How to Choose a Student Loan Repayment Plan

Two Methods:Direct Stafford LoansFFEL Stafford Loans

Once you are no longer a full-time student, the pressure of repaying student loans becomes a reality. The repayment schedule available to you depends on the type and the terms of your loan. If you have a Direct Stafford Loan or Federal Family Education Loan (FFEL) Stafford Loan, you can choose a repayment plan that fits your current financial situation.


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    Determine whether your federal student loan allows you to choose a repayment plan. Not all federal student loans offer a choice of repayment plan. For example, Federal Perkins Loans’ 9-month grace period is longer than others but do not have different repayment options.
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    Get information about repayment options before graduating or leaving school if you have a Stafford Loan. There are various repayment plans to choose from. Some are restricted to one type of loan or have qualifying criteria.
    • A Standard Repayment Plan requires making fixed monthly payments for a predetermined number of years (not more than 10).
    • A Graduated Repayment Plan also must be paid within 10 years, but payments start low and usually increase every 2 years.
    • An Extended Repayment Plan can have either fixed or graduated payments, but the borrower has up to 25 years to repay the loan. You must have a loan balance of at least $30,000 to qualify for this type of loan.
    • An Income-Contingent Repayment Plan is available for Direct Loans only. The monthly payments depend on your annual income, your spouse’s income, your number of dependents and the loan amount. You have up to 25 years to repay the loan, and any remaining balance at that time will be forgiven.
    • An Income-Sensitive Repayment Plan is available for FFEL Loans only. The monthly payment goes up or down based on income levels and must be repaid within 10 years.
    • An Income-Based Repayment Plan is a new plan starting July 1, 2009 that lowers the monthly payment for any period in which you experience a partial financial hardship. The required monthly payment amount can also be adjusted annually. Although the repayment period can exceed 10 years, borrowers can qualify to have the balance forgiven after a certain period of time.

Method 1
Direct Stafford Loans

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    Choose one of the applicable repayment plans described above.
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    Wait until the grace period ends before making payments. For Direct Stafford Loans, the grace period is 6 months, and no interest is charged during that time.
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    Start making payments online to the Direct Loan Servicing Center.

Method 2
FFEL Stafford Loans

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    Contact the lender to find out monthly payment amounts for the various repayment plans.
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    Wait until the grace period ends before making payments. Like the Direct Stafford Loan, the grace period is 6 months; however, interest is charged during that time. The interest can be paid during the grace period, or it will be added to the principal balance.
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    Start making payments to the financial institution from which you have taken the loan.


  • You can change repayment plans based on your financial situation.
  • Interest paid on student loans is deductible from income taxes. For more information, refer to Internal Revenue Service (IRS) Publication 970, Tax Benefits for Higher Education.


  • If you do not choose a repayment plan on a Stafford Loan, you will automatically be placed on the Standard Repayment Plan.
  • Any forgiven amount is considered taxable income and must be included on that year’s income tax return.

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Categories: Budgeting and Financial Aid for College