Options for Student Loan Repayment

Students attending college in the United States often depend on student loans for their educational expenses. Unfortunately, these loans are not availed freely. They should be repaid and is not like any grants or scholarships.

Banks that take part in the student loan program have developed several varieties of student loan repayment plans that students can participate in. The students can select the repayment plan that suits their current situation and ability to pay based on their financial and employment situation.

Here are some of the possible options through which you can repay your student loan.

Student Loan Repayment Options

Repay as Scheduled

This is the best option to repay your student loan. You receive a bill every month. Pay the bill and gradually the entire balance is gone. In the meantime, you will get a tax deduction for the interest that you are paying. Some private lenders who lends loans for students, charge prepayment penalties, so that you can pay the loan early and save on the interest payments.

Stretch the payment schedule and consolidate your loans

In order to do so, it is highly recommended that you consolidate your loans. Unfortunately, it is not fair to lower the interest rate that you pay on federal loans. You will need to consolidate private loans separately.

The standard repayment plan for federal loans is fixed for a span of 10 years. Once you consolidate it, you can extend the repayment period which is exactly what it sounds like. By doing so, you can extend the period of federal loans to about 30 years, depending on how much you owe.

Repayment based on income

This option is only available for federal loans. Under this process, your monthly payments get capped at around 15% of the amount by which your income exceeds 150% of the federal poverty level.

Any debt that remains after 25 years will be forgiven. It is not that simple as it sounds. The balance that is forgiven will be considered as an income by the federal government.

Standard repayment

This option offers the lowest cost, with payments that stay the same throughout the loan term. A graduate automatically gets placed, once he starts to repay his loan.

Extended repayment

If a graduate has a student loan debt of more than $30,000, this option would be the apt one . this option helps to lower the monthly repayment and as a result the graduate, doesn’t require to apply for a new loan.