When paying off certain types of loans, there’s an inherent trade-off between the ease of payments and the total interest burden. In essence, you’re deciding whether you would rather have a longer term with lower monthly payments or a shorter term with a lower overall cost.

If your ability to afford payments every month is a concern, you might choose a longer loan term. When it comes to federal student loans, this strategy refers to the Extended Repayment Plan. Here’s what you should know before choosing this option.

What is Extended Repayment and How Does It Work?

The Extended repayment plan prolongs payments for up to 25 years. Under this repayment option, borrowers can choose between either fixed or graduated payments. Fixed payments remain the same for the duration of the loan, while graduated payments increase over time.

Borrowers will pay more interest with this plan than the Standard 10-year plan due to the longer time frame. Unlike with other repayment options, loan forgiveness after a certain amount of time is not part of the Extended repayment plan. The total amount borrowed will be repaid in full, including any interest accrued.

Which Loans Are Eligible?

The following loans are eligible for the Extended repayment plan:

  • Direct Subsidized and Unsubsidized Loans
  • Direct PLUS Loans
  • Direct Consolidation Loans
  • Subsidized and Unsubsidized Federal Stafford Loans
  • FFEL PLUS Loans
  • FFEL Consolidation Loans

Borrowers with Direct Loans or FFEL loans must owe at least $30,000 to sign up for this plan. If you have $15,000 in Direct Loans and $15,000 in FFEL loans, then neither of your student loans qualify. If you have $30,000 in Direct Loans and $15,000 in FFEL loans, you can only use the Extended plan on your Direct Loans. You’ll have to choose a different repayment method for the FFEL loans.

The loan amount also refers to how much you currently have left to repay. If you had $30,000 in FFEL loans but now owe $25,000, you won’t qualify. Parent PLUS loans may also be eligible for the Extended repayment method, but they also have to meet or surpass the $30,000 minimum.

Graduates pursuing Public Service Loan Forgiveness (PSLF) are not eligible for the Extended Repayment option. Prospective PSLF applicants are better off with Income-Based Repayment (IBR) or the Revised Pay As You Earn (REPAYE) plan, as these strategies can reduce monthly payments without rendering borrowers ineligible.

Consider the ChangEd app to possibly pay down student debt sooner. It rounds up your purchases and puts that money towards your loans. You could even ask family members or friends to do the same. Learn how it works

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