Student Loan Consolidation Repayment Options

Student Loan Consolidation Repayment Options

by Ryan Konecky

Making the decision to consolidate your student loans has a big impact on your financial future. There are a few repayment options that you have for repaying the loan.
Equal (or Standard) Repayment Plan This repayment plan allows you to make equal monthly payments towards your loan. The advantage to choosing this payment option is that all of your eligible student loans are consolidated into one single payment. The term on these loans is typically 10 years.

Extended Repayment Plan This plan is similar to the equal repayment plan in that you have a set amount to pay towards the loan every month. However, the schedule for the loan is extended up to 30 years. The monthly payments are much lower than that of the equal payment plan, but the total amount that you pay over the lifetime of the loan is much higher. This is because you have a lot more to pay in interest because of the longer schedule.

Graduated Repayment Plan This plan starts with very low monthly payments which gradually increase every couple of years. This plan is excellent for those that want the payments to increase as their salary increases. The loan term can be up to 30 years depending on how much was borrowed. The payments cannot be 50% less and not more than 150% more than what would be paid under the equal repayment plan.

Income Sensitive Repayment Under the income sensitive repayment plan, the monthly payment is calculated based on a percentage of your expected monthly income. This amount is then re-evaluated every year for up to 5 years.

It is important that you understand the impacts of consolidating your federal student loans for both the long term and short term. You need to understand the many options that you have for repayment in order to make the right decisions for your financial future.