Curious if the Extended Repayment Plan is right for you?
The Extended Repayment Plan is exactly what it sounds like– a repayment plan that extends the life of your loan in order to help make your monthly student loan payments smaller. Instead of being in debt for 10 years under the standard repayment plan, you will be in student loan debt for 25 years.
Figuring out how to navigate your student loan debt is like trying to figure out what to eat for lunch when you’re already hangry. (anger induced by hunger).
There are so many different options, that it leaves you (or at least, me) feeling like sticking my head under a rug and sobbing. (I get dramatic when I’m hungry). And to make matters worse, each student loan option is needlessly complicated. Its like trying to order a basic meal (a #1– a plain hamburger with fries and a Diet Coke) and then having your waiter assault you with sundry of questions. Well do you want special sauce with that? Do you want onions? What about grilled onions? Lettuce? Tomato? What about trying something crazy on it, like pineapple? Jalapeno? And before you know it, you’ve collapsed on the ground, too hungry to make any decisions. In each of the federal student loan forgiveness options, you have to follow the rules with precision in order to have your loans forgiven. So, first, you have to know what those rules are before you can make a decision. But the rules can be hard to understand. And your hungry. And understanding things when your hungry is hard. So, in our student loans simplified series, we are breaking down each of the federal student loan repayment options in bite sized pieces to help you understand and make the best decision for you.
Who’s hungry?
Here is everything that you need to know about the Extended Repayment Plan to determine if its right for you.
You must have one of the following federal student loans to qualify:
- Direct (subsidized or unsubsidized qualify)
- Stafford (subsidized or unsubsidized)
- Any PLUS loans (i.e. Grad PLUS or Parent PLUS)
- All consolidation loans (Direct or FFEL)
- TIP: if you have FFEL loans, they will not qualify for this plan. But simply consolidate them and you will be allowed to sign up for the Extended Repayment Plan.
You MUST have at least $30,000 in student loans to qualify.
The balance if your loans has to be at least $30,000 to qualify. This includes any of the above referenced federal loans. For example, if you have three federal Direct subsidized student loans with balances of $10,000 each, then your loans would qualify. If you aren’t sure if you qualify, use this calculator from the U.S. Department of Education.
The Extended Repayment Plan is one of the most expensive repayment options available.
Since you will be extending the life of your loan, you will be paying much more in interest on this plan than on a Standard Repayment Plan. And unlike one of the income driven repayment plans, you will be paying the full balance of your loan(s) on the Extended Repayment Plan. That means that ideally, you won’t want a ton of interest accruing. To the extent that you are able, make extra payments on the Extended Repayment Plan to keep that interest balance from ballooning out of control.
You can choose a fixed monthly payment or a graduated monthly payment.
Under the Extended Repayment Plan, you can choose either a fixed monthly payment that you will pay for the full 25 year life of your loan, or you can choose a payment plan that starts out with smaller monthly payments and eventually increases over time, similar to the Graduated Repayment Plan. A graduated monthly repayment schedule would be more ideal for someone who is currently earning a low income but who expects that income to increase over the years. Keep in mind that the lower your monthly payment is, the more you will actually pay over the life of the loan.
Other plans would likely offer you a lower monthly payment.
Keep in mind that the Extended Repayment Plan is not a “student loan forgiveness” plan. The balance of your loans will not be forgiven. You will pay the full amount that you owe on your loans. Under the student loan forgiveness plans, you will pay a percentage of your income for 20-25 years and whatever you have not paid by the end of the 20-25 years will be forgiven. If you qualify for one of these plans, they will likely save you more money.
You can sign up for the Extended Repayment Plan and make more payments on it than are required.
If you are currently struggling to make your monthly student loan payment on a Standard Repayment Plan, you can switch to the Extended Repayment Plan and as soon as you are able to, you can make supplemental payments to help keep your interest in check. This will make the cost of your loan significantly less over the life of the loan.
You don’t have to stay on the Extended Repayment Plan forever.
One of the scariest things to me about choosing a student loan repayment plan, was feeling like I was going to be stuck in that repayment plan forever. #commitmentissues. It felt like saying yes to a romantic relationship that I only felt luke warm about. But just like you don’t have to marry that guy you’re dating but not that into, you don’t have to marry your student loan repayment plan– you can always change your mind later if it is not working for you. You might decide after a year on the Extended Repayment Plan that you are comfortable refinancing to a 15 year private loan to enjoy a lower interest rate (and probably a lower monthly payment). Or you might become eligible for a federal income-driven repayment plan that you previously didn’t qualify for. Don’t be afraid to change your mind if something else makes better sense/cents.
You can use this repayment estimator from the U.S. Department of Education to see which repayment plans you are eligible for and how much they will cost you.
Who should use the Extended Repayment Plan: Someone who does NOT qualify (or otherwise is uninterested in) any of the student loan forgiveness plans but wants to lower their monthly student loan payment, with the understanding that this actually dramatically increases the amount he or she will pay over the life of their loan.
Overall, the Extended Repayment Plan is a fairly solid option for someone who is searching for a way (at least temporarily) to reduce their monthly student loan payment. There are likely better options available to you, so make sure you are following our student loans series so you can make the best decision for YOU.
Are you signed up for the Extended Repayment Plan? What do you like or dislike about it?
OTHER POSTS IN OUR STUDENT LOANS SIMPLIFIED SERIES:
EVERYTHING YOU NEED TO KNOW ABOUT PUBLIC SERVICE LOAN FORGIVENESS
EVERYTHING YOU NEED TO KNOW ABOUT THE GRADUATED REPAYMENT PLAN
Hi there! I’m Amber! And welcome to the Deeply in Debt blog where we’re offering simple solutions for big debt.