Which Federal Student Loan Payment Formula?The loan payment formula for federal school loans is flexible. There are several government student loan repayment plans available, so you can figure loan payments that best meet your needs. If you want to consolidate student loans, first consider which payment plan you want; some types of student loans consolidation are not allowed for a couple of plans. For more information and loan calculators/charts about each type of payment, click on the titles: Standard College Loan Repayment ProgramThe loan payment formula for this one is simple. You will have 120 payments of equal amounts. The standard repayment plan is the default federal student loan payment plan that is used regardless of the amount borrowed.Extended Repayment Government School LoansIf you calculate monthly loan payments using the extended schedule, you will find that it provides some student loan relief. Payments (for those with more than $30,000 debt) are spread over 25 years, so each one is lower than under the standard plan.Graduated Federal Student Loan RepaymentUnder the graduated repayment plan, monthly payments start out low, but you must figure loan payments increasing every two years. If your total debt is under $30,000, then you will have ten years to repay; if it is more, you can opt for a twenty-five year loan payment formula.Federal School Loans Income Contingent RepaymentIncome contingent repayment is only available for Direct Loans (not including parent college (PLUS) loans.) Monthly payments are adjusted each year, according to income. Monthly loan repayment calculations are made on the basis of either 20% of your discretionary income or the amount you would pay if you repaid the total amount in 12 years, multiplied by an income percentage factor. (Whichever is less.)Income-Based Monthly Payment FormulaThis plan which began July 1, 2009, provides the most student loan relief of any of the federal student loan repayment options. Your monthly payments are capped at 15% of discretionary income. For a more complete explanation of the benefits and drawbacks of this student loan repayment program, click the headline.If you are considering consolidating Parent PLUS loans with other Stafford loans, the last two plans cannot be chosen. If you have federal Perkins student loans, you will have to consolidate into the Direct Loans program to be eligible for income contingent or income-based payments. If you are making payments under the direct program, you can switch payment plans at any time. Simply go to the Direct Loans servicing center online and make the change. 
No matter which loan payment formula you use, if you want to eliminate student loan debt without straining your resources, you should plan on a separate, dedicated income just for paying off student loans.If you opt for the new income-based plan, you have a full three years without penalties to develop such an income.
|
