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Repayment
Schedules/Plans
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When you repay back
your student loans, try to choose from different easy
to pay back plans that suits your requirements. These
repayments plans have different periods for payback
and different interest . So find the best one .
The 4 basic types of
repayment schedule or repayment plans are:
1.
Standard Repayment Schedule:
- Standard Repayment
Schedule is the the most common & the default
schedule that will be assigned to you if you do
not request otherwise.
- This plan is the
quickest and most financially effective way to pay
off your student loan while minimizing interest
costs.
- Under Standard
Repayment Schedule, your payments will remain the
same each month throughout the life of the loan
(unless there is a change in
interest rates).
- Payments under a
standard schedule change only as the interest rate
fluctuates.
- You will be required
to pay at least $50.00 per month. With this
minimum the repayment period may be less than ten
years.
- The loan is repaid
in 120 equal monthly payments over a 10-year
period unless you receive a deferment or
forbearance.
- For Guaranteed
Student Loans (GSL), Stafford Loans, Direct Loans,
and Supplemental Loans for Students (SLS),
payments are made over 10 years; for HEAL loans,
the repayment period is 25 years. You may request
a shorter term on HEAL if you wish. Back
2.
Graduated Repayment Schedule:
- If your income is
low initially after you leave school but you have
the potential to increase your income in a year or
two, you can go for graduated repayment schedule.
This schedule is mainly to give you payment relief
when your income is lowest.
- This is accomplished
by requiring only interest to be paid for an
initial fixed period, followed by principal
and interest payments over the
remainder of the term.
- Under a graduated
repayment schedule, payments can be lower
initially and then gradually increase. This option
is only for temporary financial difficulty.
- The payment amount
increases in several steps. It may increase
the total amount you will be required to repay as
more interest
may accrue over the life of the
loan.
- This plan is ideal
if you have limited income today but expect to
have higher earnings in the future.
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3.
Income Sensitive Repayment Schedule:
- An Income Sensitive
Repayment Schedule allows you to pay based on your
income.
- This option will
increase the total amount you will have to repay
and may extend your repayment
period.
- It is a repayment
schedule for some FFELP loans under which the
borrower's monthly payment amount is adjusted
annually, based solely on the borrower's
expected
total monthly
gross income
received from employment and other sources during
the course of the repayment period.
- You will have to
provide proof of your gross income and your
servicer will calculate the amount you should
reasonably be able to pay.
-
The plan must be renewed each year, and your monthly
payments can be adjusted annually for up to five
years.
- This plan allows
your monthly payments to be adjusted to fit your
current
annual
income, but each payment must be large
enough to cover accruing interest.
- If you use the
income-sensitive repayment plan for the maximum
five years, you will still have the opportunity to
repay your loans under one of the other repayment
plans.
- This repayment plan
is appropriate if your income fluctuates.
- You are allowed to
change your repayment plan once a year. You must
request a change in your repayment plan. If you do
not choose a repayment plan, the Standard
Repayment Plan will be used.Back
4.
Extended Repayment Schedule:
- This plan is limited
to new borrowers on or after October 7, 1998, with
an outstanding
balance of principal and interest
in Federal Family Education Loan Program loans
totaling more than $30,000.
- If you are looking
for a lower required payment, but could afford to
make extra payments occasionally, an extended
schedule may work best for you.
- You could combine
the cost advantages of the standard schedule and
the convenience of the extended schedule; by
signing up for an extended schedule with a low
required payment, but making a payment equivalent
to what you would have paid under a standard
schedule (with the excess credited to the
principal balance), you will pay the loan off in
about 10 years, but will also have the flexibility
to make only the lower required payment if
emergency expenses arise.
- By extending the term
of loan from 10 years to 25 or 30
years, you significantly decrease the required
payment amount. Of course, you also significantly
increase the total amount of interest paid over
the life of the loan.
- Keep in mind that
making extra monthly payments requires some
footwork, as lenders do not always credit
unscheduled payments correctly. You might consider
making a large lump-sum payment to principal each
year.
- You may choose
either the standard or graduated repayment
schedule over a period not to exceed 25 years.
Back
5.
Income Contingent Repayment Schedule (ICR):
- It is a repayment
schedule for some HEAL loans under which the
monthly payment amount is adjusted annually, based
on the total amount of the direct
loans, the
family size, and the
adjusted gross income
(AGI) reported on the most
recently filed federal income tax return. In the
case of a married borrower who files a joint
income tax return, the AGI includes the spouse's
income.
- The
Income Contingent Repayment (ICR) plan is designed
to make repaying education loans easier for
students who intend to pursue jobs with lower
salaries, such as careers in public service.
- This is a variation
on the graduated schedule, and is not available on
every educational loan.
- An income-contingent
repayment plan is available for direct loans and
provides for installments that are based on the
borrower's ability to pay each year (borrower's
income and the total amount of debt.). The monthly payments
are calculated on annual
income, certain other factors and
the total amount of outstanding direct
loans.
- Payments are
generally capped at an amount slightly less than
that required under a ‘standard’
schedule.
- The maximum
repayment term is 25 years. At the end of 25
years, any remaining balance on the loan will be
discharged. You will, however, have to pay taxes
on the amount that is discharged (The write-off of
the remaining balance at the end of 25 years is
taxable under current law. There is a $5 minimum
monthly payment.).
- The
monthly payment amount is adjusted annually, based
on changes in annual income and family size.
- Income-contingent
repayment is currently available only from the
U.S. Department of Education, not from banks or
other private institutions.
- you must sign a form
that permits the Internal Revenue Service to
provide information about your income to the U.S.
Department of Education. This information will be
used to recalculate your monthly payment, adjusted
annually based on the updated information. Back
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