Federal Loan Consolidation Payment Options

If you decide to go with consolidation to manage your federal student loans, there are a few options that you might be offered in order to make your payments more manageable. These three options include a graduated repayment, extended repayment and the income-tailored repayment, each of which comes with its own benefits depending on your situation.

Graduated Repayment Plans

When you are looking to consolidate your student loans through a private company, the graduated repayment plan is an option that helps most graduates who feel they will need the most help only in the short term. The graduated repayment plan is a scheduled repayment that allows you to make smaller payments at first, but will then gradually increase over time to include the interest and principal together. Typically the graduated repayment plan is chosen by those students who have recently graduated and feel that they will have a significant income and easier time with repayment in the future.

Extended Repayment Plans

Extended repayment plans are typically only offered to those who have student loan debts that total in the high tens of thousands or more. This federal loan repayment plan will extend the amount of time that you are allowed to make total repayment of your loan - in some cases up to 25 years. The amount of time you will be given by the lender depends on how much debt you have, your income and the lender you choose. Current market situations and interest rates may also play a significant part in the repayment plan terms that you are offered.

Income-Tailored Repayment Plans

Income-tailored repayment plans will generally let you pay only the interest on your loan every month along with a small (usually around 10%-25%) percentage of your monthly income as well. You can pay more on the loan as you wish and may have to reapply for this type of repayment plan on a yearly basis, just as you had to reapply for your federal student loans on a yearly basis.

No matter which repayment plan or lender you choose, keep in mind that you should focus on making as quick a repayment of your consolidated loans as possible. The more quickly you pay off your loan, putting whatever extra per month you can possibly afford, the more money you will save in the long run.