Six Student Loan Repayment Options You Need to Know About
By Mark Munzenberger
GreenPath Student Loan Director
Student loan debt now impacts more than 43 million Americans, so it shouldn’t be surprising that GreenPath’s student loan experts are busier than ever.
According to a recent New York Federal Reserve report, US student loan debt has surpassed $1.3 trillion and continues to grow. The average 2016 college graduate has $37,172 in student loan debt, up six percent from last year.
Every day, GreenPath assists people who are stressed out by student loan debt. Many contact us because they are confused by their repayment and deferment options. In this post, let's review repayment programs and options. (Watch this space for deferment options shortly!)
Federal Repayment Programs
Most student loans are funded by the U.S. government. These loans, called federal student loans, offer some flexibility in how they are repaid. Some of the most common federal loan repayment options include:
Standard Repayment - You pay a fixed monthly amount and pay off the loan in 10 years (or less). You pay the least amount of interest with this repayment plan.
Graduated Repayment - Starts with a lower monthly payment amount and then gradually increases the payment amount every two years. Like standard repayment, the repayment period is up to 10 years. However, you'll pay more interest over the life of the loan.
Extended Repayment - Stretches loan payments up to 25 years. This lowers the monthly payment, but increases the total paid in interest. Total student loan debt must be more than $30,000.
Income-Based Repayment (IBR) – Monthly payment amount is recalculated each year based on income and family size. Can lower monthly payment amounts, which are capped at 10-15 percent of discretionary income. Increases total interest paid, but remaining loan balance will be forgiven after 20-25 years of qualifying loan payments. Estimate monthly payments using the government's Income-Based Repayment calculator.
Public Service Loan Forgiveness (PSLF) - Program for borrowers who work in certain kinds of “public service” jobs, including jobs in government and non-profit organizations. Remaining loan balance is forgiven after 10 years of eligible employment and qualifying loan payments. Can be used with the Income-Based Repayment (IBR) plan to help keep loan payments affordable.
Pay As You Earn (PAYE) / Revised Pay As You Earn (REPAYE) – Similar to IBR, the monthly payment amount is recalculated each year based on income and family size. Usually features the lowest monthly payment amount --- no more than 10 percent of discretionary income. Increases total interest paid, but remaining loan balance will be forgiven after 20-25 years of qualifying loan payments. Use the government's Pay As You Earn calculator to see if you qualify for the Pay As You Earn repayment program.
Soon, in this space, I will cover the different deferment options available (there are six!) I'll also cover the pros and cons of deferement.
Expert Assistance Is Available
GreenPath’s student loan experts are ready to assist you in understanding your student loans, exploring your repayment options, and dealing with your student loan servicers. Click here to learn more. Or you can call GreenPath’s toll-free Student Loan Helpline at 855-400-3718.