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What is a Graduated Repayment Plan?

If you have federal student loans, a graduated repayment plan could get you a lower payment today that increases every two years — but can also lead to higher interest payments over time.

Eric Rosenberg Eric Rosenberg Updated July 2, 2020

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."

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).

What will my payment be on the graduated repayment plan? Under the graduated repayment plan, your payment will start low and increase every two years (the actual amount of your payment is based on your loan balance). This loan calculator from the Department of Education can help you estimate what your payments would be under a graduated repayment plan.

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.

What if I have private student loans? While private student loans aren’t eligible for graduated repayment, you do have other options. One alternative is private student loan consolidation, which combines your loans into one new loan and might get you a lower payment.

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 planFinancial hardship requiredEligible student loansPaymentRepayment terms
Graduated repayment planNoAll 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 planNoAll federal student loans Based on your loan amount10 years
REPAYENoFederal Direct Loans
(Parent PLUS Loans not eligible)
10% of discretionary incomeFor undergrad loans: 20 years

For graduate loans: 25 years
PAYEYesFederal Direct Loans
(Parent PLUS Loans not eligible)
10% of discretionary income20 years
IBRYesFederal 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
ICRNoFederal 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 plan25 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.

Find out if refinancing is right for you

  • Compare actual rates, not ballpark estimates – Unlock rates from multiple lenders in about 2 minutes
  • Won’t impact credit score – Checking rates on Credible won’t impact your credit score
  • Data privacy – We don’t sell your information, so you won’t get calls or emails from multiple lenders

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About the author
Eric Rosenberg
Eric Rosenberg

Eric Rosenberg is a Credible expert on personal finance. His work has been featured at Business Insider, Investopedia, The Balance, The Huffington Post, MSN Money, Yahoo Finance, Mint.com and more.

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Home » All » Student Loan Refinancing » What is a Graduated Repayment Plan?

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