GRADUATED REPAYMENT
TOTAL REPAID: $39,161
MONTHLY PAYMENT: $175 to $525
REPAYMENT TERM: 120 months
Graduated plans start with low payments that increase every two years to complete repayment in 10 years. Despite having the same repayment term as the standard plan, graduated repayment costs $1,850 more overall due to additional interest costs. Cathy Mueller, executive director of Mapping Your Future, a nonprofit located in Sugar Land, Texas, that helps college students manage debt, says graduated repayment may be a good option for those who expect their earnings to increase in the future. However, those doing well careerwise should try to make the standard plan work because of its lower interest costs. “It’s not going to be a huge difference, but every penny counts,” she says.
EXTENDED REPAYMENT
TOTAL REPAID: $50,027
MONTHLY PAYMENT: $167
REPAYMENT TERM: 300 months
The extended plan stretches repayment to 25 years, with payments either fixed or graduated. Fixed payments add more than $20,000 to the example $30,000 balance; graduated payments would inflate your balance even more. “[Extended repayment] is not going to be best for a lot of people,” Mueller says. “But it is an option.” You must owe more than $30,000 in federal student loans to use extended repayment.
INCOME-DRIVEN REPAYMENT
TOTAL REPAID: $37,356
MONTHLY PAYMENT: $261 to $454
REPAYMENT TERM: 110 months
The government offers four income-driven repayment plans that base payments on your income and family size. This example uses the Revised Pay As You Earn plan, a family size of zero and an income of $50,004, based on starting salary estimates from the National Association of Colleges and Employers. It also assumes annual income growth of 5%.
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