For loans that are not in default, any excess payment is applied first to interest and then to principal. This 25-year extended repayment plan does not require you to consolidate your loans.Īll Federal education loans allow prepayment without penalty. There is a variation on extended repayment in the FFEL program that provides a repayment term of up to 25 years, not 30 years, if you have more than $30,000 in loans with a single lender. Loan Term for Extended/Graduated Repaymentįor extended and graduated repayment, the following chart shows how the maximum loan term depends on the amount borrowed. Income-Based Repayment. Similar to income contingent repayment, Income-Based Repayment caps the monthly payments at a lower percentage of a narrower definition of discretionary income.Īll six plans are available for student loans, but only the first three plans are available for parent loans.Income-Sensitive Repayment. As an alternative to income contingent repayment, FFELP lenders offer borrowers income-sensitive repayment, which pegs the monthly payments to a percentage of gross monthly income.Income Contingent Repayment is available only for Direct Loan borrowers. The write-off of the remaining balance at the end of 25 years is taxable under current law. At the end of 25 years, any remaining balance on the loan will be discharged. ![]() Monthly payments are adjusted each year as the borrower’s income changes. Income-Contingent Repayment. Payments under the income contingent repayment plan are based on the borrower’s income and the total amount of debt.The monthly payment must be at least the interest that accrues, and must also be at least $25. The monthly payment can be no less than 50% and no more than 150% of the monthly payment under the standard repayment plan. The loan term is 12 to 30 years, depending on the total amount borrowed. Graduated Repayment. Unlike the standard and extended repayment plans, this plan starts off with lower payments, which gradually increase every two years.Stretching out the payments over a longer term reduces the size of each payment, but increases the total amount repaid over the lifetime of the loan. ![]()
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