July 24, 2009, Newsletter Issue #129: Stafford Loan Repayment Options

Tip of the Week

Stafford Loans made through the William D. Ford Federal Direct Program are often referred to as Direct Loans. Within this program, eligible students and parents borrow college funds directly from the U.S. Department of Education at participating colleges.

In this case there are no banks or outside guarantors involved. The Federal Government is providing the loan. They will also handle all maintenance of the loan, including repayment options, consolidation and deferments or forbearance.

Direct Stafford Loans can be both subsidized and unsubsidized, as well as Direct PLUS and Direct Consolidation Loans.

When entering the repayment period for these school loans there are four available options to choose from. The Standard Repayment Plan will require a minimum monthly payment of at least $50 over a span of up to 10 years.

The Income Contingent Repayment Plan determines monthly payments based on your loan amount, family size and annual income. The Extended Repayment Plan lets the borrower extend the length of the loan repayment period to anywhere between 12 and 30 years.

The last option is the Graduated Repayment Plan, under which payments will be smaller in the first few years and increase every two years over a 12 to 30 years span.

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