Standard Repayment Plans
There are several options out there for repaying your student loans, and it can be tricky to find the right one. The most common plan, usually the one you will start with, is the standard repayment plan for paying off loans granted from the William D. Ford Direct Loan Program and the Federal Family Education Loan, as defined by the U.S. Department of Education.
If you can afford slightly higher monthly payments and wish to pay less interest over time, a standard repayment plan may be the best option for repaying your federal education loan. This plan can help you save money long-term, and usually loans can be paid back in the shortest amount of time, generally within 10 years.
Basics of Standard Repayment Plans
If you do not specifically choose a repayment plan when the time comes to begin paying back your federally funded loan, your loan servicer will most likely put you on the standard repayment plan. In this plan, payments are fixed and at least $50 a month made for up to 10 years unless you have a consolidation loan and then payments can last up to 30 years. Since this is the standard plan, there is no application process, and you are automatically enrolled in the program. Contact your loan provider for more information.
Loans eligible for the standard repayment plan include:
- Direct Consolidation Loans
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- FFEL PLUS Loans
- FFEL Consolidation Loans
- Direct PLUS Loans
- Subsidized Federal Stafford Loans
- Unsubsidized Federal Stafford Loans
If you have a consolidation loan, payments are made for a time period ranging from 10 to 30 years, and this length of time is determined based on your total amount of student loan debt from all sources. In order to estimate your payments on a standard repayment plan, you can use the Federal Student Aid Repayment Estimator.
Pros and Cons
One of the fastest and most cost-effective ways to pay off your student loan is with a standard repayment plan. It also requires the least amount of work to enroll, and most federal loans are immediately qualified and eligible. Payment amounts are fixed and typically spread out over a 10-year period, making payments easy to budget and account for.
If, however, larger monthly payments are a hardship, this plan may not be right for you. Sometimes you may not make enough right out of college to pay larger amounts. Other plans exist that take into account your current income and family size.
If your loan is over $30,000, you may qualify for an extended repayment plan also. You do need to exercise caution in choosing a plan, as it can be tempting to pick the one with the smallest initial payments. This can actually end up costing you more money in interest down the line.
How to Begin Repayment
Repayment on a federal loan will usually start when you either complete school or drop below half-time status. Your lender or loan servicer will provide you with a payment schedule detailing when your first payment is due. Some loans even offer a grace period of a set time, usually up to six months, before repayment must start. Interest will still accrue during your grace period, however.
The repayment amount is based on how much you borrowed, the type of loan you received, the interest rate on your loan, and the repayment plan you have chosen. The lender or loan servicer will give you a bill and let you know how, when, and to whom the payments are due.