Students have five repayment options:
- Standard Repayment: With the standard plan, you will pay a fixed amount each month until your loans are paid in full. Your monthly payments will be at least $50, and you will have up to 10 years to repay your loans.
- Extended Repayment: To be eligible for the extended plan, you must have more than $30,000 in Direct Loan debt, but you have 25 years to repay it. Under the extended plan you have two options: fixed or graduated payments. Fixed payments are the same amount each month you are in repayment, as with the standard plan, while graduated payments start low and increase every two years, as with the graduated plan below.
- Graduated Repayment: With this plan your payments start out low and increase every two years. The length of your repayment period will be up to ten years. If you expect your income to increase steadily over time, this plan may be right for you. Your monthly payment will never be less than the amount of interest that accrues between payments. Although your monthly payment will gradually increase, no single payment under this plan will be more than three times greater than any other payment.
- Income Contingent Repayment: This plan gives you the flexibility to meet your Direct Loan obligations without causing undue financial hardship. Each year your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse’s income if you are married), family size and the total amount of your Direct Loans. Under the ICR plan you will pay each month the lesser of:
- The amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or
- 20% of your monthly discretionary income.
If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate, but will no longer be capitalized. The maximum repayment period is 25 years. If you have not fully repaid your loans after 25 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged. You may however, have to pay taxes on the amount that is discharged.
- Income-based Repayment (effective July 1, 2009): Under this plan the required monthly payment will be based on your income during any period when you have a partial financial hardship. Your monthly payment may be adjusted annually. The maximum repayment period under this plan may exceed ten years. If you meet certain requirements over a specified period of time, you may qualify for cancellation of any outstanding balance of your loans.