Income-driven repayment costs about the same as standard repayment under these circumstances. But these plans are typically a safeguard for borrowers who can’t afford their loans, as payments can be as small as $0 and balances are forgiven after 20 or 25 years of payments. Lindsay Ahlman, senior policy analyst for the Institute of College Access & Success, says to think long-term before choosing an income-driven plan, and know you can always switch to income- driven repayment if you hit a rough patch. “A lot of things are going to happen over the course of repayment — your earnings trajectory, your life decisions like marriage and children — that affect your income-driven payment,” Ahlman says. And while an income-driven plan can reduce monthly payments, you may pay more overall because the repayment period is longer than the standard plan, she says.
WAYS TO SAVE
Even the least expensive repayment plan could add $7,000 to your loans. If you just graduated and want to shave down that amount, you have options. Coleman suggests making payments during the six-month grace period and paying off interest before it’s added to your balance when loans enter repayment, if possible. Other ways to cut costs include letting your servicer automatically deduct payments from your bank account, which can reduce your interest rate, and paying loans twice a month instead of once. You can always prepay student loans without penalty.
This article How Much You’ll Really Pay for That Student Loan was written by NerdWallet and was originally published by The Associated Press.
RYAN LANE is a NerdWallet authority on student loans. He has worked in the student loan industry for more than a decade.
10
Powered by FlippingBook