PLUS Loan Repayment Options
Parents have several repayment plans from which to choose to repay their PLUS loans: the standard, the extended, and the graduated repayment plans. Borrowers may change their repayment plans at anytime with certain restrictions.
The STANDARD REPAYMENT plan is a ten year plan. The minimum monthly payment is $50. Borrowers are initially given the standard plan, but may request a different plan.
The EXTENDED REPAYMENT plan allows for an increased length of time to pay off the loan. If you have borrowed a total of $30,000 or more in PLUS loans from the same lender, you can request to pay off the loans over 25 years. This will lower the monthly payments, but increase the total interest paid. Remember that you may pay extra on your loan principal, as there is no pre-payment penalty. This will help in paying off the loan sooner and reducing total interest paid.
If you would like an extended repayment plan to reduce your monthly payments, but do not have $30,000 or more in loans, consider consolidating your PLUS loans. Consolidation loan repayment terms range from 12 to 30 years depending on the amount borrowed.
The GRADUATED REPAYMENT plan is for ten years, but the payments in the first few years start out low and increase over time. The graduated period is usually during the time when the student is enrolled. During this time the monthly payment is usually only the interest charged, making the monthly payments much less than the standard plan. Once the interest only period has ended, the monthly payments must increase significantly in order to pay off the amount borrowed in the short period of time remaining on the loan.
The INCOME-CONTINGENT REPAYMENT plan allows borrowers to pay according to their annual income. Borrowers must consolidate their PLUS loans with the Direct Loan Program to be eligible for this repayment plan. Monthly payments are determined by the borrower's annual income and the repayment term is 25 years. Borrowers working in public service positions, including government and not-for-profit organizations may be eligible for the Public Service Loan Forgiveness Program.
Additional Loan Repayment Options to Consider
Use your available postponement options: You have several forbearance options on your PLUS loan including economic hardship, unemployment, and the student's in-school enrollment during which payments are not required while the student is enrolled. The in-school deferment period is not part of your chosen repayment plan term. For example, if you choose the EXTENDED REPAYMENT plan and opt for three years of in-school deferment, you still have 25 years to repay the loan.
Use postponements to your advantage: If you have borrowed a total of $30,000 or more in PLUS loans from the same lender and you are considering the GRADUATED REPAYMENT plan, a better alternative may be the EXTENDED REPAYMENT, plan as your payments would be much less. In addition, you can also request the in-school deferment if you need relief during the first few years of loan repayment. And remember you can always pay extra on the loan principal to pay the loan off sooner.
LOAN CONSOLIDATION allows parent borrowers to combine one or more PLUS loans into one Consolidation loan. The PLUS loans may be from one or more lenders. A PLUS consolidation loan has a fixed rate of interest which, if low, can save the borrower a lot of money during repayment.
If you consolidate while the student is still enrolled, and if you prefer to postpone payments while the student is in school, you would need to use some of your economic forbearance on the consolidation loan. A better plan would be NOT to consolidate any PLUS loans borrowed after July 1, 2008 while the student is enrolled, and to request the in-school deferment option instead.
The major advantage of loan consolidation currently is the extension of the repayment terms giving you more options than repaying the loan in ten years. The extended plans will reduce the amount of your monthly payments. The term of a consolidation loan is based on the total loan amount being refinanced, and can be as long as 30 years (see table below).
The repayment terms for a PLUS consolidation loan are as follows:
$ 0 - 7,499 = 10 year term
$ 7,500 - 9,999 = 12 years
$10,000 - 19,999 = 15 years
$20,000 - 39,999 = 20 years
$40,000 - 59,999 = 25 years
$60,000 or more = 30 years
Note that if you consolidate between $30,000 and $39,999, your repayment term would be 20 years. If you do not consolidate, you could select the Extended repayment plan and have 25 years to repay.
Use the interactive calculators to help you see how your payments would decrease if you choose an extended term through loan consolidation.