Extended Repayment Plan

Detailed Explanation

The extended repayment plan is designed for borrowers with federal student loans who are seeking a more manageable monthly payment. This plan extends the loan's repayment term to up to 25 years, significantly reducing the amount that borrowers must pay each month. It's particularly beneficial for those with a substantial loan balance and who are struggling to meet the higher payments required under the standard 10-year repayment plan.

Under the extended repayment plan, borrowers can choose between fixed or graduated payments. Fixed payments remain the same throughout the life of the loan, offering predictability. Graduated payments, on the other hand, start lower and gradually increase, typically every two years. This is advantageous for borrowers who expect their income to rise over time.

It's important to note that extending the repayment term means that borrowers will pay more in interest over the life of the loan compared to the standard plan. While the monthly payments are lower, the total cost over the extended term is higher. This plan is best suited for those who need immediate relief from high monthly payments and are less concerned about the total cost over time.

Borrowers with Direct Loans and FFEL Program loans are eligible for this plan. However, those with Parent PLUS loans or consolidated loans that include Parent PLUS loans are not eligible for graduated payments under this plan.

Example

Consider a borrower with $35,000 in federal student loans at a 4.5% interest rate. Under the standard 10-year plan, their monthly payment would be about $363.

Under the extended repayment plan with fixed payments, their monthly payment could be reduced to around $184, assuming a 25-year term.

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Related Terms

Standard Repayment Plan: A structured payment arrangement where borrowers make fixed monthly payments over a period of 10 years. Under this plan, the monthly payments remain the same throughout the repayment term, leading to a total of 120 payments over the course of the loan.

Graduated Repayment Plan: A repayment plan where borrowers start with lower monthly payments that gradually increase over time, usually every two years. This plan typically spans a 10-year term, like the standard repayment plan, but the initial payments are lower and increase at regular intervals.

Income-Driven Repayment Plan: A student loan repayment option that sets monthly payments based on income and family size.

Repayment Schedule: A detailed plan that outlines the terms of loan repayment, including the frequency and amount of each payment, and the duration of the repayment period for a student loan.

Frequently Asked Questions

Who is eligible for an extended repayment plan? 

Borrowers with federal student loans, excluding those with Parent PLUS loans included in consolidated loans for graduated payments.

How does an extended repayment plan affect interest payments? 

While monthly payments are lower, the total interest paid over the life of the loan is higher due to the extended term.

Can I switch from an extended repayment plan to another plan? 

Yes, borrowers can switch to a different repayment plan if their financial situation changes.

Does extending the loan term always reduce the monthly payment? 

Yes, extending the loan term reduces the monthly payment but increases the total interest paid over time.

Are private loans eligible for the extended repayment plan? 

No, this plan is only available for federal student loans.