Pros and Cons of Graduated Repayment Plans

One repayment method is a graduated repayment plan.

Flickr user Greg Nelson

After graduation, you have quite a few options when it comes time to repay your student loans. One of those options is a graduated repayment plan. This plan works by starting your payments lower and raising them slowly over time. Here’s a rundown of what that means for you as well as the pros and cons.

Pro: Lower Payment After Graduation

It can be a scary prospect thinking about how you’re going to start paying your student loans back after graduation. When it comes to federal loans, you generally have a six month grace period before they start asking for repayment. However, even when you find a job, the idea of having to send in quite a bit of money towards repayment can be daunting, especially if you’re not making a lot.

Thankfully, the graduated repayment plan can give you an avenue that may work for you. When the repayment plan begins, you will pay a lower monthly payment. Every two years, that amount will increase, hopefully with your income. This helps take the stress out if you have a lower income straight out of college.

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Con: Your Income May Not Increase Much

The downside of this, however, is that your income may not increase. Or it may not increase enough. When the two year period is up, and an increase is due, your income may not be enough to cover it. This can be especially troublesome if you’re in an industry that takes a while to move up in.

Sadly, even with this repayment plan, there’s no guarantee that you won’t struggle with payments if your income just isn’t keeping up.

Pro: May Be Able To Pay It Off in 10 Years

If you have loans from the federal government and you chose the graduated repayment plan, it’s designed so you can pay off the loans completely in 10 years. Many graduates have their loans for well past a decade, so this lays out a good foundation for your finances. You’re also welcome to pay more than the minimum each month if you want.

It’s important to note though: The 10-year expectation only applies to loans that are not consolidated. If you have consolidated your loans, the repayment time frame may vary. They tend to be between 10 and 30 years.

Con: Only For Federal Loans

The graduated repayment plan is only available to students who have federal loans. This includes all of them: direct subsidized and unsubsidized, Stafford loans, and PLUS. If you have private loans and you’re struggling with them, you may have to seek other options with your lender, including refinancing or consolidation.

Graduated repayment plans may not be the best option financially for everyone (you could end up paying more interest in the long run), but they can be a great choice if you believe you’ll struggle with the payments early on. It provides a way for you to balance your checkbook a bit easier, while still paying back what you owe on a set time schedule. Before you choose a repayment plan, it’s best to look into all the options available to you.

Use College Raptor’s free Student Loan Finder to compare lenders and interest rates side by side!


Lender Rates (APR) Eligibility
Earnest company logo.
Variable APR: 1.74% - 5.64%*
Fixed APR: 2.44% - 5.79%*
Undergraduate and Graduate
Lendkey company logo.
Variable APR: 1.90% - 5.25%*
Fixed APR: 2.49% - 7.75%*
Undergraduate, Graduate, Parent PLUS
Credible company logo.
Variable APR: 1.80% - 9.99%*
Fixed APR: 2.15% - 9.99%*
Undergraduate and Graduate
Laurel road company logo.
Variable APR: 1.89% - 5.90%*
Fixed APR: 2.50% - 6.00%*
Undergraduate and Graduate
Commonbond company logo.
Variable APR: 1.98% - 7.04%*
Fixed APR: 2.59% - 6.94%*
Undergraduate, Graduate, Parent PLUS
Fixed APR: 2.44% - 6.22%*
Undergraduate, Graduate, Parent PLUS
VISIT ISL Education Lending
Variable APR: 1.87% – 6.52%**
Fixed APR: 2.30% – 5.96%**
Undergraduate, Graduate, Parent PLUS
VISIT Nelnet
Variable APR: 2.94% - 4.79%*
Fixed APR: 2.99% - 4.89%*
Undergraduate and Graduate
VISIT College Ave
Variable APR: 1.86% - 6.01%*
Fixed APR: 2.47% - 5.99%*
Undergraduate and Graduate, Parent PLUS

*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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