While college graduation is exhilarating, the burden of student loan debt is undeniable. MyFedLoan, a former federal loan servicer, offers different repayment plans to help borrowers to be able to manage their student loans in the best way possible.
Although MyFedLoan has changed to another servicer such as MOHELA, Edfinancial, Aidvantage, or Nelnet and so your loans have been probably transferred to them. These new services provide comparable repayment plans. We will go through these alternatives to arm you with the necessary information.
Understanding Your Repayment Options
The appropriate repayment plan is crucial in making your student loans manageable. Depending on your current financial situation, loan amount, and goals, you may want to consider the following types of repayment plans:
Standard Repayment Plan
- Overview: It is the standard repayment plan, involving fixed monthly payments for up to 10 years (or 30 years for consolidated loans).
- Benefits: The quickest and in some cases the cheapest way of repaying your loans is where you minimize the amount of interest paid over time.
- Considerations: If the monthly payments are not too much for you, this is a fast way to get rid of debt.
Graduated Repayment Plan
- Overview: This plan has a lower monthly payment which increases every two years and the payment plan is for 10 years (30 years for consolidated loans).
- Benefits: Ideal if your income is currently low but expected to rise in the future.
- Considerations: You can pay a lot of interest throughout the loan than a standard payment plan.
Extended Repayment Plans
- Overview: Plans with a 25-year repayment term, thereby reducing monthly repayments. To qualify, the outstanding balance must surpass $30,000 or more in direct or FFEL loans.
- Benefits: If your principal balance is high, it makes your payments more manageable.
- Considerations: You pay much more interest over the extended repayment period.
Income-Driven Repayment (IDR) Plans
- Overview: This type of plan is more flexible as your monthly payments are based on your income and family size. There are several IDR plans available:
- Revised Pay As You Earn Repayment Plan (REPAYE Plan)
- Pay As You Earn Repayment Plan (PAYE Plan)
- Income-Based Repayment Plan (IBR Plan)
- Income-Contingent Repayment Plan (ICR Plan)
- Benefits: Provides affordable monthly repayments and forgiveness of the loan after 20-25 years.
- Considerations: May extend your repayment term and increase the total amount you pay.
How to Choose the Right MyFedLoan Payment Plan
There are so many alternatives that it might become confusing which payment plan fits you the best from all MyFedLoan repayment plan options. Here’s how to make an informed decision:
- Know Your Situation: Consider your current income, debt-to-income ratio, and expected future income.
- Short-Term vs. Long-term Goals Do you want to pay off your loans as quickly as possible or minimize your monthly payments?
- Use Online Tools: The Federal Student Aid website (https://studentaid.gov/) has a Repayment Estimator to help you compare plans and estimate potential monthly payments.
- Seek Guidance: It might be helpful to speak with your current loan servicer for personalized advice on choosing the best repayment plan.
Conclusion
The first thing to do in regaining control of your student loan debt is to get a grasp of MyFedLoan payment plans (and your current loan servicer’s similar plans). Do not feel overwhelmed by the decisions, employ the available tools and resources to help you come up with the right decision for you.