You can opt to switch your student loan repayment plans to lessen the burden on your finances. If you have taken a federal student loan, the standard repayment plan is of 10 years but it is possible to apply for an alternate plan with lower monthly repayments- this applies to both federal and private loans. While the repayment switching in federal plans is typically easier, it is possible to switch private repayment plans too. To switch private loan repayment plans you need to contact your loan provider and research the available options for switching repayment plans. Switching to a lower monthly payment plan can help you to avoid the consequences of student loan default, even if it bears the risk of increasing the interest rate or the amount you owe. Let us take a look at the options available for switching student loan repayment plans and the process to do so in this article. We also hope to answer any doubts you may have like the following-
How to change your student loan repayment plan?
Can I switch to a more affordable repayment plan?
Types of Student Loan Repayment Plans |Switching Student Loan Repayment Plans
After graduation, borrowers are placed on the standard repayment plan of 10 years with a fixed monthly repayment amount. However, if you want to change this plan, you can do so anytime. If you decide on switching student loan repayment plans, you can opt for any of the following repayment plans-
Graduate repayment plan
Under this scheme, the repayments start at a low rate and increase every 2 years. You will be able to pay off the loan within 10 years but will have to pay more in interest. If you have opted for a consolidation loan, you will have up to 30 years for repayment.
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Extended repayment plan
Under this scheme, the student loan repayment plan is extended for up to 25 years, meaning much lower monthly repayments but paying a higher amount than the originally intended over the course of time.
Suggested Read- Things To Know About The Student Loan Repayment For The UK
Income-driven repayment plan (IDR)
Under this scheme, the federal loan repayment term is extended for up to 25 years by the government, and the payments are capped at certain income percentages, meaning that if your income increases, so will your monthly payments. This plan is divided into 4 types- Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Contingent Repayment (ICR), and Income-Based Repayment (IBR).
Process of Choosing a Repayment Plan |Switching Student Loan Repayment Plans
What is the process to follow while switching student loan repayment plans? Read on to know-
- Choose the plan which is best for you, considering your economic situation.
- Contact your student loan servicer or provider and ask for guidance and expert help. This process is easy and free- it requires no third-party charges or payments.
- Complete all the necessary paperwork beforehand, including filling and completing the necessary application forms to switch your repayment plans.
- Sometimes the process of switching plans may take up time, make sure you don’t fall behind in your payments or default on your student loan in the meanwhile.
Wondering how the student loan repayment plans will reduce your expenses and lower the number of monthly payments you make? Read the following pointers to gain more clarity over which student loan repayment will be ideal for your economic situation-
- Pay on the basis of your income- Use the IDR repayment plan to pay off your student loans based on your income and reduce the monthly payment amounts significantly. Note that this option is usually only available for federal student loans.
- Lower payments temporarily- As previously mentioned, the Graduate Loan repayment program helps you pay a lower amount every month for the initial years, increasing it every 2 years. This can provide a good temporary economic relief.
- By opting for extended repayment plans, you can reduce your payments for a longer period of time. But note that this type of plan is only available to those who have taken more than $30,000 in outstanding Direct Loans.
We hope all your doubts like How to change your student loan repayment plan? and Can I switch to a more affordable repayment plan? have been answered in this blog. If you are an Indian student looking for loans, do check out the variety of loans UniCreds offers to Indian students opting for study abroad programs.
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