What Is the Extended Graduated Repayment Plan?

Paying off student loan debt can be challenging, and many borrowers struggle to manage payments on the 10-year Standard Repayment Plan. If you have more than $30,000 in federal loans and expect your income to be low for several years, you may want to consider the Extended Graduated Repayment Plan. 

This plan is designed for borrowers with significant student loan debt and stretches your repayment timeline to up to 25 years. However, this plan isn’t right for everyone — let’s look at how it works and the pros and cons of enrolling. 

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What is the Extended Graduated Repayment Plan? 

The Extended Graduated Repayment Plan is a federal student loan repayment option that allows eligible borrowers to stretch repayment over 25 years. Payments are low in the beginning, and increase every two years, making it a good option for borrowers who expect their income to increase over time. It combines the long repayment term of the Extended Plan with the gradually increasing payment structure of the Graduated Plan.

Unlike income-driven repayment (IDR) plans, your payments aren’t tied to your income. Instead, they’re based on the loan balance and schedule. This structure can make payments more affordable in the early years, but borrowers will likely pay more interest over the life of the loan.

“On this plan, payments will increase after the first two years,” explains Leslie Tayne, Esq., a financial attorney and founder of Tayne Law Group, P.C. “So while it can be helpful for consumers who are struggling to make payments, they should prepare themselves accordingly for future increases.”

Who qualifies for the Extended Graduated Plan?

To qualify for the Extended Graduated Plan, you must have more than $30,000 in Direct Loans or Federal Family Education Loan (FFEL) program loans. You also can’t have an outstanding balance as of Oct. 7, 1998, or on the date you received a Direct Loan after that point.

“Note that consumers cannot combine their loan balances together in hopes of attaining the $30,000 threshold,” says Tayne. “This means they must owe $30,000 in either Direct Loans or FFEL loans solely to qualify,” she adds. 

Borrowers who don’t meet the criteria may still qualify by consolidating their loans into a Direct Consolidation Loan. However, it’s important to weigh how consolidation could affect your repayment timeline and total cost of borrowing.

How does the payment structure work?

When you sign up for the Extended Graduated Repayment Plan, you’ll receive a low initial payment. From there, your payments will increase every two years. These low early payments make the plan more manageable for borrowers who need breathing room in their budget after leaving school.

The adjustments to your monthly payment aren’t tied to your financial situation — instead, they happen on a set schedule until the loan is fully repaid. The Department of Education caps the growth of payments, and your monthly amount will never be more than three times larger than any other payment. You’ll receive a full repayment schedule after enrolling in the plan, so you’ll know in advance how much your payments will increase and when.

Pros and cons of the Extended Graduated Repayment Plan

The Extended Graduated Repayment Plan has both benefits and downsides to consider.

How does Extended Graduated Repayment compare with other plans?

Here’s how the Extended Graduated Repayment Plan compares to other popular repayment plans:

When is the Extended Graduated Plan a good fit?

The Extended Graduated Repayment Plan can be a good option for borrowers who carry a large federal loan balance and don’t qualify for an IDR plan. By spreading your payments out over 25 years, they’ll be more affordable than they would be on the Standard Repayment Plan. 

“The Extended Graduated Repayment Plan offers short-term relief at the expense of long-term savings,” says Bethany Hubert, a financial aid specialist at Going Merry by Earnest. “If you’re fresh out of school and need predictable and manageable payments now, this plan can give you that cushion,” she adds. 

However, this plan isn’t right for everyone. In particular, borrowers hoping for loan forgiveness through programs like PSLF won’t benefit. It’s also not the best option if you’re hoping to minimize the total amount of interest you pay.