Making Sense Of The Different Federal Student Loan Repayment Programs

Federal student loans should be your first option when you are looking for financial assistance to fund your college education. But before you even apply for any loan, it is a good idea to understand what the different repayment programs available. This will help you make smart choices that can reduce your monthly student loan payment considerably.

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10 Year Standard Repayment Plan

Under this loan repayment program, you keep paying what you owe on a regular schedule. Most federal student loans have a 10-year repayment term. Your monthly payments will be calculated to complete repaying your loans within 10 years from the time you start repayment.

You can get rid of your debt faster and avoid paying any extra interest by paying more than the minimum repayment whenever you can.

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Graduated Repayment Plan

With this loan repayment program, you will start off by paying lower monthly payments. The monthly payments will keep increasing over time, typically every two years. With a graduated repayment, you will end up paying more for your loan over a period of time. However, it helps make your monthly payments more manageable when you are just starting out.

This loan is designed to enable you to pay a lower amount when you just start working and then move on to higher repayments as you gain more experience and start to earn a higher income. This is also a 10-year repayment plan.

Extended Repayment Plan

A 25-year extended repayment plan allows you to extend the life of your loan repayment for up to 25 years. This means you pay lower monthly payments as compared to the standard or graduated repayment plans. However, you will end up paying a higher amount because of the accrued interest over the extended timeline.

Income-based Repayment Plan

Choosing the income-driven repayment plan gives you even more flexibility in repaying your debt. This can be particularly useful when your monthly earnings are low.

Under this plan, how much you pay every month will depend on your monthly salary. As with the graduated and extended repayment plans, you will end up paying more for your loan in the end but it will remove the stress of paying when finances are tight.

Moreover, if you consistently make every payment for an extended period of time—usually about 10 years—you may be eligible to get some of your loans forgiven.


Under certain circumstances, you are allowed to postpone your loan payments for up to 3 years. This is called a deferment. You may be allowed to defer your student loans due to disability, unemployment, military service or if you are in a medical residency or you decide to return to school.

If you qualify to get your subsidized loans deferred, the loan balance will not accrue any interest. However, your unsubsidized federal loans may accrue interest.


If you find it impossible to make your scheduled loan payments, but you don’t qualify for a deferment, you can apply for forbearance. This is a temporary postponement of your student loan payments. The difference between forbearance and deferment is that with forbearance, the interest will continue to accrue on your debt balance.

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*APR includes a 0.25% interest rate reduction for enrollment in automatic payments.

**Interest rate reduction of .25% for automatically withdrawn payments from any designated bank account (“auto debit discount”). Auto debit discount applies when full payments (including both principal and interest) are automatically drafted from a bank account. The auto debit discount will continue to apply during periods of approved forbearance or deferment if the auto debit discount was in effect at the time of receiving the forbearance or deferment. Auto debit discount will remain on the account unless (1) the automatic deduction of payments is canceled or (2) there are three consecutive automatic deductions returned for insufficient funds at any time during the term of the loan.

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