The time has come to pay back your loans. *le sigh* There is nothing as intimidating as knowing that lump sum looms over you in sadistic glory, and worse yet, your lenders (the heartless fiends!) keep tacking on interest, gobbling up your money almost faster than you can make it. It’s looking like those four years of Ramen (something to be said for variety of flavors) in college are going to be extended for another five to fifteen years. Wait! Doesn’t the federal government offer repayment plans and consolidation options, including prepayment options? Yes they do! Unfortunately, we can’t give you the breakdown for state and private loans because they are so subjective to individual states and plans, but luckily, some of the plans are similar to federal.

For federal loans, they can help space it out for you! Okay, it’s not as exciting as that because Uncle Sam will be sitting there with his pimp cane, counting your Benjamins, but at least you will not have to become destitute to do so. Based on your situation, you should be able to make an affordable payment each month.

Federal Repayment Plans

Standard Repayment Plan

• The Dealio: Your loans are broken up into a fixed payment over a fixed amount of time that cannot exceed 10 years.
• Applies to: Stafford Loans and PLUS Loans

Graduated Repayment Plan

• The Dealio: Your loans are paid over a fixed amount of time that cannot exceed 10 years. The payments start out at a relatively low but increase in amount every two years. This means that although the payments start out low, later payments compensate for the lower payments, equaling it all out in the end.
• Applies to: Stafford Loans and PLUS Loans

Extended Repayment

• The Dealio: Your loans can be paid in a fixed amount or a graduated (i.e. starts out low and gets higher later) amount over a period that cannot exceed 25 years. Because you take longer repaying your loan, you end up paying back more money. The interest adds on to the balance at the end of each month, so while the interest percentage stays the same, the actual interest (the monetary amount) added continues to rise.
• Applies to: Stafford Loans and PLUS Loans

Income-Contingent Repayment Plan

• The Dealio: Your loan payments will be based off your family size, your income (plus your spouse’s income), and the total amount of Stafford loans. After 25 years, if you still have payments left, they are forgiven. It sounds really nice of them, right? Truth is after 25 years, not only have you repaid your debt, but have probably paid it twice over (unless you are totally destitute for 25 years). It does lower your payments on a month to month basis, but they readjust the payments to your financial situation each year. Plus, you have to qualify for this repayment plan.
• Applies to: Stafford Loans

Income-Based Repayment Plan

• The Dealio: You have to demonstrate financial hardship (like your house burnt down…twice, or maybe you work eight jobs but still have to use the presents your cat brings home as a major source of protein. Yum, chipmunk!). You are considered under financial hardship if the payment you would make in the Standard Plan is more than what you would pay in this plan. Payments are decided by this complicated formula that relates you to the federal poverty level. Yeah, nothing is easy, is it? If you make an appointment with a  personal finance guide, they can figure all this out for you.
• Applies to: Stafford Loans

Other Important Details:

• Perkins Loans repayment plans are established by your school as the lender, you have a nine month grace period unless you have dropped below part-time student status and in that case touch base with your school for details.
• If you don’t choose a repayment plan, the government will automatically put you under the Standard Repayment Plan.
• You can change plans.
• Stafford Loans can be paid online at www.dl.ed.gov. (Direct Loan Servicing – Online)

Prepayment
Prepayment can be a good way to get a handle on the money you owe. It can decrease the balance and deplete interest. Prepaying can save you money by reducing the total amount of interest you need to pay. Even if you just pay the interest, you keep yourself from having to pay interest on the interest. Repayment plans will just adjust accordingly to the amount you have already paid off.

Consolidation
Consolidation combines all your federal loans, so the borrower only has to make one easy payment (one and done). This can apply to Stafford, Perkins, and PLUS loans. The interest rate of these loans will be an average of all the interest rates rounded up the nearest one-eighth of a percent. The interest rate cannot exceed 8.25%.

By consolidating your loans, your monthly payments might be lower, and repayment period can be extended. However, consolidation might take away benefits on individual loans such as cancelation, and if you do take the extended repayment plan, it can increase the overall cost of repaying your loans.