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There are more repayment options than ever for repaying federal student loans. So no matter your income, you should be able to keep your education debt in good standing – IF you take the time to learn about your options and apply them to your personal situation.
After leaving school, you will enter a grace period. During this time, typically six months, you are not required to make payments on your student loans but interest is growing on the loans – so start paying if you can.
When you begin to repay your loans, you can send monthly checks to the servicer of your loan or you can set up an automatic bank draft, so your payment is deducted from your bank account each month. Bank drafts reduce the chances of a missed payment, which can mean additional fees and higher interest rates. There are often interest rate reductions when paying by automatic draft, so you could also save money.
Monthly Payment Plans
Federal student loan repayment plans offer options that balance affordable payments with the overall cost of paying off the loan. As a general rule, lower payments and longer repayment periods increase your overall cost since interest grows over a longer period of time. The major federal repayment plans are:
Any plan other than the Standard plan will be more expensive overall, but your monthly payment will likely be lower. While the monthly payments may be lower, interest accrues over a longer period of time. Longer repayment schedules can triple the amount of interest you pay and the overall cost of your loan. For example, an education loan balance of just over $30,000 would result total payments of $41,430 under the 10-year Standard plan at 6.8% interest – a cost of just over $11,400. Under the 25-year Extended Graduated plan, the same loan balance would result in payments up to $67,653 – a cost of over $37,600.
But there is an exception to the lower payment equals higher overall cost rule - if you participate in the Public Service Loan Forgiveness program and the amount forgiven makes up for a decade of extra payments. Please review our Public Service Loan Forgiveness material for details.
To estimate your potential federal loan payment under a variety of plans, use the Federal Student Aid Repayment Estimator.
If you have alternative or private loans, your repayment schedule will likely be most similar to the "Standard Repayment Schedule,” but you should contact your lender to understand all of your options.
Other Considerations for Repayment
Student loan repayment is a serious commitment with serious consequences for non-payment. If a payment is missed, you could damage your credit report for up to seven years and even reduce your credit score. So pay close attention to due dates and consider setting up automated bank draft payments.
If you’re having trouble making your monthly payment, there will often be options to help you reduce your payment. With federal loans, you can change your repayment plan at any time.
And remember, you can pay off any federal student loan early, potentially saving thousands of dollars in interest!