Graduated Repayment Plans are plans that allow borrowers to start with a lower monthly payment that will consistently increase every two years. This repayment plan is designed so that it does not extend their repayment period. The gradual increase insures that the loan will be paid off in the same amount of time as your original term. On a graduated plan, the loan may end up costing more in terms of interest paid, due to starting off with a lower payment.
The Graduated Repayment is not for everyone and not for every financial situation. If you are confident that your income will increase over time than the Graduated Repayment plan might be your best choice. If you choose the Graduated Program and you have more than $30,000 in Direct Loans, you may be eligible to extend the repayment term for up to 25 years. The monthly payments will never be less than the amount of interest that accrues between payments and no single payment will ever be more than three times the value of any other payment.
One must keep in mind, the longer it takes to repay a loan, the more you could end up repaying. Since you are starting off paying less than what the lender would normally require on a standard repayment, your payment may only cover the interest. On a positive note, you are able to send in more than your minimum required at any given time which will help you lower your time frame and the total amount you are paying back in the end.
Starting off with the lower minimum payment is like a safety net. The reason for this is to allow you time to get on your feet after college. However, if you select a Graduated Repayment Plan and for whatever reason your income does not increase at the rate you foresaw, you can switch repayment plans along the way.
We want to assure you that our primary objective is to help you understand the options available to you in repaying your student loan debt. Our organization, which is a nonprofit Consumer Credit Counseling Organization has over twenty years of experience helping individuals live debt free and understand their complete financial picture. The consultation is free and the help and guidance we’ve provided individuals throughout the years has been invaluable. We encourage you to learn more about our organization by visiting Debt Reduction Services or calling us toll free at 1-877-688-3328. Our certified student loan counselors are ready to help you today!