The Department of Education has a variety of repayment plans to help borrower's manage paying their loans back. Each of the repayment plans has their own advantages and disadvantages.
Income Driven Repayment Plans
There three types of Standardized repayment Plans: Standard, Graduated, and Extended. These payment plans will have monthly until the loan is paid in full. In addition, borrower's will pay less interest because principal and interest will be paid on monthly bases. The payment plan are as follows:
Standardized Repayment Plans
The Department of Education has many different income-driven repayment plans. These plans are lower then the standardized repayment plans. The repayment plans are based on your AGI, family size, and the total loan and can be up to 25 years. Any remaining balance will be forgiven and subject the current Internal Revenue Service (IRS) rules for cancallation of debt. The payment plans are as follows:
Revised Pay As You Earn Plan
Begining in December 2015, the Department of Education announced that individuals who have taken student loans prior to October 1, 2007 and revised a disbursement on or after October 1, 2011 would be eligible for the Revised Pay As You Earn. Is similar to the Income Based Plan; however, the it is capped at 10% of your discretionary income and limits the payment terms to 20 years for undergraduate and 25 years for graduates.
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Standard Repayment Plan
On this plan, the borrower will have fixed monthly payments each month until the loan is paid in full. The monthly payment will be no less than $50.00 per month, and you will have 10 years to repay the loan, although this could be longer depending on the amount of the loans.
Graduated Repayment Plan
On this payment plan, your payments will start out low and increase every two years. The length of the payment is up to 10 years just like the Standard Plan. If you expect your income to increase over time, this plan may be right for you. Your payments will never be less than the amount of interest accrued between payments.
Extended Repayment Plan
This payment plan combines both the features of graduate payment plan and extended amortization schedule. To be eligible for the extended plan, a borrower need to have more than $30,000 in Direct Loan debts and you must have an outstanding balance on a Direct Loan as of Oct. 7, 1998. The repayment can be up to 25 years and borrower's have choose between a fixed or graduated payment options.
This plan gives consumers a more flexible option to meet your Direct Loan obligations without causing undue financial hardship. This repayment plan is primarily used for borrowers who wish to or have already consolidated their Parent Plus Loan into own new Direct Consolidation loan. The ICR is unavailable to FFEL loans borrowers. The monthly payment will be calculated on the basis of borrower's AGI, your family-size, and the total amount of your Direct Loans. The maximum repayment period will be 25 years.
The required monthly payment is based on your income during any period when borrower's have a partial financial hardship. The monthly payment can adjust every year, but will be capped at 15% of your income. The repayment period may exceed not 25 years. If you meet certain requirements over a specified period of time, you may qualify for cancellation of any outstanding balance of your loans.
Pay as You Earn Plan
In January 2013, the DOE announced that borrowers new repayment plan that could lower their monthly federal student loan payments. This payment plan is similar to other Income-Driven repayment plans; however, the discretionary income is capped at 10%.