Choose the Best Student Loan Repayment Options
In case you are among the 44 million American borrowers, you do not need to be worried about your student debt. The good thing about the process of a federal student loan repayment is that it is characterized by certain beneficiaries and a lot of flexibility in terms of payment. For example, you are always provided with a number of repayment plans to choose from. Whenever you wish to reduce the monthly payments, you are allowed to apply for income based repayment plan student loans. You can also make additional payments if you want to clear your debt without being penalized. Given that students loans are usually quite stressful, this flexibility is extremely helpful. Here you will learn about different ways of paying back your loan, and you will also be able to determine the most suitable payment plan.
Types of Repayment Plans for Student Loans
So if you feel stressed about the repayment of your student loan, the first thing you should do is to get the hold of the various student loan repayment plans. This is a very important stage when deciding which one is favorable for you. There are eight different payment methods that can be used to settle federal student loans. The most common repayment plans include:
- Standard repayment – here you will be required to make monthly fixed payments for a period of 10 years.
- Graduate repayment – this repayment plan also covers ten years but the payments you make every month will be small at the beginning and will increase after every 2
- Extended repayment – in this case, you will be paying a small amount monthly, but the payment will go on for 25 years. One has the option of selecting a fixed payment, which remains constant every month, or graduate payments, in which the amount paid monthly increases every 2
- Income-driven repayment – here the monthly payments are at 10-25% of their discretionary income. They entail Income-Based Repayment (IBR), Income-Sensitive Repayment (ISR), Income Contingent Repayment (ICR), Revised Pay As You Earn (REPAYE), and Pay As You Earn (PAYE).
In most cases, the income-driven payment plans result in the loan forgiveness if one has not paid off their loans within 20-25 years. When the borrower has a federal loan and has not requested for an alternative plan, they put their payments under the standard repayment plan. It is obvious that for some people, the standard repayment plan is a big burden. At the same time, private student loans lenders normally don’t provide flexible repayment methods. Every lender sets their own requirements for repayment. Therefore, the first thing one has to do is inquire from the lender about their option they offer.
After you have learned about the various student loan repayment methods, you should consider your income and budget. You can download an application for tracking your expenses or a spreadsheet to have a good understanding of your money flow. Depending on your income and expenditures, determine the amount of money you can channel towards your student loan repayment every month. You should then use a student loan repayment estimator to define your payment in terms of various plans.
The Most Suitable Student Loan Repayment Program for You
Under a standard repayment plan, your student loan repayment is not favoring your budget. The thing is that you can always go for a more favorable plan since each of them has their specific eligibility requirements. They may include such factors as your income, the date the loan was awarded, loan type, and the amount of the debt, which can greatly reduce your options.
The best student loan repayment plan for you has to match your situation so that your monthly deduction is manageable. It is important to keep in mind that whenever you reduce your monthly loan payments, the chances are high that eventually you will be required to pay more interest than initially. Again, in case you took a private student loan, and you want a more flexible payment plan, it is important to talk with your loan provider. In instances of economic difficulty, they may provide a temporary forbearance.
Income Based Student Loan Repayment for Army Students
There is a specific type of paying back educational debts, which is called an army student loan repayment. It can assist many soldiers to manage the student loan debt accrued prior to joining the army. The Loan Repayment Program (LRP) is provided by recruiters as a unique incentive to all prospective soldiers. To be eligible to get the LRP benefits, one has to meet a couple of qualifications. It should be the first time that they are enlisted in the service, and they should have a high school diploma. If you are a soldier and wish to enjoy the LRP benefits, you should decline to enroll in the Montgomery GI Bill in writing. Student loan repayment program army is only available to the recruits who have been enlisted in MOS (military occupation specialty).
The best way to repay your loan should depend on your expenses and income. The consideration should be made for now and for the future. In some cases, there is a chance to reduce or defer. You may wonder how to repay student loans at the very beginning of the process. Even if you have been delaying the payments, you can always get student loan repayment help to choose the best way of going about paying your loan. It is true that repaying a student loan is not an easy thing and the plan that you put in place now might change in the future. For instance, medical students have big student loans so many years of residency before they earn enough to be able to make a full loan repayment. A smart medical student always takes advantage of the student repayment plan. They will not have the same plan while in residency and when they start earning. The idea here is that a thorough analysis of one’s cash flow and determining what is best for you at that particular time are the main prerequisites for a wise repayment of a student loan.