How to Choose the Right Student Loan Repayment Plan

When education planning or trying to figure out the best way to pay off a newly minted college education, students are often faced with the myriad of options for student loan repayment. Although these options can seem pretty confusing, they really boil down to just a few choices. Choosing the right plan, moreover, can make repaying those loans easier or harder financially, so making sure to pick the right repayment method is paramount. To make things easier for you when education planning, we here at PaydayLoansCashAdvance have put together the following breakdown on student loan repayment plans.

Loan Forgiveness

Loan forgiveness is a lot like what it sounds, meaning that the government will annul your debt in return for services performed. Peace Corps, AmeriCorps and Teach for America reward graduated students with paying off their loans depending on their years of service. Certain public service jobs such as social work can also qualify for loan forgiveness.

Loan Repayment

Probably the most standard plan for paying down college debt and the one most often used, loan repayment simply means that students pay back the federal aid they’ve borrowed according to a scheduled timeline of payments. This plan can mean standard repayments, which are set out at the time of signing the loan and may change only slightly if the loan moves to a different lender. Of all loan repayment options, this one entails the least interest over time as compared to graduated repayment and extended repayment.

Graduated Loan Repayment

In a graduated repayment plan, payments start out low but increase over time to allow the student time to find good employment. However, your loan will end up costing more if you use this plan.

Extended Loan Repayment

In an extended repayment plan, payments are lower but there are more of them, and you end up paying more in the long run. When considering a college education or figuring out how to repay student loan debt, make sure you understand the differences between these plans, as it will widen your options.

Income-Based Repayment

Students who wish to repay under an income-based repayment plan must prove a financial hardship that will allow their loans to be calculated as a percentage of their discretionary income. That way income will change depending on the amount of money you are making at the time, and the loan period can be extended up to 25 years. If you believe you are qualified for an income-based repayment plan, make sure to talk to a loan representative and get the necessary documentation. Although in the long run you will pay more, it can really help lessen the burdens of student loan payments in the difficult early days.

Pay As You Earn Repayment

Again, students wishing to receive this loan repayment plan must prove a partial financial hardship that would account for their receiving payment moderations based on their discretionary income. This plan can take up to 20 years to fully pay off, but allows for greater flexibility when first entering the workforce.

Income-Contingent Repayment

This plan takes into account adjusted gross income, family size, and the total amount of loans received from the government before calculating the payment amount. Because all of the repayment plans based on income only work for certain situations, make sure you understand whether or not this works for your particular loans (subsidized and unsubsidized, Stafford, PLUS and FEEL loans, for example) before getting started.

Income-Sensitive Repayment

Based on your annual income, this plan takes a wider array of loans into account but can vary by lender in how it is calculated.

Repaying Federal Loans

Your federal loans are generally more forgiving than your private loans, so even if you aren’t able to wipe out your loan debt, you have a lot of options in terms of repaying the money you borrow. Generally repayment has a minimum stipulation of 5 years and a maximum of 10, though a variety of more flexible options attempt to help students who need more time. Extended repayment, for instance, offers students up to 25 years, while many of the options that depend on income allow for repayment options of longer than 10 as well.

Repaying Private Loans

Private loans will take a little more wrangling to figure out what the repayment options actually are. Private lenders, unfortunately, rarely offer employment perks like loan forgiveness, and do not offer the wide range of flexible options that the government attempts to provide when it comes to education planning. Students who are dealing with private loans must be sure to read the fine print to figure out their exact terms and conditions and any fees attached. Especially if the loan gets sold or transferred, you should make sure those conditions have not changed. However, being familiar with your private loans can still mean better access to the options available.

Changing Repayment Plans

Luckily, repayment plans are not set in stone. Rather, students are free to change their plans so long as the loans allow for it and you make sure not to exceed the allowed number of changes. Switching can be as simple as choosing a different plan, or as complicated as providing evidence that you don’t have the means to meet the terms of the plan you are currently under. Most plans can’t be switched until you are in active repayment, after you have completed school. When switching a plan, make sure you understand the new terms and conditions and how many times you will be allowed to change the nature of your repayment plan. You don’t want to get stuck in a bad one and discover that you have no options left.

Understanding your choices really is the best way to get ahead of student loans and begin education planning today, whether you’re about to graduate high school or are already done with college. Our best advice here at PaydayLoansCashAdvance is to thoroughly understand your options so you aren’t taken by surprise. Knowledge, after all, is power.

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