Millions of people all over the country, in all sorts of different circumstances, have student debt they need to pay off. Student loans are a necessary evil for a lot of people who want a college education, or who want to return to school for a graduate degree or because they want a change of career, and can't afford to do it without some financial assistance.
Just as there are different sorts of loans available to different people, there are also several common types of repayment plan you can choose when they time comes to start paying off that student debt. But which repayment plan is best?
Well, this depends essentially on what you consider to be best - the one that leaves you paying the least each month, the one that means you pay the least overall, or a balance between the two that segues nicely with your earning potential over the course of the repayment period.
If you come out of university and can get a job where you can comfortably manage a reasonably high repayment, or you don't owe very much, then the best option is the Standard repayment plan. This plan allows you to pay off your loan relatively quickly (over a maximum of ten years) so the period of time you are accruing interest is minimized and the cost of your loan overall ends up being less. You are also debt free as soon as you can be, and as your income is likely to be lowest at the start of your post college career, if you can afford it then it is only likely to get easier over the years as your salary goes up.
If you like the idea of paying off your loan as quickly as possible, and are in the kind of career where you are likely to progress and earn significantly more over time than you do when you first graduate, but can't afford high repayments right now, your best option is the Graduated repayment plan. This is another plan with a maximum ten year duration, so you get the benefits of that, but the payments start off low and increase every couple of years, so if everything goes to plan your payments will rise as your income does as you work your way up the career ladder.
If you owe a huge amount and think you can't afford to settle your debts in ten years, even with the Graduated plan, then you can get an extended plan. This can run for up to twenty five years, and will mean much lower monthly repayments. The low monthly repayments make life easier, but you will of course end up paying more overall for the amount you borrowed in the first place, and you have to accept that you will be in student debt for a large proportion of your working life.
If you don't have a very high income or you have a large family to support and you are worried that repayments may become uncomfortable for you and your family, you may be better off with a repayment plan that takes your earnings and circumstances into account on an annual basis, such as Income Based Repayment or Income Contingent Repayment. These schemes are designed to prevent people having to pay more than they can comfortably afford, and can run for up to 25 years. If the amount you could afford to repay over 25 years still hasn't covered the entire loan (but you have stuck to your plan and met any other qualifying criteria), any remaining debt may be written off.
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