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Standard Student Loan Repayment Plans

10 Truths about Standard Student Loan Repayment

Standard student loan repayment balances payments against total indebtedness

Truth No. 1: It’s the only program with fixed payments

Standard student loan repayment is straight forward and simple. Eligible federal student loans are rolled into a single monthly payment. That payment is determined by dividing the amount of debt you have by the term of the loan.

The payment stays the same from the first payment you make to the last. This makes budgeting around loan repayment easier. You know what to expect. Monthly payments must be at least $50.

Truth No. 2: This is the fastest repayment option

Standard student loan repayment is ideal for anyone who wants to pay off their student debt as quickly as possible. The payments may be higher than with other repayment plans. But that’s the best way to be done with your debt as soon as possible.

If you have the means to make higher payments, this program is recommended. You don’t want to let debt linger. Eliminating student loan debt is better for your credit score and your ability to borrow. You reduce your debt-to-income ratio, meaning it’s easier to get approved for loans like a mortgage.

If you don’t include a federal consolidation loan, such as a Direct Consolidation Loan, then the term is 10 years. It may be even less if your payments don’t exceed $50 at a 10-year term. There is also an option to extend the term to 25 years if you need lower monthly payments.

Truth No. 3: It’s also the most cost-effective option

Anytime you eliminate debt quickly, it usually means it’s also the most cost effective method, too. The less time it takes to eliminate debt, the fewer payment cycles there are to apply interest charges. You save money by reducing the total interest charges applied to your debt.

It’s another reason this plan is the best choice if you have the means to make a higher monthly payments. Lower monthly payments might give you more spending cash at the time. However, it means you end up spending more to pay off your loans.

Truth No. 4: Consolidation loans increase the term

If you include a Direct or FFEL Consolidation Loan in a standard repayment plan, then the term changes. It ranges from 10-30 years, depending on your “total education loan indebtedness.” In other words, the term is set based on how much student debt you owe in total. That even includes private loans that are ineligible for repayment plans.

Total education indebtedness Term
Less than $7,500 10 years
$7,501-$10,000 12 years
$10,001-$20,000 15 years
$20,001-$40,000 20 years
$40,001-$60,000 25 years
More than $60,00 30 years

Basically, this is meant to acknowledge the fact that if you’re using consolidation loans, you generally have significant amounts of debt to pay back. It’s a way to ensure a standard plan doesn’t overburden you with monthly payments that are too high.

There’s a little more to total education loan indebtedness; learn more now >

Truth No. 5: The interest rate is based on your original rates

The interest rate applied to a standard student loan repayment plan is based original interest rates on your loans. It’s a “weighted average” of the interest rates originally applied to all of the loans you include.

This may be a good thing or a bad thing, depending on your credit. If you have bad credit then it may be good that your credit score isn’t a factor. On the other hand, with a good credit score it might seem like a private consolidation loan is better. You still get fixed payments at an event lower interest rate. This means you’d save more money.

The only problem is that by consolidating this way, federal student loan debt is converted to private. You wouldn’t be eligible for other payment plans if your situation changes. You also lose eligibility for Public Service Loan Forgiveness.

Think carefully before you convert your loans! This may work for your current situation, but if you lose your job or your situation changes then you may regret the conversion. With that in mind, it may be better to accept the higher rate and lower cost savings with standard repayment.

Truth No. 6: You can switch plans

As mentioned above, there’s a risk involved when you convert student loans from federal to private. By contrast, if you use a standard repayment plan, you can switch to a different repayment plan anytime. Even better, it’s free to switch as many times as you wish.

This means if life happens and your situation changes, you can switch to a plan that offers lower payments. Then you can use the one of the hardship-based repayment plan until your situation improves. Once it does, you can switch back if you want to return to paying off your debts quickly.

Truth No. 7: You can’t use PSLF, but you don’t lose it

Public Service Loan Forgiveness (PSLF) is an option available to public servants that forgives remaining balances after 10 years. You have to be enrolled in a hardship-based repayment plan in order to qualify. Standard repayment is not hardship-based because it’s not designed to help people who are struggling. It’s just meant to simplify and speed up repayment.

However, being enrolled in a standard repayment plan does not mean you lose eligibility for PSLF. Let’s say you’re a nurse working for a private practice. You might have higher income, meaning you can afford standard repayment. You also wouldn’t be eligible for PSLF because you’re not in public service.

Then you decide to switch to nursing in the public sector. You would be eligible for PSLF if you switched to a hardship-based program. This may also be in your best interest since public service usually means you earn less annual income. You can switch plans to something like an IBR. Then you’re eligible for loan forgiveness after 120 payments on that plan.

 Truth No. 8: This program even works with PLUS loans

Standard repayment plans are one of the few where PLUS loans can be included, even PLUS loans to parents. In fact, the only types of federal student loans that CAN’T be included are Perkins loans. Private loans are also ineligible.

Still, if you’re a parent who has taken out several PLUS loans for your children’s education, standard repayment can be a way to simplify.

Here’s a handy list of all the types of federal student loans that can be included with standard loan repayment:

  • Direct student loans, subsidized and unsubsidized
  • Stafford loans, subsidized and unsubsidized
  • PLUS loans (Direct or FFEL) for parents and graduate students
  • Direct and FFEL Consolidation Loans

Truth No. 9: You aren’t required to include everything

Just because all of the loans listed above CAN be included, it doesn’t mean you have to include them. You may choose to keep some federal student loans out of a standard plan. In some cases, you may already be close to paying some of your loans off. It may be better to leave those out and make a push to get them repaid separately.

Doing so means you decrease the monthly payments because it decreases the total debt you include in the plan. In some cases, this can also decrease the term of the loan. For instance, if you don’t include your Federal Direct Consolidation Loan, then the term would be less than 10 years. It may be in your best interest to strategically exclude debts from your plan.

Truth No. 10: You can run 2 standard plans at once

In some cases, you may even choose to separate your federal student loan debt between 2 standard repayment plans. This usually applies when you have a Federal Direct or FFEL Consolidation Loan to repay. If so, you may divide some of your federal loans into a 10-year repayment plan that doesn’t include the consolidation loans. Then you use a 10-30 year plan for the consolidation loans.

Splitting your debts up into 2 plans may also occur if you want to use an extended repayment plan. In order to extend the term on a standard repayment plan, you must meet certain dollar amounts of debt. If you have both Direct Loan and FFEL debt, then both must meet certain eligibility requirements to qualify. Otherwise, you can only use the extended plan for the type of debt that meets the requirements.

Do-it-yourself or get help?

Now that you understand standard student loan repayment, you have a choice. You can sign up for all of this on your own. Contact your loan servicer to get started.

However, things may get complicated depending on the types of loans you have, your total debt, and your repayment goals. This is where a federal student loan repayment specialist can help. They can evaluate your situation to help you determine the right repayment strategy for your needs. You’ll find a payment structure that fits the debts you have and works for your budget and goals.

If your debts are limited and fairly straight forward, you may not need assistance. If your situation is complex, we recommend a consultation before you decide.

Pop Quiz

What is the maximum amount of time you have to make payments on student loan debt if you use a federal repayment plan?

a) 10 years

b) 20 years

c) 25 years

d) 30 years

Reveal Answer

Tip: The maximum term on all 5 repayment plans is 25 years, UNLESS your repayment plan includes federal consolidation loan and you have more than $60,000 in total debt. In this case the term extends to 30 years.

d) 30 years

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