The Understanding You Need Repaying Federal Student Loans

If you are graduating this spring, like tens of thousands of other new graduates, you're probably coming away from your time in college with a degree in one hand and student loans in the other that amount to tens of thousands of dollars. But not all loans are equally difficult to pay back. Federal student loans offer a degree of fairness in the options they come with.

Anyone who is fresh out of college and struggling to make their monthly payments will find these options a little accommodating.

The standard plan, which is what you get if you don't specify anything else, divides your student loan up so that you pay in equal monthly installments once a month for 10 years. It's your student loan paid back in 120 months.

To many who struggle to find their feet after college and to make their payments, 10 years is often too much pressure. The graduated plan makes a lot of sense. This is a plan that recognizes that asking for equal payments over ten years makes little sense to a fresh graduate who at the beginning of his career, making very little. Past the fifth year after college, such a person is probably going to be reasonably well-off. Why require someone to pay the same amount of money in the fifth year as they would in the first year when they are usually in bad financial shape? The graduated plan allows fresh graduates to repay their federal student loans by making lower payments in the beginning and bigger ones later on. The entire repayment period lasts 10 years. It does require that you pay a bigger slice of interest; but it should make life more bearable for many young people.

An extended repayment plan is something that students with at least $30,000 in federal student loans can opt for. This is where they are allowed to take 25 years to pay their loans back, even if they pay a great deal more interest than in the ten-year plans. But all of these methods basically don't make any allowances for how much you earn. The income-based repayment plan below does that.

If you have a great deal of debt but you have a very low income job, you can visit the Student Aid on the Web website to have very reasonable monthly payment worked out. Whatever doesn't get paid off in 25 years, they forgive you for it. There's a 30 year plan as well. That's where you apply with the Federal Direct Loan Program to consolidate all the student loans you owe everywhere. As you might expect, this could work out to be a little more expensive over the long run. But it gives you the reprieve you need at the moment.