Repayment Plans

Direct and FFEL loans generally offer standard, extended and graduated repayment plans as well as special repayment plans determined by your income and circumstances. Each federal loan servicer may have their own procedures and forms – many of these repayment plans are unique to federal student loans and all options should be carefully reviewed.

Standard Repayment

Most loans fall into the Standard Repayment Plan category. The fewest number of years under which a federal loan could be paid under the Standard Repayment Plan is five years. The most number of years is ten years. You can pay off your federal student loan early, however. Be sure to contact your servicer to confirm that there are no early repayment penalties. Standard repayments should be fixed (the same basic payment amount each month).

If you don’t choose a repayment plan, you will probably be put into the Standard Repayment Plan. There are limitations on when you can select the Extended Repayment and Graduated Repayment Plans, check with your servicer. Return to this site for more general information.

Extended Repayment

When you get your loan (or graduate from college), you could elect to repay under the Extended Repayment Plan. True to its name, the Extended Repayment plan gives you more time to repay your loans than the Standard Repayment Plan.

The Extended Repayment Plan is for borrowers with more than $30,000 in principal and interest. The minimum amount to be paid each year for a Direct Loan under the Extended Repayment plan is $600 and, obviously, most borrowers will pay much more.

With the Extended Repayment Plan your payments will be fixed or graduated. When your payments are graduated, your payments will start out low but increase over time. This option is selected when you think your job won’t pay as much at first but you’re sure to be able to handle a larger payment later on.

The repayment period for the Extended Repayment plan should not exceed 25 years, generally. (See Limitation on Extended Repayment below). However, if you consolidate, you may have a repayment plan of 30 years.

Limitation on Extended Repayment

For borrowers after October 7, 1998 (and with no balance before then), the repayment plan should generally not exceed 25 years.

This rule might not apply for borrowers who sign up for a program which ties their income to the amount of their payment (and seek forgiveness after 20 or 25 years). If, in this example, the borrower exits the program tied to income and goes back to a Standard Repayment Plan, then the borrower might actually spend more than 25 years repaying their federal student loan.

Alternatively, some borrowers might defer their loans quite frequently and end up with a repayment period longer than 25 years.

Exception to the Limit on Extended Repayment

If you borrowed a Direct Loan before July 1 2006, you could be allowed an Extended Repayment Plan of 30 years. Repayment plans – if you borrowed enough money to warrant that many years to repay.

Graduated Repayment

Graduated repayments start low but increase over time and are paid over ten years.

However, if you borrowed before July 1st 2006, you could have a repayment plan which is longer than ten years.

Minimum Amounts You Are Required To Pay

FFEL Borrowers must make payments of at least $600 per year. Special agreements to the contrary are allowed.

As noted above, Direct Loan borrowers under the Extended Repayment Plan have to pay at least $600 per year.

The least you will pay is the amount of interest that has accrued. If you are in a forbearance, this amount will be added to your loan. You might avoid having to pay interest if you are participating in the Direct Loan Income-Based Repayment or Direct Loan Income-Contingent Repayment, however, interest will accrue under these plans and be added to the balance of your loans. These plans might help you obtain forgiveness after 20 or 25 years depending and any forgiveness could be taxed.

If you have exceptional circumstances, you may be able to negotiate other repayment terms.

Other Repayment Plan Examples

  • Income-Based Repayment (IBR)
  • Pay As You Earn (ICR-A)