By the time you are confronted with the decision of choosing a student loan consolidation repayment plan, you have already done all the hard work of comparing lenders and choosing the best one for you. You are probably tired of anything that has to do with student loan consolidation, and you just want to select the first plan you see and be done with it. But don't do it. The student loan consolidation repayment plan you select can have a huge effect on your financial future. It will determine how long you are repaying your debt, how big your monthly payments will be and how much you will ultimately have to pay in interest. Just because the decision is important, doesn't mean it has to be difficult. Here's what you need to know about student loan consolidation repayment plans to ensure you make the best decision for your financial future.Standard Student Loan Consolidation Repayment Plan
The standard student loan consolidation repayment play is the least expensive and takes the least amount of time to pay off your debt (US Department of Education). That is because the loan term can be no longer than 10 years, which means you make fewer interest payments, saving you money. The trade off is that you have to make larger monthly payments. If you can afford the higher monthly payments, this plan is the best for you because it will save you money in the long run ("Student Loan Consolidation").
Extended Student Loan Consolidation Repayment Plan: The extended student loan consolidation repayment plan will cost you more money and take longer to repay your debt, but you will have smaller monthly payments (US Department of Education). The term length varies from 12 to 30 years depending on the size of your debt, and the minimum required monthly payments will be at least $50. Only select this plan if you are on a tight budget and won't be able to afford the larger payments offered under the standard student loan consolidation plan.
Graduated Student Loan Consolidation Repayment Plan: The graduated student loan consolidation repayment plan is designed to accommodate recent graduates who have little income now but expect to be making more money as time progresses. Payments under this plan start off low and gradually increase usually every two years ("Repayment Plans"). The term length varies from 12 to 30 years depending on the size of your loan, and your payments can never become greater than 1.5 times what your monthly rate would be under the standard student loan consolidation repayment plan (US Department of Education). You should also be aware that you will pay more interest with the graduated student loan consolidation repayment plan than you would with the standard or extended repayment plans.
Income Contingent or Sensitive Student Loan Consolidation Repayment Plan: For income contingent or sensitive student loan consolidation repayment plans, your monthly payments vary depending on your income, family size, interest rates and total amount of debt (US Department of Education). The plan is designed to reduce the hardship of repaying your loans. To enroll in the plan you must allow the IRS to give the Department of Education information about your income, so that each year your new rates can be calculated. Your monthly payments will never be three times greater than any other scheduled payment amount (US Department of Education). Contingent or sensitive student loan consolidation repayment plans are for those who don't think they will be able to make the payments on any other repayment plan.
Carefully consider your future financial situation before selection a student loan consolidation repayment plan. Although you can change plans once a year, it is much better to pick a plan a stick with it ("Repayment Plans"). Also, know that not all types of loans offer all the types of repayment plans, but generally, most have at least the standard, extended and graduated student loan consolidation repayment plans. One final word of advice, always remember that the longer it takes you to pay off your loans, the more interest you will have to pay. Pay off your debt as soon as you can. It will not only save you money, it will alleviate the stress of being in debt.Student Loan Consolidation Guide Sections: