Federal Direct Subsidized/Unsubsidized Loan Repayment

This information applies to the 2012-2013 academic year.  

Lenders are currently required to provide borrowers with four repayment options for Federal Stafford Loans provided through the Federal Family Education Loan Program (FFELP) before the program was discontinued in 2010.

Similar plans are often available for Federal Consolidation Loans and for loans borrowed through the Federal Direct Loan Program. Repayment option information for each loan typically is sent to you during the grace period. This allows you to review the different options and select the one that works best for you.

If you do not respond with your choice, the lender/holder/servicer will assign you the Standard Repayment Plan.

The four repayment options are:

  • Standard (Fixed) Repayment Plan
  • Graduated Repayment Plan
  • Income-Sensitive Repayment Plan
  • Extended Repayment Plan

Standard (Fixed) Repayment Plan

In this plan, you pay a fixed amount each month. All payments include both interest and principal. This plan requires the highest initial monthly payment but produces the lowest cost in total interest paid.

Graduated Repayment Plan

All lenders are required to offer at least one graduated repayment plan; some offer more. The main benefit of such a plan is that it offers the borrower the opportunity to reduce the required monthly payment amount due to the lender.However, choosing a graduated plan means a borrower is likely to pay more in interest charges over the life of the loan.

Under graduated repayment plans the minimum monthly payment amount increases at specific intervals during the repayment period. Payments due to the lender early in the repayment period typically require the borrower to pay only interest charges.When set periods of time have passed, payments will graduate to higher amounts and will include not only payment toward interest on the loan amount, but toward the principal amount of the loan as well.

Because the monthly payment amount can increase significantly at the specified intervals (although no payment can be three times greater than any other payment), graduated repayment plans are generally best suited for those who expect large salary increases at predictable points in time. Before committing to a graduated repayment plan, be sure that you will be able to afford the increased monthly payments.It is wise to speak with your lender to obtain a repayment schedule prior to making a decision to choose the graduated repayment option.

Income-Sensitive Repayment Plan

Monthly payments for this plan are based on the borrower’s expected total monthly gross income and total federal student loan debt. Payments are adjusted annually. This plan results in higher total finance charges than under the Standard Repayment Plan, because loan principal is not repaid in level amounts throughout the repayment period.

Extended Repayment Plan

This plan is available only to those who first borrowed FFELP loans on or after October 7, 1998, and whose total FFELP loan debt exceeds $30,000. It allows borrowers to repay their loans over a maximum term of 25 years, with either standard or graduated payments.

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