Why should you stay with a standard repayment plan?
The standard repayment plan on student loans may make sense for you if you want to limit the amount you pay overall. Payments under standard repayment are larger than under other plans that extend your repayment term. But you'll pay the least interest and finish repayment the fastest using standard repayment.
You'll save on interest charges.
The longer you have an unpaid loan balance, the more interest you'll pay. Since the standard plan is among the shortest repayment terms offered by the Department of Education, you'll have fewer interest charges overall.
With the standard repayment plan, you will pay the same fixed amount each month for the length of the term. On the graduated plan, your payments will be lower than what you would pay if you were to stay on the standard plan, but never too low that you aren't paying the amount of interest that is accruing each month.
Some reasons for switching from the standard repayment plan to a graduated, extended, or income-based plan is to pay less in the beginning and pay more as time progresses. The automatic standard repayment schedule for a loan establishes the fixed monthly payments for a set amount of time, frequently ten years.
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.
Standard Repayment Plan
You'll pay less interest over time compared to longer-term plans. Cons: Monthly payments are higher than other plans, which may be challenging for some borrowers. If you don't feel confident in your earning ability after graduation, you may want to consider a different plan.
Monthly payments can be higher than other plans, but total interest paid is usually lower and length of repayment is usually shorter.
Payments made under the Standard Repayment Plan for Direct Consolidation Loans would qualify for PSLF purposes only if the maximum repayment period was set at 10 years, and that would be the case only if the total amount of the consolidation loan and your other education loan debt was less than $7,500.
Repayment plans based on your income are a smart choice to lower your payment. For example, payments on the Saving on a Valuable Education (SAVE) Plan are no more than 10% of your discretionary income. The lower your income—or the larger your family size—the less you'll pay each month.
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.
Is standard repayment plan good?
The standard repayment plan on student loans may make sense for you if you want to limit the amount you pay overall. Payments under standard repayment are larger than under other plans that extend your repayment term. But you'll pay the least interest and finish repayment the fastest using standard repayment.
The standard repayment plan is available to all federal loan borrowers, and you can even switch back to it if you've chosen a longer repayment plan in the past. Eligible loans include: Direct subsidized and unsubsidized loans.
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.
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.
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.
The downside to choosing a personal loan with a longer repayment term is paying more in interest charges over the life of the loan. Since lenders charge interest payments monthly, a longer loan term inherently means more interest payments.
Generally, no. The Standard Repayment Plan for Direct Consolidation Loans is not the same repayment plan as the 10-Year Standard Repayment Plan, and payments made under the Standard Repayment Plan for Direct Consolidation Loans don't usually qualify for PSLF.
There is little doubt that SAVE will be the most affordable repayment option for many borrowers, particularly those with relatively lower incomes compared to their balances. But for some, switching to SAVE from another IDR plan may not be the best move.
Which Federal Student Loans Are Eligible for the Standard Repayment Plan? All loans from the Direct Loan Program (subsidized or unsubsidized) and the Federal Family Education Loan (FFEL) Program are eligible for this plan, including: Direct Subsidized Loans. Direct Unsubsidized Loans.
If your income is low now, but you expect it to increase steadily over time, this plan may be right for you.
How many years is 120 monthly payments?
Because you have to make 120 qualifying monthly payments, it will take at least 10 years before you can qualify for PSLF. Important: You must still be working for a qualifying employer at the time you submit your form for forgiveness.
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.
The 10-year Standard Plan is included as an eligible repayment plan for PSLF purposes so that borrowers may receive credit toward the required 120 PSLF payments for payments they may have made under this plan before switching to either IBR or ICR plans or after leaving IBR or ICR plans.
If you work full time for a government or nonprofit organization, you may qualify for forgiveness of the entire remaining balance of your Direct Loans after you've made 120 qualifying payments—i.e., 10 years of payments. To benefit from PSLF, you need to repay your federal student loans under an IDR plan.
Loan consolidation can simplify your monthly payments by combining multiple loans into one loan. After consolidating your loans, you will only have to make a payment to one student loan servicer. This may make it easier to keep track of your student loans and help manage your finances.
