Alternative Federal Student Loan Repayment Plans

Success Tip Save Money by Paying Off as Much as Possible Each Month Keep in mind it's to your advantage to pay as much as you can on your student loan. The lower the payment amount, the longer it will take to repay your loan and the more interest you will pay, therefore increasing your total debt over the life of the loan.

Iowa Student Loan offers a number of repayment plan options for Federal Stafford Loans, Federal PLUS Loans and Federal Grad PLUS Loans.

Below is information on the different repayment options available and examples for each.

• Standard — With this plan you pay an interest and principal payment that remains the same each month for the entire term of your loan. This is the plan that Iowa Student Loan establishes for all borrowers unless otherwise requested.
• Graduated — This plan gives you a smaller payment amount in the beginning and gradually increases the payment amount every two years. This plan will accrue more interest over the life of the loan because principal decreases at a slower rate. You must have a minimum balance of $2,500 to qualify for this plan.
• Extended — This is essentially an extra option that can be used with any of the above repayment plans if your loans were first disbursed on or after Oct. 7, 1998, and your eligible loan balance is $30,000 or more. This plan allows you to extend the repayment term up to 25 years.
• Income-Sensitive — Similar to the Graduated plan, the Income-Sensitive plan begins with payments that are lower in the beginning and increase later as your income increases. Payments are based on a percentage of your income ranging from 4% to 25% of your gross income (which must be verified). Iowa Student Loan will determine whether you qualify for an Income-Sensitive Repayment Plan based on your expected total monthly gross income. On this plan, you are required to pay at least the accrued interest on a monthly basis.
• Income-Based — This repayment option is available beginning July 1, 2009, to all FFELP and Direct Loan borrowers who have a partial financial hardship, except for:
  • FFELP or Direct Loan PLUS Loan (parent) borrowers.
  • FFELP or Direct Loan Consolidation Loan borrowers who consolidated PLUS Loans (parent).
  Under this plan, your required monthly payment amount is based on your income when you have a partial financial hardship. Use the Federal Student Aid calculator to find out if you qualify for this plan.
  
  Your monthly payment amount may be adjusted annually. The maximum repayment period under this plan may exceed 10 years. If you repay under this plan and meet certain other requirements over a specified period of time, you may qualify for cancellation of any outstanding balance on your loans. You may have to pay income tax on any amount that is cancelled.
  
  If the monthly payment amount does not cover accrued interest on a subsidized Federal Stafford Loan, the U.S. Department of Education will pay the remaining interest for a period of three years. More interest may accrue over the life of the loan because the principal balance decreases at a slower rate.

The following examples show the differences in estimated monthly payments, total interest paid and total amount repaid. The examples are based on $10,000 in principal, an 8.00% interest rate and a 120-month (10-year) term.