What is the downside of an extended repayment plan?
The biggest disadvantage of an Extended Repayment Plan is the cost. You end up paying more in interest than you would under other payment plans. There's an inherent trade-off between your monthly payment and how much you pay in interest over time.
If you need to make lower monthly payments over a longer period of time than under plans such as the Standard Repayment Plan, then the Extended Repayment Plan may be right for you.
Cons. The standard repayment plan really just has one major drawback, but it can be very significant, depending on your financial situation: Your monthly payments will likely be higher than with other federal options.
The benefit of an extended repayment plan is that it lowers your monthly payments. For example, if you have $35,000 in unsubsidized federal student loans with a 4.53% interest rate, you might struggle to keep up with the $363 monthly payment on the standard plan.
Payments under the extended graduated repayment plan
Under extended graduated student loan repayment, your payments start small and then increase every two years. You can also choose a fixed version of the extended repayment plan, which splits payment amounts evenly over the 25 years.
In almost every circ*mstance where you have federal student loans with over 5% interest, the Extended and Graduated repayment plans are a bad idea. However, if you look at the stats from the federal government, hundreds of thousands of people use these alternative loan repayment options.
The Extended Repayment Plan can give you more time to pay off your federal student loans if needed. But there are drawbacks, such as higher interest charges and the fact that you'll remain in debt longer than you would on many other repayment plans.
Best repayment option: standard repayment. On the standard student loan repayment plan, you make equal monthly payments for 10 years. If you can afford the standard plan, you'll pay less in interest and pay off your loans faster than you would on other federal repayment plans.
If you're currently in the IBR (Income-Based Repayment) plan, switching to SAVE will have some consequences. First, you'll need to elect to pay a one-time $5 monthly payment during the switch, which won't count toward PSLF. Any unpaid interest will also capitalize, or getting added to your principal balance.
How to pick the best income-driven repayment plan for you. Overall, the Pay As You Earn (PAYE) plan comes out as the winner against Income-Based Repayment: PAYE lowers your monthly payments to 10% of your discretionary income. PAYE offers loan forgiveness after 20 years, no matter when you borrowed your loans.
Does extended repayment plan qualify for PSLF?
Some payments that don't count toward loan forgiveness under PSLF may count toward forgiveness under TEPSLF. The additional qualifying repayment plans include the Graduated Repayment Plan, Extended Repayment Plan, Consolidation Standard Repayment Plan, and Consolidation Graduated Repayment Plan.
With the graduated repayment plan, your monthly student loan payment will increase every two years. However, your minimum payment amount will never fall below that month's accumulated interest. In contrast, your monthly payment on an income-driven repayment plan can drop to “zero dollars.”
Under the budget law, borrowers who have made payments on a graduated, extended, consolidation standard or consolidation graduated repayment plan have a chance to get relief through PSLF, even though payments made on those plans don't normally qualify.
Extended Repayment.
This plan is like standard repayment, but allows a loan term of 12 to 30 years, depending on the total amount borrowed. Stretching out the payments over a longer term reduces the size of each payment, but increases the total amount repaid over the lifetime of the loan.
In short, extended payment terms are policies where one company allows its customer to pay their invoices over a longer-than-normal time period. Extended payment terms are usually 60, 90 or 120 days. EXAMPLE: A local candle company sells their candles at several stores that are a part of a large nationwide retailer.
Under either the fixed or graduated monthly payment option, the Extended Repayment Plan will give you a lower monthly payment on your non-consolidation loans than the Standard or Graduated Repayment Plans. However, because of the longer repayment period, you will pay more interest over the life of your loans.
Borrowers who have reached 20 or 25 years (240 or 300 months) worth of eligible payments for IDR forgiveness will see their loans forgiven as they reach these milestones. ED will continue to discharge loans as borrowers reach the required number of months for forgiveness.
Income-driven repayment disadvantages
Income-driven plans extend your repayment term from the standard 10 years to 20 or 25 years. Since you'll be repaying your loan for longer, more interest will accrue on your loans. That means you may pay more under these plans — even if you qualify for forgiveness.
Repayment plan negotiation can be very beneficial in that it can relieve financial pressure. Although it is not required, it is strongly recommended that you work with a lawyer when pursuing repayment plan negotiation.
Federal student loans are forgiven after you pay on your loans for 25 years while in an income-driven repayment plan. You can get your federal student loans forgiven after 25 years — but only if you pay your loans under an income-driven repayment plan.
How much can student loans garnish?
For federal loans, the maximum wage garnishment amount is 15% of your disposable income. The law defines your disposable income as your earnings after the legally required deductions are made, such as Social Security, Medicare, federal, state and local taxes.
You can change your repayment plan at any time by applying for an income-driven repayment (IDR) plan or by requesting a new plan from your servicer, typically by submitting the necessary application and additional information as needed.
- Switch Repayment Plans.
- Update Your Current IDR Plan.
- Get Temporary Relief: Deferment or Forbearance.
- Review Your Loan Forgiveness Options.
The Standard Repayment Plan is the basic repayment plan for loans from the William D. Ford Federal Direct Loan (Direct Loan) Program and Federal Family Education Loan (FFEL) Program. Payments are fixed and made for up to 10 years (between 10 and 30 years for consolidation loans).
Income-Based Repayment (IBR)—Depending on when you first took out loans (before or on or after July 1, 2014), payments are generally 10% or 15% of the borrower's discretionary income, but never more than the 10-year Standard repayment plan amount. The remaining unpaid balance of loans is forgiven after 20 or 25 years.
