The following loan repayment plans follow a payment structure based on what is owed by the borrower rather than the borrower's discretionary income. See below for Income-Based repayment plans.
The Standard 10-Year Repayment Plan will automatically be assigned to you, but other options may be available. Under a Standard Repayment Plan, you will pay a fixed amount each month. If you can manage the monthly payments, your loans will be repaid in the shortest time and you'll likely pay the least amount of interest, but payments per month are generally the highest.
The Graduated Repayment Plan is recommended for students with low income at present time, but expect it to steadily increase over time (every two years) at a tiered rate. Payments may begin lower than the Standard plan and will never be less than the amount of interest that accrues between your payments. Payments are made for up to 10 years.
The Extended Repayment Plan allows borrowers to make lower monthly payments over a longer period of time compared to the Standard and Extended plans.Direct Loan borrowers must have had no outstanding balance on a Direct Loan as of October 7, 1998, or on the date you obtained a Direct Loan after October 7, 1998, and must have more than $30,000 in outstanding Direct Loans. Monthly payments are at either a fixed or graduated amount for 25 years.
Selecting an Income-Based repayment option could make your monthly payments affordable if you have high debt relative to your income. Monthly payments are based on the borrower's adjusted gross income (AGI), household size, and the federal poverty guideline.
Payments are applied to interest first and principal last, so negative amortization may occur. Negative amortization is when the amount of your monthly loan payment is less than the amount of interest that accrued on the loan during the billing period. When this occurs, the unpaid interest may be capitalized (added to the principal balance) if you leave the IBR or PAYE plan (or no longer qualify), which could increase your total debt and the amount you must repay.
The Department of Education's Income-Driven Repayment website may provide useful information to borrowers who are considering the IBR or PAYE repayment option. Also read Federal Student Aid's Q&A for Income-Driven Repayment Plans[PDF] for more information.
See our IBR Chart[PDF] for monthly payment examples.
See our PAYE Chart[PDF] for monthly repayment examples.