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Understanding your repayment
options may help you to estimate your projected monthly payments
while in repayment. Federal Stafford and Federal Grad PLUS loans
offer Standard, Graduated, Extended, and beginning in July 2009, an
Income Based Repayment Plan.
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Standard Repayment
provides fixed
monthly payments for a period of time not to exceed 10 years.
It will cost you approximately $115/month for every $10,000 you
owe, assuming the interest rate is 6.8%, the repayment term is
ten years, and you are making equal monthly payments.
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Graduated Repayment
begins with lower payment amounts that increase over time. This
allows payments to be smaller in the beginning of repayment with
periodic increases during the repayment period.
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Extended Repayment
is available to borrowers whose first loan was disbursed on or
after October 7, 1998. If you have a federal student loan
balance totaling more than $30,000, you may request that your
repayment term is extended for a period not greater than 25
years. With this option, your payment amounts can be either
fixed or graduated.
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Income-Sensitive Repayment
results in an adjusted payment amount annually, based on your
gross income.
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Income-Based Repayment (IBR)
is available after July 1, 2009 to borrowers experiencing
economic hardship. Income-based repayment caps monthly payments
at 15% of your monthly discretionary income, where discretionary
income is the difference between adjusted gross income (AGI) and
150% of the federal poverty line that corresponds to your family
size and the state in which you reside. There is no minimum
monthly payment.
While extending your
repayment term to lower your monthly payment might sound appealing,
remember that the longer you take to repay your loans the more you
will pay in interest over the life of the loan. If you must lower
the payments at the beginning of your repayment, try to position
yourself to be able to begin making larger payments as soon as
possible. Remember, you may prepay all or part of your loan at any
time without penalty. Prepayment may substantially reduce your
interest costs.
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