The Top Four Student Loan Repayment Options

Many graduates pay off their student loans with the standard repayment plan, but there are a lot of other options available. There are actually four options four student loan repayment that are available. There is standard repayment, graduated repayment, extended repayment and income-sensitive repayment. The standard repayment option allows recent graduates to consolidate their government student loans using equal monthly payments.

They get a fixed interest rate for the life of the student loan repayment and make equal payments until it is paid off. The principal benefit to standard repayment is that it is the least expensive option in the long run. Graduates pay both interest and principal with a standard repayment plan, and the consistency of this option also helps. Borrowers know how much they will pay each month, and it won't change. Recent graduates who anticipate a need for lower monthly payments the first couple of years after graduation may want to look for a graduated repayment plan. With graduated repayment, borrowers begin by paying lower monthly payments, which are usually interest only.

After a certain period of time, which is typically from two to five years, their monthly payments will increase to include both interest and principal. Graduated repayment is more expensive than standard repayment because the initial period only covers interest, so it takes longer to pay off the principal. Anyone who has either a standard repayment or graduated repayment plan, can also chose to extend their repayment period to 15 years if they qualify. Borrowers need to have FFEL student loans that were disbursed on or after October 7, 1998, and the total amount of debt must be greater than $30,000. With extended student loan repayment, borrowers lower their monthly payments so they fit their financial situation. Extended student loan repayment becomes an expensive option, since borrowers get charged interest for a longer period of time.

Those whose financial situation just can't handle the student loan repayment requirements of these options should consider income sensitive repayment. The monthly payments are adjusted each year based on the borrower's gross annual income. It takes into account their total debts and the size of their family. The lenders do require documentation, however, about income levels and debts in order to properly assess the monthly student loan repayment level. Regardless of the financial situation, there is an option for paying off anyone's student loans. These four student loan repayment plans provide a wide range of options so grads can repay their student loans and have those monthly payments fit into their budget.