What payment plan is best for you?

The biggest sin of servicers and many others helping with student loans is they try to fit students into a "one-size-fits all" type box.  This usually happens in the form of an Income-Driven plan.  In fact when I worked for a servicer, if you told us you can't afford your payment we instantly must try an Income Plan first.  But that is not always the best.  Here is an overview of each plan to help you decide!

The facts

  • Pays it off the quickest
  • Has the least amount of interest
  • Payments typically are level and do not change (as long as no capitalization)
  • Highest Payment Amount
  • 10 year plan (or less depending on loan amount) (may be more with consolidation)

When I should choose this plan:

If you can afford your payment, this is the way to go.  You will get your loans paid off in 10 years or less and pay the least amount of interest as a result!

The facts

  • Payment starts out lower and goes up typically every two years (stair step plan)
  • Has 3x rules where highest payment cannot be more than 3x lowest payment
  • Initial payments will cover only interest or slightly above
  • 10 year plan (may be more with consolidation)
  • This plan is not beneficial for PSLF

When I should choose this plan:

If you want to stay on a 10-year schedule but can’t afford your payments right now this may be the way to go.  This is especially great if you know you will be getting regular raises or expect to make more.  For example if you know you will get tenure, partnership or will get a raise after passing the bars, the Graduated plan could be for you!

The facts

  • Same as 10-year Level and Graduated but over 25 years instead
  • Has 3x rules where highest payment cannot be more than 3x lowest payment (for Graduated)
  • Will pay significantly more in interest over the life of the loan
  • Not beneficial for PSLF

When I should choose this plan:

If you can afford your payment but only if the term is stretched out.  The difference between this plan and a consolidation term is usually insignificant (if you can’t afford one you often times cannot afford the other)

The facts

  • Bases your payments on your income at either 10%, 15% or 20% depending on what you qualify for
  • Made up of three payment choices (IBR, Pay As You Earn, ICR)
  • Most Beneficial Plan for PSLF
  • Must reapply yearly
  • If Married Filing Joinly must include your income along with spouse’s income
  • Based on AGI and does not include other external expenses (however can include spouse eligible loan debt)
  • Interest can be paid on subsidized loans for IBR and PAYE (on anything not covered by payment)
  • Payment can be as low as $0.00

When I should choose this plan:

This plan is great if you are looking for a deferment or forbearance because you can make no payments and qualify for a $0.00 or low payments (keeps you in repayment).  It is also the most beneficial plan for the PSLF and allows for maximum forgiveness.  Please be aware if you are going back to school or believe your hardship is only temporary, this may not be a good way to go.

Figuring out the best Repayment Schedule for you is a great reason to hire a reliable loan counselor!

The Department of Education loves the Income-Driven plans.  And they probably should.  They are often times great things for many borrowers.  But they are not for everyone.  However if you speak to many companies that charge a fee to complete forms for you they will push the IDR because that is where the money is.  If you talk to your servicer they will push it because it is required as a first step and they want to keep their calls under 10 minutes.

Often times I could not serve the borrowers I talked to best and keep the interest of the company I worked for.  We want to help borrowers but we want to do it fast.  Like really fast.  As a result sometimes we don't have the time to ask the questions and decide what is really great for you.

Which is why a loan counselor/consultant is a great choice.  We can tell you if you qualify for a plan (such as Pay As You Earn vs IBR), which plan you do qualify for, and most importantly based on your situation and budget (which we can look at but others often times can't) what plan best fits your life.  We can also direct you towards ways to apply for free and help you with those forms if you have trouble.  Also you are dealing with a person who has your best interest at heart from the first step to repayment success.


So let's talk and schedule your risk free consultation today!





And remember--if you don't save $5,000*,  you pay nothing!

*Loan term must be 120 months or more with a minimum balance of $5,000. $5,000 is determined by greater of money saved on interest by refinancing or , total monthly payment through changing of repayment plan or projected forgiveness amount.

Depending on income, cosigner may be required. All refinancing decisions made by Darrien Rowayton Bank (DRB).  Student Loan Insider (SLI) is not an agent of DRB nor is involved in any credit decisions. All forgiveness, consolidation, and repayment plan changes are done through the Department of Education. SLI has no special access to or is not affiliated with the DOE. Any changes to loans are through programs offered free of charge by DRB or the DOE. The fee rendered is for paperwork assistance and/or consultation of the borrower’s individual situation. If federal loans are refinanced, federal protections will be lost. SLI has a financial interest in loans refinanced by DRB.