Whether you’re considering taking out a federal student loan to pay for school, you’re in college and in debt, or you’ve just graduated, you may go with the default repayment plan of 10 years.
That isn’t the only option, however.
By learning more about the Standard Repayment Plan, you can decide if it’s the right choice for you or you want to go a different route.
What Is the Standard Repayment Plan for Student Loans?
Upon graduation from college or dropping below half-time enrollment, you’ll have a six-month grace period for a Direct Loan program loan (nine months for a federal Perkins Loan) when you don’t have to make payments.
Once that ends, you’ll begin the Standard Repayment Plan, the default for all federal student loan borrowers once they have left school unless you choose a different plan, perhaps one where you make lower monthly payments, extend your repayment period, or both.
The standard plan sets your monthly payments at a certain amount so that you will have your loans paid off within 10 years.
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Standard Repayment Plan Eligibility
As you explore student loan repayment plans, you can make sure you are eligible for the standard plan if it sounds fine.
Loans That Are Eligible
Federal Family Education Loan (FFEL) Program loans and Direct Loans qualify for the Standard Repayment Plan. They include:
• Direct Subsidized and Unsubsidized Loans
• Direct PLUS Loans
• Direct Consolidation Loans
• FFEL consolidation loans
• FFEL PLUS loans
Keep in mind that you will only be able to use the Standard Repayment Plan if you have federal student loans, not private student loans.
Recommended: Direct vs. Indirect Student Loans: What’s the Difference?
How Does the Standard Repayment Plan Work?
The Standard Repayment Plan features fixed monthly payments for up to 10 years. Because the plan offers a relatively short repayment period and monthly payments don’t change, it will save you more money in interest than longer repayment plans at the same rate.
If you just graduated with the average student loan debt of $39,400 at 5% interest, you’ll pay $10,748 in total interest. Expanding to 25 years at the same rate will lower your monthly payment, but you’ll end up paying nearly $29,700 in total interest.
There’s a variation on the 10-year theme: the graduated repayment plan, which keeps repayment costs low for recent graduates who may have lower starting salaries but who expect to see their pay increase substantially over 10 years.
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Payments on the Standard Plan
What may make the Standard Repayment Plan less appealing to some borrowers is that payments will likely be higher than on any other federal repayment plan, thanks to the short term.
For people with a large amount of student debt or high-interest rates, the monthly payments can be daunting or unmanageable. You might face sticker shock when you receive your first bill after your grace period, so don’t let it come as a surprise.
To determine if the Standard Repayment Plan is a good option for you, you could use the federal Loan Simulator to calculate student loan payments. Or contact your loan servicer before your first payment is due to see what you will owe each month.
Changing Your Repayment Schedule
If you want to change your repayment schedule or plan, call your loan servicer and see what they can do.
You’ll need to contact each loan servicer if you took out more than one loan and want to change repayment schedules.
What Are the Pros and Cons of the Standard Repayment Plan?
There are upsides and downsides to weigh when considering the Standard Repayment Plan.
You will pay off your loans in less time than you would with other types of federal repayment plans, which would allow you to set aside money for things like purchasing a home.
You’ll save money on interest, since you’re paying your loan back faster than you would on other federal plans.
The plan offers predictability. Payments are the same amount every month.
Your monthly payments will probably be higher than payments made under other student loan repayment plans with extended repayment periods.
And monthly payments are going to be based on the number of years you’ll take to repay the loan, not on how much you can afford, as with income-based repayment plans.
The federal Standard Repayment Plan of 10 years could be right for you if you’re able to keep up with payments and you want to pay off your debt quickly.
An option is to refinance your student loans to improve your interest rate and possibly change your loan term. Just realize that refinancing federal student loans into a private student loan means giving up federal benefits like income-driven repayment and loan forgiveness.
SoFi offers enticing interest rates on refinancing and charges no application or origination fees. Look for special offers.
SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
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Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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