Student loans can be intimidating and understanding the repayment options available can be confusing. As with all things financial, we tend to ignore or put off what we don’t understand. Don’t do that! Lack of planning will always cost you more money! If you are a recent college graduate don’t put off getting a plan to pay back your student loan debt. I’ve got two tools that will allow you understand all your options and decide on the best plan to pay back your federal student loans. (Note – this applies to federal loans and not private loans.)
Generally speaking a borrower’s options to pay back federal student loans include the following with a very general description.
Standard Repayment (IBR) – A payment of at least $50 for up to 10 years.
Extended Repayment Plan – A payment is made for up to 25 years. Payments may be fixed or graduated.
Income Based Repayment (IBR) – A payment equal to 15% of disposable income up to 25 years.
Income Contingent Repayment (ICR) – Either a payment of 20% of disposable income or a fixed repayment plan over a 12 year period.
Income Sensitive Repayment (ISR) – A payment based on changes to your income over a 10 year period.
Pay As You Earn (PAYE) – A payment of 10% of disposable income up to 20 years.
There are several factors that will go into determining which repayment plan is right for you such as income, living expenses, the balances on your student loans and if you have a hardship situation. With all the options available it can be difficult to know where to start. This is what you should do to determine the best repayment option for you.
First go to the National Student Loan Data System and look up your Federal Student Loans.
Second, go to the Repayment Estimator and enter your information.
The first essential tool will give you a list of all your federal student loans. The second one will give you an estimate of your monthly payment, repayment period, loan forgiveness if any, total interest you will pay and total amount paid for each of the possible repayment plans. These are all the important factors that determine which plan is best for you. Can you afford the payment? How much will it cost you to pay back? How long will it take you to pay back? Using these tools you can answer these questions which will tell you the best plan for you.
Sometimes it is easy and sometimes there are other factors at play that make it more difficult. Don’t be intimidated! If you are struggling to understand your options with student loans or you just want to review your plan with a counselor to validate your decisions, Apprisen is here to help. Click here to learn more!