The graduated student loan repayment plan cuts your monthly payments – potentially up to the interest accrued on your loans – and then increases the amount you pay every two years.
Gradual repayment at a glance
Repayment period : 10 years.
Payment amounts: Increase every two years, but cannot exceed three times any previous payment.
Other qualifications: Must have federal student loans.
Is progressive repayment right for you?
Gradual repayment can make sense if you want smaller payments but are making too much money for one. income based repayment plan. Otherwise, income-based repayment is a better option due to its payment limits and loan cancellation after 20 or 25 years of payment.
Any repayment plan that lowers your payments, even temporarily, will likely make you pay more interest overall. If you can afford standard student loan repayment, it is better to stick with this plan rather than a phased repayment.
Payments under the Graduated Student Loan Repayment Plan
Gradual repayments can start small and then increase significantly. For example, let’s say you have a student loan of $ 35,000 with an interest rate of 4%. As part of the progressive repayment plan:
Your first payments would be $ 198.
Your last payments would be $ 595.
You would pay $ 44,390 in total.
Plug in your own loan information into the education department Loan simulator to get an idea of how your progress payments would compare to other student loan repayment programs.
How to switch to the progressive repayment plan
Contact your attendant switch to the graduated student loan repayment plan. You can change your repayment plan at any time. When you do, any interest you owe will be capitalized or added to your balance. This will further increase the amount you repay.
Should You Refinance Student Loans?
If you are switching to phased repayment because you are making too much money for an income-based repayment plan, consider refinancing your student loans instead. Refinancing could lower your payments without increasing the amount you repay overall, if you qualify for a lower interest rate.
Refinancing Federal Student Loans is risky. You will lose access to income-based repayment, loan cancellation, and other benefits specific to federal loans. Make sure you are comfortable giving up these options before you refinance.