Stafford Loan Repayment
With the standard plan, you'll pay a fixed amount each month until your loans are paid in full. Your monthly payments will be at least $50, and you'll have up to 10 years to repay your loans.
Your monthly payment under the standard plan may be higher than it would be under the other plans because your loans will be repaid in the shortest time. For that reason, having a 10-year limit on repayment, you may pay the least interest.
Under the extended plan, you’ll pay a fixed annual or graduated repayment amount over a period not to exceed 25 years. If you're a Direct Loan borrower, you must have more than $30,000 in outstanding Direct Loans to qualify for an extended repayment plan. Your fixed monthly payment is lower than it would be under the Standard Plan, but you'll ultimately pay more for your loan because of the interest that accumulates during the longer repayment period.
This is a good plan if you will need to make smaller monthly payments, since the repayment period will be 25 years. Your monthly payments will be less than with the standard plan due to your monthly payment being stretched out over a 25 year period instead of a 10 year period. However, you may pay more in interest because you're taking longer to repay the loans. Remember that the longer your loans are in repayment, the more interest you will pay.
With this plan, your payments start out with a low monthly repayment that gradually increases every two years. The length of your repayment period will be up to ten years. If you expect your income to increase steadily over time, this plan may be right for you. Your monthly payment will never be less than the amount of interest that accrues between payments. Although your monthly payment will gradually increase, no single payment under this plan will be more than three times greater than any other payment.
Income Based Repayment (IBR) Effective July 1, 2009
Income Based Repayment is a new repayment introduced to students with a Stafford Loan. Under IBR, the required monthly payment is capped at an amount that is intended to be affordable based on income and family size. You are eligible for IBR if the monthly repayment amount under IBR will be less than the monthly amount calculated under a 10-year standard repayment plan. If you repay under the IBR plan for 25 years and meet other requirements you may have any remaining balance of your loan(s) cancelled. Additionally, if you work in public service and have reduced loan payments through IBR, the remaining balance after ten years in a public service job could be cancelled.
Direct Loan Income Contingent Repayment (ICR)
This plan gives you the flexibility to meet your Stafford Loan repayment obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse's income if you're married), family size, and the total amount of your Direct Loans. Under the ICR plan you will pay each month the lesser of:
1. The amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income,
2. 20 percent of your monthly discretionary income.
If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized (added to the loan principal).