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What Repayment Options are Available to me on my Federal Loans?


The Federal Loan Repayment options available to you on the Federal loans you borrowed are:

Non-Income Driven Repayment Plans:

Standard Repayment:  10-year repayment term.  Repayments are in qual amounts each month and include both interest and principal.  This Plan costs the least amount in interest over the repayment term, but it is the highest monthly payment.

Graduated Repayment:  10-year repayment term, but payments at the beginning are lower, with the payments gradually increasing every two years.  Payments are never less than the monthly accrued interest. 

Extended Repayment -  Fixed or Graduated:  25-year repayment term, depending upon the amount borrowed.  Borrower must have more than $30,000 in outstanding FFELP loans to choose this plan for those loans and more than $30,000 in outstanding Direct loans to choose this plan for those loans. 

Borrowers can choose a fixed repayment for 25 years or a payment that gradually increases every two years over the 25-year term.   The Graduated Extended Plan helps graduates who need more cash for living expenses after graduation, but it will cost the borrower more in interest over the life of the loan if paid over the 25-year term. 

Income Driven Repayment Plans - Requires annual submission of income documentation.

Income-Sensitive Repayment:  Available on FFELP Loans only.  10-year repayment term, but the lender may increase the term to 15 years.  Monthly payments are based on the borrower's expected total monthly gross income and on the amount of the loan debt. Payments are adjusted annually.

Income Contingent Repayment (ICR):  Available only on Direct and Direct Consolidation Loans.  25-year repayment term.  Payments are based on the borrower's total debt, annual income and family size and are limited to 20% of the borrower's Discretionary Income.  Discretionary Income is the difference between the borrower's Adjusted Gross Income and 100% of the poverty guideline amount for the borrower's family size.  Payments are adjusted annually. Any balance remaining at the end of 25 years will be forgiven.  Unpaid interest is capitalized once a year but the amount capitalized will not exceed 10% of the amount owed when the borrower entered ICR. 

Income Based Repayment (IBR):  Available on FFELP and Direct Loans, but not Parent PLUS Loans or a FFELP or Direct Consolidation Loan that repaid a Parent PLUS Loan.  Borrowers need not consolidate to choose IBR, but the borrower must be experiencing a partial financial hardship to be eligible.  Limits loan repayments to 15% of Discretionary Income.  Discretionary Income is the difference between the borrower's Adjusted Gross Income and 150% of the poverty guideline amount for the borrower's family size.  Payments are adjusted annually.

Under IBR if the borrower's monthly payment does not cover the interest that accrues on the loans each month, the Government will pay any unpaid interest on the Subsidized portion of the borrower's debt for up to three consecutive years from when the borrower first entered IBR.  After three years and for all other types of loans the unpaid interest that accrues will be capitalized, i.e., added to the principal balance, when the borrower is no longer eligible for IBR.

Once the borrower is no longer eligible for IBR because he/she is no longer experiencing a partial financial hardship, any unpaid interest will be capitalized.  The borrower may remain in IBR and continue making payments under the amount the borrower would have paid on the Standard ten-year repayment plan when he/she first entered IBR until the balance is paid in full or eligible for forgiveness.  Any balance remaining at the end of 25 years will be forgiven.

If the borrower chooses to leave IBR, any unpaid interest will be capitalized, and the borrower will be placed into the Standard ten year Repayment Plan based on the term remaining on the debt.  For example, for Stafford and PLUS Loans, the borrower will have ten years minus the time the borrower has been in repayment under IBR to repay the balance remaining.  Consolidation Loans may have a 10 to 30 year repayment term, depending upon the amount of the borrower's debt, minus the time the borrower has been in IBR to repay the balance remaining. 

Pay As You Earn (PAYE):  Available on Direct Loans and Direct Consolidation Loans only.  To be eligible, a borrower must be a new borrower as of October 1, 2007 AND must have a Direct Loan disbursement after October 1, 2011 AND be experiencing a partial financial hardship. 

The Direct Loan disbursement after 10/1/11 can be a Direct Consolidation Loan, but it cannot include a loan borrowed prior to 10/1/07.  Limits loan repayments to 10% of Discretionary Income.  Discretionary Income is the difference between the borrower's Adjusted Gross Income and 150% of the poverty guideline amount for the borrower's family size.  Payments are adjusted annually.  Any balance remaining at the end of 20 years will be forgiven.

Under PAYE if the borrower's monthly payment does not cover the interest that accrues on the loans each month, the Government will pay any unpaid interest on the Subsidized portion of the borrower's debt for up to three consecutive years from when the borrower first entered PAYE.  After three years and for all other types of loans the unpaid interest that accrues will be capitalized, i.e., added to the principal balance, when the borrower is no longer eligible for PAYE, but the amount capitalized willl not exceed 10% of the amount owed when the borrower entered PAYE.

Borrowers are advised to log on to their loan servicer's website, www.studentloans.gov, or www.finaid.org and use the loan repayment calculators to compare loan repayments under each of the above repayment plans.