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Student loans. When you hear that phrase, what’s the first thought that comes to your mind?

The student loan crisis in our nation has been constantly and rapidly evolving. These increasingly high rates can cause stress, worry, and frustration for many individuals. With education costs rising by the year, this issue grows in significance.

With student loans being such a multifaceted topic, we have developed a blog series wherein we will cover subjects such as Traditional Repayment Programs, Income-Driven Repayment Options, and Loan Forgiveness Options. In addition, we will also have content to help guide you into paying off your student loans faster.

Understanding and selecting the best student loan repayment strategy can feel quite overwhelming. In addition, various components can be challenging to understand and discern.

However, this is not a reason to worry. This had been a familiar feeling for our clients… until we could give them our student loan repayment advice and how to get through it. Our firm is here to help you during this process, as you can speak with a financial advisor specializing in student loans with years of expertise. Reach out to us today for a complimentary consultation.

Please visit our website for more information about our student loan advice packages.

 

Traditional Student Loan Repayment Program Options

There are two categories of repayment options for federal student loans: Traditional and Income-Drive Repayment Plans. This article covers the Traditional plan. Traditional plans are not tied to your income, and all federal student loan types (including Direct, FFEL, and PLUS) qualify for them.

The Traditional Repayment Plan has four options:

  • Standard Repayment
  • Graduated Repayment
  • Extended Fixed
  • Extended Graduated

We will be breaking down each option to help you understand which could work best for you.

 

Standard Repayment

This plan is available for all borrowers. This is the most clear-cut repayment plan: you will have fixed payments over a 10-year repayment schedule. Your loan is paid in full at the end of the 10 years.

Key Points:

  • Unless a different repayment plan is selected, you will automatically be enrolled in this plan during the repayment phase.
  • Usually, the fixed payments will lead you to pay less than the other options by the end of repayment.
  • This is a well-suited option for those who can pay off their student loans as quickly as possible.
  • This option is not suited for those seeking Public Service Loan Forgiveness (PSLF) because it is not a qualifying repayment plan for PSLF.

 

Graduated Repayment

This plan is also available for all borrowers. Similar to the Standard Repayment Plan, this option also works on a 10-year schedule. However, these are not fixed payments; they start at a low rate and gradually increase for 10 years until the loan is repaid.

Key Points:

  • With the gradual increase and interest costs, this plan will be more expensive than the Standard Plan by the end of repayment.
  • This is a well-suited option for those who foresee their income increasing over time and would like to pay off their loans in the shortest time period.
  • This option does not qualify for the Public Service Loan Forgiveness (PSLF).

 

Extended Fixed

This plan is solely eligible for those who have over $30,000 in outstanding Direct or FFEL loans. Like the Standard Repayment Plan, you will pay fixed payments throughout the repayment schedule. However, the Extended loan term is 25 years instead of 10.

Key Points:

  • With the extended repayment schedule, you will pay a lower monthly payment than the Standard or Graduated Repayment Plans.
  • Although, this also means you will pay more in interest costs over the schedule than the Standard or the Graduated Plan.
  • This option is well-suited for those with higher loan amounts and who want lower fixed payment amounts.
  • This option is not a qualifying Public Service Loan Forgiveness (PSLF) repayment plan.

 

Extended Graduated

This plan is solely available for those with over $30,000 in outstanding Direct or FFEL loans. Like the Graduated Repayment Plan, the payments start at a low rate and gradually increase over the repayment schedule. However, the Extended loan term is 25 years instead of 10.

Key Points:

  • With the extended repayment schedule and gradual increase, you will pay a lower monthly payment than the Standard, Graduated, and Extended Fixed Repayment Plans.
  • Although, this also means you will pay more in interest costs over the schedule than the Standard, Graduated, and Extended Fixed Repayment Plans.
  • It is well-suited for those who foresee their income increasing over time and would like lower payments initially.
  • This option is not a qualifying Public Service Loan Forgiveness (PSLF) repayment plan.

 

Private refinancing options

Another option to consider is private refinancing your student loans through a private lender, such as CommonBond or SoFi. Private lenders’ loans have different interest rates, terms, and eligibility requirements. If the borrower can obtain better loan terms, private refinancing your student loans could be advantageous.

However, private refinancing can come with some disadvantages, as it may reduce repayment flexibility and jeopardizes your access to government programs like student loan relief or forgiveness programs. In addition, at the time of this article, interest rates are starting to increase, and refinancing older federal loans may not be in an individual’s best interests.

Also, you must be sure if you would like to refinance to a private loan. This is because once you refinance into a private loan, you cannot refinance back into a federal loan.

Speak with a Financial Advisor specializing in student loans

Every facet of student loans can be overwhelming. However, our team of student loan professionals has a sincere passion for helping students and parents navigate these complexities with a qualified plan.

Our firm is here to help you understand your options and devise a debt reduction strategy that works for you. You can click here to schedule a complimentary consultation, and speak with a student loan consultant near you.

Please visit our website for more information about our student loan advice packages.

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