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If you’re struggling with student loan payments but earn too much for income-driven repayment, a graduated repayment plan might be an option for you. With a graduated repayment plan, your student loan payment will lower in the short term. However, your payment amount will go up over time.
Here’s what to know before deciding on a graduated repayment plan:
- Graduated repayment plans start with lower payments that go up later
- How to know if a graduated repayment plan is right for you
- How is a graduated repayment plan different from other repayment plans?
- Consider refinancing your student loan to lower payments
Graduated repayment plans start with lower payments that go up later
If you have federal student loans, there are a few federal student loan repayment options to choose from that could lower your monthly payment. This includes the graduated repayment plan — but keep in mind that graduated repayment means your payment will slowly rise over time.
Federal student loans that are eligible for graduated repayment plans:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans
- Direct Consolidation Loans
- Subsidized Federal Stafford Loans
- Unsubsidized Federal Stafford Loans
- FFEL PLUS Loans
- FFEL Consolidation Loans
For most eligible loans, the graduated repayment term is 10 years. But if you have a Direct Consolidation Loan, this term can be extended up to 30 years (depending on your loan amount).
Learn More: How Long It Takes to Pay Off Student Loans
How to know if a graduated repayment plan is right for you
A graduated repayment plan can be a good idea if you earn too high of an income to qualify for most income-driven repayment plans, but struggle to make monthly student loan payments. Since your payments will increase every two years under graduated repayment, it might also suit your situation if you expect your income to increase in the future.
But keep in mind that a lower payment today could lead to more interest in the long run. Under graduated repayment, your monthly payment is never lower than your monthly interest. If you’re able to keep up with your current payments, the standard repayment plan typically accrues less total interest than graduated repayment.
Learn More: Private Student Loan Repayment Options
How are consolidated and unconsolidated loans treated under the plan?
- Federal student loans (not consolidated): Payments last for up to 10 years
- Federal consolidation loans: Payments last 10 to 30 years
Graduated repayment treats both consolidated and unconsolidated loans similarly — except when it comes to your repayment term. For most eligible student loans, you’ll have 10 years to pay off your balance under graduated repayment. But if you’ve consolidated your federal student loans, you could end up with a longer repayment term depending on your loan balance.
| Consolidation loan balance | Repayment period |
|---|---|
| Up to $7,500 | 10 years |
| $7,500 – $10,000 | 12 years |
| $10,000 – $20,000 | 15 years |
| $20,000 – $40,000 | 20 years |
| $40,000 – $60,000 | 25 years |
| $60,000 or more | 30 years |
How is a graduated repayment plan different from other repayment plans?
In addition to the graduated repayment plan, the standard repayment plan and income-driven repayment plans are also options to pay off your federal student loans.
- Standard repayment plan: This plan uses a 10-year loan amortization schedule for paying off your student loans. Payments are set at a fixed amount every month for up to 10 years (with a $50 minimum monthly payment). All federal student loans except for Direct Consolidation Loans and FFEL Consolidation Loans qualify for standard repayment.
- Income-driven repayment (IDR) plans: There are four IDR plans to choose from: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). Each plan gives you a monthly payment based on a percentage of your discretionary income (usually 10% to 20%, depending on the plan). After making 20 to 25 years of payments (also depending on the plan), your remaining balance will be forgiven.
| Repayment plan | Financial hardship required | Eligible student loans | Payment | Repayment terms |
|---|---|---|---|---|
| Graduated repayment plan | No | All federal student loans | Based on your loan amount (payments start low and increase every two years) | 10 years (up to 30 years if loan is consolidated) |
| Standard repayment plan | No | All federal student loans | Based on your loan amount | 10 years |
| REPAYE | No | Federal Direct Loans (Parent PLUS Loans not eligible) | 10% of discretionary income | For undergrad loans: 20 years For graduate loans: 25 years |
| PAYE | Yes | Federal Direct Loans (Parent PLUS Loans not eligible) | 10% of discretionary income | 20 years |
| IBR | Yes | Federal Direct Loans (Parent PLUS Loans not eligible) | Loans taken out before July 1, 2014: 15% of discretionary income Loans taken out after July 1, 2014: 10% of discretionary income | Loans taken out before July 1, 2014: 25 years Loans taken out after July 1, 2014: 20 years |
| ICR | No | Federal Direct Loans (Parent PLUS Loans eligible if consolidated) | Lesser amount of either 20% of your discretionary income or what you'd pay on a 12-year fixed repayment plan | 25 years |
Consider refinancing your student loan to lower payments
If you don’t qualify for income-driven repayment and aren’t excited about the prospects of a graduated repayment plan, refinancing could be another option. When you refinance student loans, your old loans are paid off with one new loan.
You could opt for a longer loan repayment term when you refinance, which means you might be able to lower your monthly student loan payment. You can always pay off your loan faster, too, if you’re able to do so. Just keep in mind that if you refinance into a private student loan, you’ll be giving up your federal student loan benefits — including access to the repayment plans described above.
If you decide that refinancing is right for you, be sure to consider as many lenders as possible to find the best deal for your situation. You can compare multiple lenders easily with Credible — and you only have to fill a single form instead of multiple applications.
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