The various repayment
options offered on federal student loans include
the following: Standard, Extended, Graduated,
Income-Based, Income Contingent, and Income Sensitive.
Standard – fixed
monthly payment for up to 10 years; $50 minimum
monthly payment
Extended – fixed monthly
payments up to 30 years, depending on amount
borrowed; reduces monthly payments, but increases
interest paid and overall amount repaid over
life of loan
Graduated – lower monthly payments
for first two years, then payments increase;
payments up to 30 years, depending on amount
borrowed; based on assumption that ability to
repay increases as anticipated student earnings
increase
Income-Based – monthly payments
based on borrower’s income, family
size, and total amount borrowed; payments adjusted
on yearly basis for up to 25 years; any remaining
loan amount after 25 years is discharged as taxable
event; best for students pursing public service
careers and those with high debt and low income
Income
Contingent – monthly payments based
on borrower’s income,
family size, and total amount borrowed; payments
adjusted on yearly basis for up to 25 years;
any remaining loan amount after 25 years is discharged
as taxable event
Income Sensitive – monthly payments
based on percentage (4% to 25%) of borrower’s
income; monthly payment must be greater than
accrued interest; borrowers must reapply annually;
limited to 10-year repayment schedule |
