A Breakdown of Student Loan Repayment Options

Student loan debt repayment True Measure Wealth Management

There are about 1.26 trillion dollars in combined student loan debt as of this year. With 43.3 million Americans contributing to that total and over 11% of them in delinquency, if you're one of these new graduates, you may want to consider creating a plan to get this off your back.

To create a plan of this nature though, one has to know the basics of student debt. Because the majority of student debt is from the government, we're going to concentrate on public student debt in this post.

When you graduate, you will be given the option to select a repayment plan, so if you do not receive something along these line, you need to contact your loan holder and ask about their options. There are six different repayment plans; some of them are only available depending on the type of loan you have, but I've outlined each of them below:

 

1. The Standard Repayment Plan

With this plan, you will pay a fixed amount each month for ten years. The payment must be at least $50 a month during those ten years. The more you pay the faster the loan will be paid off.

 

2. The Graduated Repayment Plan

This plan's payments will increase every two years with full repayment in ten years, however since you are paying less in the beginning more interest will grow as the interest level will be consistent and you end up paying more in the end.

 

3. The Extended Repayment Plan

Choosing this plan will involve creating a fixed monthly payment. The monthly payment is lower than that of the Standard Payment Plan and like with the Graduated Repayment Plan, you will be paying more for the loan because interest will build over the longer time period created. This plan is only an option for FFEL Loans above $30k and/or more than $30k in Direct Loans.

 

4. The Income Sensitive Repayment Plan

This plan is for FFEL Loans onlyhas a maximum repayment period of 10 years and your monthly payment will be based on your annual income. This means as your source of income increases or decreases so does your debt payment.

 

5. The Income-Contingent Repayment Plan

For Direct Loans and Direct PLUS Loans only, this plan will include monthly payments that are based on you and your spouse's annual income, your family size as well as the total amount of Direct Loans owed. You as the borrower have 25 years to repay under this plan and the unpaid portion will be forgiven but I don’t think anyone wants student debt for that long, so the larger the payment the better.

 

6. The Income-Based Repayment Plan

This payment plan is based on your income during any period when you have a partial financial hardship allowing the payment to be adjusted annually. The maximum repayment period may exceed 10 years. The loan may also be qualified for cancellation of any outstanding balance on your loans if you repay under this plan and meet certain requirements.

 

Now that you have a basic understanding of the six types of repayment plans available for any public debt, you can start figuring out your own personal plan for getting on your feet and moving up in the world without loans weighing you down!

Creating a plan for tackling your student debt may sound daunting. True Measure is able to help you create a plan that won't only get rid of your student debt, but will help you to start investing in your long term goals and life down the road! For a free 30 minute consultation contact us here

If you enjoyed this post, be sure to check out "Tips on Becoming Your Best Self; Personally & Financially."

Steven LaFleur Wealth Manager Financial Planner  Financial Advisor Omaha Nebraska True Measure Wealth Management

Steven LaFleur attended college at the University of Nebraska-Lincoln where he majored in finance. After college, he worked in his family’s business. After three years Steven decided it was time to pursue his passion; helping and educating younger generations on money, planning, and finances. Steven is now a financial advisor at True Measure Wealth Management in Omaha, NE. Steven and his wife Kelly have two daughters who keep them busy at all times of the day. Steven enjoys skiing in the mountains and also biking and golfing during the non-snowy months. As a junior advisor, he’s passionate about helping the younger generations plan for their future. For more of Steven’s insights subscribe below.