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Repayment Options

One of the benefits of a student loan is the variety of repayment options available. Most student loan payments are set up on a standard repayment plan with monthly payments that remain constant throughout the repayment period. However, other plans are available that may make the student's payments more manageable in the beginning.

Guidance from the U.S. Department of Education (ED) regarding student loan repayment by borrowers who are members of the U.S. Armed Forces is provided through Dear Colleague Letter, GEN-03-06.

Borrowers should work with their lender to determine which repayment option works best for them.

The following are the basic parameters of the repayment options available.  For specific information regarding the regulations that must be followed in establishing repayment terms for a borrower, please refer to the Common Manual.

Standard Repayment

  • Equal monthly payments.
  • Final payment, however, may be adjusted to reflect the remaining balance.
  • Maximum of 10 years to repay.
  • Monthly payment amount may be adjusted annually to reflect changes in the loan’s variable interest rate.
  • The borrower will pay the least amount of interest under this option as compared to other options.

Graduated Repayment

  • Monthly payment amount will change (usually by increasing) during the repayment period, regardless of income.
  • Allows the borrower to begin with a smaller payment amount and increase it over the course of the repayment period.
  • No one payment amount can be more than three times greater than any other payment amount.
  • If the interest rate is variable, the payment amount may be adjusted to reflect annual changes in the interest rate or forbearance can be granted for up to three years due to interest rate changes.
  • Maximum 10 years to repay.

Extended Repayment

  • Available to new FFELP borrowers*
  • Allows borrowers to repay the loan on a fixed annual repayment amount or a graduated repayment amount for a period that may not exceed 25 years.
  • Allows alternative loan borrowers to repay the loan on a fixed annual repayment amount or a graduated repayment amount for a period that may not exceed 20 years.

*For purposes of this repayment option a new borrower is defined as an individual who has no outstanding principal or interest balance on a FFELP loan as of October 7, 1998, or on the date(s) he/she obtains a FFELP loan after October 7, 1998, and whose total outstanding principal and interest in FFELP loans exceeds $30,000.

Income-Sensitive Repayment

  • Payment amount is adjusted annually based on total monthly gross income.
  • Payment amount covers the interest and a small portion of the principal.
  • No one payment amount can be more than three times greater than any other payment amount.
  • The borrower must inform the lender of their income 90 days prior to the due date of the initial payment.
  • The borrower must provide the lender with evidence of their income every year.  If the interest rate is variable, the payment amount may be adjusted to reflect annual changes in the interest rate or forbearance can be granted for up to three years due to interest rate changes.
  • Maximum of 10 years to repay. Can be extended up to an additional five years in certain cases.

Income-Based Repayment

  • Borrowers who meet conditions of partial financial hardship (based on income and family size) may qualify.
  • Monthly payment amount will not be more than 15% of amount by which adjusted gross income exceeds 150% of the poverty line for family size.
  • If monthly payment amount not sufficient to pay accrued interest on a subsidized Stafford loan, ED will pay remaining interest for 3 years.
  • Any outstanding balance after 25 years will be forgiven.
  • Not available for loans in default.

Repayment Option Comparison Chart

The following chart compares the "monthly payments" and the "estimated interest expenses" of the standard and graduated repayment plans using identical 10-year terms and an 8.25% interest rate.

Standard Repayment Option

Amount Borrowed Monthly Payment for 10 Years Total Amount Repaid
$10,000 $123 $14,718
$15,000 $184 $22,077
$20,000 $245 $29,437

Graduated Repayment Option

Amount Borrowed Monthly Payment for 10 Years Total Amount Repaid
$10,000 1st stage: $75 for 3 years
2nd stage: $125 for 3 years
3rd stage: $181 for 4 years
$15,888
$15,000 1st stage: $135 for 3 years
2nd stage: $180 for 3 years
3rd stage: $250 for 4 years
$23,340
$20,000 1st stage: $185 for 3 years
2nd stage: $250 for 3 years
3rd stage: $318 for 4 years
$30,905