CREDIT AND DEBT

Living within a budget

Using credit wisely

Types of credit cards

Terms and conditions

Paying your credit card bills

Your credit history

Getting in step with a loan

Paying for school

	Repaying student loans
	Other payment solutions
	Defaulting on a loan

Understanding taxes

Dealing with debt

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There are several ways to simplify repayment of Stafford Loans. Each one suits a slightly different financial situation.

The standard repayment plan requires that you make fixed payments of at least $50 a month for a period of time determined by the amount you’ve borrowed. This plan, which will not exceed 10 years, will probably let you pay back your loan quickest, and cost you the least overall.

The graduated repayment plan requires monthly payments that begin small and increase every two years. The minimum monthly payment could be less than $50, and increases gradually over the next 10 years. This plan may suit you if you’re not making a lot of money now, but expect to have a higher income in the future.

The extended repayment plan also requires that you make fixed payments of at least $50. However, these payments may be smaller, since they may be spread over anywhere from 10 to 25 years. This increases your overall interest over time, but it can make your payments more manageable.

The income-sensitive repayment plan, which applies to private lender loans, adjusts your monthly payments annually, based on your income and student loan debt. The repayment period for this plan lasts up to 10 years.

The income-contingent repayment plan, which applies to Federal Direct loans, sets your monthly payments based on your income. What you pay each year rises and falls based on what you make, and there’s no set minimum payment. You can take up to 25 years to repay what you’ve borrowed. After that, any unpaid amount will be discharged, or cancelled, though you’ll owe income taxes on the amount that’s forgiven.

Choosing the best repayment plan
Remember that the best plan for you isn’t necessarily the one with the lowest — or highest — monthly payments. When you’re choosing a repayment plan, think about what you can afford now, as well as what you can reasonably expect to pay further down the road. Keep in mind that you’re not making an irrevocable decision. You can always switch plans if you need to.

If you have more than one student loan to repay, you might want to consider loan consolidation. That means combining different student loans with varying interest rates and repayment terms into a single loan with a single set of terms. Your monthly payments are adjusted to suit the consolidated loan, and your repayment period may be extended up to 30 years at a fixed interest rate, which is calculated by taking the weighted average of your various interest rates and rounding it up to the nearest 1/8th percent, with a maximum of 8.25%.