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On July 1, federal student loan borrowers who were enrolled in the SAVE repayment plan will have “at least 90 days” to choose a new repayment plan, according to a March 27 press release from the Department of Education.
The SAVE plan, a Biden-era creation that lowered monthly payments and offered loan forgiveness after as little as 10 years, was struck down in March by a federal court. The decision effectively ended the plan, leaving around 7.5 million borrowers to choose a new plan for what loan data platform Education Data Initiative indicates is an average balance of $39,075.
The Department of Education offers seven repayment plans as of Monday, and will add two plans – the repayment assistance plan and tiered standard plan – on July 1.
A borrower’s repayment options depend on when they took out their loans, their income, how many dependents they have and where they live.
open image in galleryNon-Income-Driven Repayment Plans
Non-income-driven repayment periods mentioned below might be longer for borrowers with consolidated federal student loans.
Standard Repayment*
The standard repayment plan is a 10-year repayment plan with fixed monthly payments. Borrowers who choose this plan will pay the lowest amount of interest, generally speaking. A standard plan tends to have the highest monthly payment of the nine that the Department of Education will offer on July 1.
A borrower living in California with an adjusted gross income of $60,000 and no dependents would pay $636 each month.
*Payments don’t count toward loan forgiveness.
Graduated Repayment*
The graduated repayment plan has a 10-year repayment period. Instead of requiring a fixed monthly payment, the plan’s initial payments are lower than the standard plan’s and then increase every two years.
A single borrower living in California with an adjusted gross income of $60,000 and no dependents would pay $360 each month to start and end with $1,080 payments.
*Payments don’t count toward loan forgiveness.
Extended Graduated Repayment*
The extended graduated repayment plan has the payment schedule as the graduated repayment plan – payments start low, then increase every two years – but over 25 years instead of 10 years.
Only borrowers with more than $30,000 in Direct Loans and Federal Family Education Loans are eligible for extended repayment plans.
A single borrower living in California with an adjusted gross income of $60,000, no dependents and a $60,000 loan balance will start the plan with a $250 monthly payment and end it with $577 monthly payments.
*Payments don’t count toward loan forgiveness.
open image in galleryExtended Fixed Repayment*
The extended fixed repayment plan is pretty similar to the standard repayment because its payments are fixed. However, the repayment period is 25 years instead of 10, meaning borrowers will have lower monthly payments but higher total interest charges.
Only borrowers with more than $30,000 in Direct Loans and Federal Family Education Loans are eligible for extended repayment plans.
A single borrower living in California with an adjusted gross income of $60,000, no dependents and a $60,000 loan balance would pay $351 a month.
*Payments don’t count toward loan forgiveness.
Tiered Standard Repayment
The tiered standard plan bases monthly payments and repayment period on the borrower’s loan balance, according to the Department of Education:
- Less than $25,000: 10 years
- $25,000 to less than $50,000: 15 years
- $50,000 to less than $100,000: 20 years
- $100,000 or more: 25 years
Borrowers cannot choose their repayment period. Loans are not eligible for tiered standard repayment if they are in the Federal Family Education Loan Program, Perkins Loan Program or Health Education Loan Program, according to the Department of Education.
A single borrower living in California with an adjusted gross income of $60,000, no dependents and a $60,000 loan balance would pay $396 a month over 20 years.
Income-Driven Repayment Plans
Borrowers on income-driven repayment plans receive a $50 monthly payment discount for every dependent they claim.
Income-Based Repayment*
The income-based repayment plan calculates a borrower’s monthly payment based on 10 percent of discretionary income for those who were new borrowers on or after July 1, 2014, according to the Department of Education. All other borrowers will pay 15 percent of their discretionary income.
Borrowers have to recertify their income every year to account for any changes to their income and family size. Generally speaking, payments drop when income drops, and payments increase when income increases. Payments made to this plan count toward the payments required by loan forgiveness programs.
The education department will discharge loans after 20 years for new borrowers on or after July 1, 2014. Otherwise, discharge happens after 25 years.
A single borrower living in California with an adjusted gross income of $60,000, no dependents and a $60,000 loan balance would pay $451 a month.
*This plan is only available to those who borrowed their first federal student loan before July 1, 2014.
open image in galleryRepayment Assistance Plan
The repayment assistance plan calculates a borrower’s monthly payment based on as little as 1 percent and up to 10 percent of the borrower’s income. The percentage increases as the borrower earns more.
As long as borrowers make on-time payments, the education department will waive any unpaid monthly interest (which happens when a borrower’s payment isn’t big enough to cover the interest part of their monthly payment).
Borrowers will receive a $50 discount on their monthly payment for every dependent they have.
The plan’s repayment period is 30 years. If there is a balance left over at the end of those 30 years, the borrower’s balance will be discharged.
A single borrower living in California with an adjusted gross income of $60,000, no dependents and a $60,000 loan balance would pay $250 a month.
Income-Contingent Repayment*
The income-contingent repayment plan is the same as an income-based repayment plan, but requires a payment of the lesser of:
- 10 percent of a borrower’s income
- A fixed payment on a 12-year standard repayment plan
The Department of Education recalculates payments yearly, before which borrowers have to provide their income and family size.
Payments made to this plan count toward the payments required by loan forgiveness programs.
A single borrower living in California with an adjusted gross income of $60,000, no dependents and a $60,000 loan balance would pay $528 a month.
*The Department of Education will phase out this plan by June 30, 2028.
Pay-As-You-Earn*
The pay-as-you-earn plan calculates a borrower’s monthly payment by calculating 10 percent of their adjusted gross income in conjunction with the state’s poverty line. Borrowers have to recertify their income and family size every year to maintain the plan.
The Department of Education will discharge a borrower’s remaining loan balance if they still owe something after 20 years of qualifying payments.
Only those who were new borrowers on or after October 1, 2007, and received a direct loan disbursement on or after October 1, 2011, are eligible for this plan.
A single borrower living in California with an adjusted gross income of $60,000, no dependents and a $60,000 loan balance would pay $451 a month.
*The Department of Education will phase out this plan by June 30, 2028.
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