Different Student Loan Repayment Plans

When you are consolidating your student loans, it is common to be confused by the different repayment plans in the market. The student loan consolidation comparison below is to help you to be clear of the features of the different plans available.

1. Simple repayment plan

This gives you a fixed monthly repayment for a 10 years loan period. If you are looking forward to settle your loan as soon as possible, you should look into this plan.

2. Extended repayment plan

What if you have other priorities to take care of and you can't take out so much money every month? This repayment plan helps you to extend the repayment period to the maximum of 30 years and you can enjoy lower interest rate with this repayment plan.

It might be good to extend your payment with a lower interest rate but when you really think of it, you are actually paying more with this plan. This is because loan agencies have to cover back their cost (low interest rate) by extending your loan period.

3. Graduated payment plan

This plan was designed to start off with lower monthly payment and increases gradually every 2 years. The graduated payment plan has the loan period of 12 -30 years and your minimum monthly repayment must be at least $25 or the offered interest rate.

This plan was built for young graduates with lower starting income. Its logic is that you will earn more money as you progress in building your career. Some believe that this is a riskier plan as you need to constantly monitor your financial condition. Sometime you even need to do a projection for your income in the coming months. What if you decide to venture into a new market with lower pay? If you are unconfident about your future financial situation, it is best that you consider other repayment plans.

4. Income contingent repayment (ICR) plan

This repayment plan is suitable for you if you have a family and you are a direct loan borrower. Your repayment period will be spread to 25 years and at the end of the loan period, your remaining loan balance will be write off.

With this repayment plan, your repayment is calculated base on your total student loan, annual income and family size.

5. Income sensitive repayment (ISR) plan

This repayment plan is similar to income contingent repayment plan with 10 years loan period. However, this plan is not included in the direct loan and Federal Family Education Loan Programs (FFELP).

6. Income based repayment (IBR) plan

This payment plan is said to be initiated on July 1, 2009. And unlike the income sensitive repayment plan, this plan is available in the direct loan and FFELP. It works similar to the income contingent repayment plan with the criteria that you are pursuing a career in a lower pay market like public service.

With this repayment plan, you can enjoy lower monthly repayment but subject to a percentage of your discretionary income (your remaining income after minus off the expenses for essentials) and family size.

As you can see, there is more than one plan to choose from when you want to consolidate your student loans. Your job however, is to look into what you need and choose the plan that is most suitable for you.