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Loan Repayment

Student loans are obligations that must be repaid. You will be presented with a variety of repayment options. It is important to keep in mind that although stretching your payment over a longer period of time will lower your monthly payments, it will increase the total amount that you are required to pay.

When you begin borrowing, make certain that you keep track of all paperwork associated with your loan. This will not only allow you to monitor what you are borrowing, it will also ensure that you have relatively good idea of what you will be responsible for paying back.

The Repayment Plans Offered by the Government:

Standard Repayment
Fixed monthly payments of at least $50 over a fixed period of time (up to 10 years). The length of repayment depends on the amount of the loan. May result in the lowest interest paid since repayment is usually the shortest of the choices.

Extended Repayment
Repayment is extended over a period of 12 to 30 years, again depending on the amount borrowed. A fixed amount is still paid each month (minimum of $50). Payments are generally less than under the Standard Plan, but borrowers may end up paying more in interest.

Graduated Repayment
Payments start out low and increase approximately every two years. May be beneficial to those borrowers whose incomes start out low. The repayment plan varies from 12 to 30 years. Again more will probably be paid in interest due to longer repayment period.

Income Contingent Repayment
Payments are calculated based on the borrower's adjusted gross income and the total amount of Direct Loans borrowed. As income rises and falls, monthly payments will be adjusted. Borrowers have up to 25 years to repay. After 25 years, any unpaid amount is discharged, but the borrower will be responsible for paying taxes on the discharged amount.

Loan Consolidation
Allows borrower to consolidate multiple federal loans into one loan. The interest rate will be the weighted average of all loans consolidated, and may range from 10 to 30 years.

The following chart is provided to give you an idea of what repayment of your Direct Stafford Loan might be, assuming an interest rate of 6 percent. The number of monthly payments and the amount paid each month may vary from the schedule below, depending on the repayment plan which is chosen by the borrower. This chart is a Standard Repayment plan.