Federal Stafford Loan Repayment Options – Standard Repayment

As we get closer to graduation, the topic of student loan repayment gets more and more relevant. Today, we are starting a series of blogs about Federal Stafford Loan repayment options. Please follow along, as new blogs will be posted every week.

First up, let’s look at the Standard Repayment option. This is a 10 year repayment plan that is currently available to all Federal Stafford Loan borrowers. The minimum payment on this plan is $50, and it goes up from there depending on the total amount of the loan. By choosing this plan, the borrower will repay the entire amount of the loan in 10 years by making the same fixed-amount payments every month.

If the borrower decides to keep the loan for the entire repayment period, this is the most cost-efficient pay-back option. The reason is because with Standard Repayment, the borrower will pay back his/her sooner than with most other options, therefore saving money on interest which can result from longer repayment plans. At the same time, it is important to mention that there is no penalty for early repayment. This means that if the borrower chooses to make larger monthly payments or to put down a lump sum of money toward the repayment plan, he/she will also be saving on interest and will not incur any penalties for doing so.

On the flip side, the disadvantage of this repayment option is the fact that borrowers who start off their careers in low paying jobs do not have the flexibility of lower payments and may find it difficult to make payments every month.

For more information, please visit http://studentaid.ed.gov/repay-loans/understand/plans or contact your financial aid counselor.