Private student loan repayment options and terms for those options vary from lender to lender. The most common of these private loan repayment plans are the standard,graduated,extended, income contingent and income based repayment options. The last few listed take into consideration the income being recieved while repaying the loan. This can be a great help especially to those who might not be able to afford to pay the monthly payments under the standard plan.
Standard Repayment - The default loan repayment option offered to the borrower,therefore, unless the borrower chooses another option for repayment, this is loan repayment loan option that will be used. Monthly standard repayment plans usually will have the highest loan interest rate of all repayment options. Typically you get about 5-15 years from private loan lenders to fully repay the loan. The time that you are given usually depends on the amount of money that was borrowed. Generally the larger the amount borrowed, the greater the time given to repay. This plan does not take into consideration the income being earned by the student after obtaining a job upon graduation. So some borrowers may experience difficulty in repaying the loan as required monthly payments may be higher than they are able to afford based on the income that is being received. In this case, the student should consider looking at other repayment plan option that have a monthly payment thay can afford.
Graduated RepaymentThis option allows smaller, monthly payments at the start of the repayment term and a gradual increase in the monthly payment for the rest of the loan repayment period. The increase in monthly repayments will usually take place every two years. This plan is based on the underlying assumption that there will be inceases in the income recieved by the borrower during the time given for loan repayment(the loan repayment term) . the loan repayment term,however, usually remains the same as that given in the standard repayment term. The amount paid during monthly payment will differ beween the two.
Extended Repayment
If the loan amount is very high, a choice can be made by the lender to allow the borrower to pay the loan amount over a longer than normal period of time, usually up to 25 years. The loan repayment scheduled monthly payments may be less than that on the default standard repayment programme. Also to be considered, when payments are made under this plan the interest payed on the loan to he lender is greater than if the borrrower had opted for a plan with a short repayment period.
Income Contingent Repayment Programme
Another payment plan which looks at the income of the borrower when determining your required monthly loan payments. They obtain the poverty level by looking at factors such as your income and family size, your payment will not be grater than 20% of you earnings above the determined poverty level. This loan programme requires you to sign a form to give your permisiion to the government to view your recent tax returns.One of the benefits of this repayment method is the fact that payments made after 25 years will be cancelled by the government, but it will be considered taxable income cancelled by government. It can be used for to repay many college loans ,the parent PLUS loan, however, is not able to be repayed with this programme, unless you have a cosolidated loan.
Income Based Repayment Programme
To be approved for this loan repayment program you cannot be in default. if your are in default and still want to be appoved for this program, you will need to work to get out of default. Like the ICR program, after 25 years of consitent monthly repayment the borrowers remaining debt will be cancelled. The cancellation is considered taxable income. Due to the longer than average repayment period however, more interest is paid out thrughout the life of the loan than if the loan had a shorter repayment period. To be approved for this payment plan,like ICR, a determination of the poverty level based on your income and family size is determined. If you earn less than 150% of the poverty level then you will not be required to make any payments. If you earn greater then 150% then a calculation will be made for your loan payment. The amount of money you earn will be subtracted from the amount of money that was calculated when determining the borrowers poverty level.
