loans, you’re going to have a monthly payment that will pay your balance in full within ten years. In the student loan biz we call this STANDARD REPAYMENT. It is the fastest and most cost-effective payment plan available (unless, of course, you choose to make additional payments).

Fortunately, if Standard Repayment doesn’t work for you, there are other options that are available through any federal student loan servicing agency. Both UHEAA and FedLoan offer the following alternative repayment plans:

GRADUATED REPAYMENT

This payment plan offers a lower monthly payment which will gradually increase over the repayment term.  This is an option you might consider if you expect your income to increase over the upcoming years.  Keep in mind, however, that the reduced payments made at the beginning of your Graduated Repayment plan will not lower your principal balance as much as if you were paying at a Standard Repayment amount. Because interest accrues daily based on your principal balance you will pay more interest over the life of the loan than you would with Standard Repayment.

INCOME SENSITIVE REPAYMENT

This plan allows you to adjust your payments based on your income. While it can help you to significantly lower your monthly payment, it is not a long-term solution and is more expensive in the long run than Standard Repayment. Income Based Repayment is very similar to this payment plan, and may be better if you don’t expect your financial situation to change in the foreseeable future.

INCOME-BASED REPAYMENT (AKA IBR)

Income-Based Repayment allows you to pay according to your income and family size; it also allows you to extend your repayment term beyond the standard ten years. Paying faithfully on Income-Based Repayment may help you to earn loan forgiveness after 25 years. If you don’t ever expect your income to increase significantly and your student loan payments are just too high, this may be the option for you.

EXTENDED REPAYMENT

Last but not least, Extended Repayment may allow you to extend your repayment term from ten years to up to twenty-five years IF your principal loan balance exceeds $30k and you have no outstanding student loan balances from before October 7^th of 2008. One good thing about Extended Repayment is that it takes any federal student loan into consideration, even if your loans are with several different servicing agencies. Again, with Extended Repayment you can plan on paying more interest than you would with Standard Repayment.

Having said all this, don’t forget that the info above is seriously condensed. For more information about these repayment options and to see which option is best for you, give us a call.