“I love deadlines. I love the whooshing noise they make as they go by.” Author Douglas Adams probably wasn’t talking about student loans, but he might as well have been.
If you have a large amount of student loan debt, meeting the standard 10-year deadline for paying it off can feel impossible.
An extended repayment plan could push back that deadline, offering up to 15 additional years to pay off your federal student loans.
Read on for a deeper look at the extended repayment plan, including…
- How the extended repayment plan works
- Extended repayment plan: Pros
- Extended repayment plan: Cons
- Compare your federal student loan repayment options
- Consider the big picture before changing your plan
The extended repayment plan gives you up to 25 years to pay off your loans, so your monthly payment will generally be lower.
Under this option, you have two options for your student loan payments: fixed or graduated. Under the fixed plan, your monthly student loan bills stay the same throughout repayment. If you choose graduated, your payments will start low and then increase — usually every two years.
Your monthly payments will be lower than what they’d be with the standard or graduated repayment plans, though you’ll pay more than you would under the standard one.
Which student loans are eligible?
The extended repayment plan is best for borrowers with a large amount of debt. You’ll need to have at least $30,000 in federal student loans to be eligible.
You must also have at least one of the following loans:
- Direct subsidized loan
- Direct unsubsidized loan
- Direct PLUS loan
- Direct consolidation loan
- Subsidized federal Stafford loan
- Unsubsidized federal Stafford loan
- Federal Family Education Loan (FFEL) PLUS loan
- FFEL consolidation loan
Let’s say you have $35,000 in direct loans and $5,000 in FFEL loans. You could put your direct loans on the extended repayment plan, but your FFEL loans wouldn’t qualify. The only
workaround would be to consolidate your student loans before applying.
Both direct loan and FFEL borrowers can’t have outstanding balances from before Oct. 7, 1998. As long as you have at least $30,000 in direct or FFEL loans that you obtained after this date, you might be eligible for the extended repayment plan.
The benefit of an extended repayment plan is that it lowers your monthly payments.
For example, if you have $35,000 in student loans with a 4.53% interest rate, you might struggle to keep up with the $363 monthly payment on the standard plan.
By applying for the extended repayment plan with fixed payments, you could lower your bill to $195 a month.
As we’ve noted, you can also pay back your loans under a fixed or graduated amount.
Although lowering your monthly student loan bill might sound tempting, there are also downsides of the extended repayment plan.
You’ll be in debt longer. This plan adds 15 years to the typical 10-year plan, which means you’ll be making student loan payments for a long time.
You’ll pay a lot of student loan interest. Let’s take that example of a $35,000 loan again. On the standard 10-year plan, you’ll pay $8,589 in student loan interest. On the extended repayment plan with fixed payments, you’ll pay $23,541.
Other plans could get you lower monthly payments. Income-based repayment, for example, could lower your student loan payments to 10% of your discretionary income — if you qualify.
This plan doesn’t qualify for Public Service Loan Forgiveness (PSLF). If you’re working toward Public Service Loan Forgiveness, you need to make 10 years of qualifying payments. Payments on the extended repayment plan are not eligible.
Before choosing extended repayment, weigh the pros and cons. Although this plan might help in the short term, it’s less appealing when you consider the long-term costs.
If you’re looking to lower your monthly student loan payments, the extended repayment plan isn’t your only option. Check out these other federal student loan repayment plans and choose what’s best for your wallet.
- Pay as You Earn (PAYE)
- Revised Pay as You Earn (REPAYE)
- Income-based repayment (IBR)
- Income-contingent repayment (ICR)
- Income-sensitive repayment (ISR)
- Graduated repayment plan
Some of these plans could lower your monthly payments even more than the extended plan. Plus, several of them offer loan forgiveness after 20 or 25 years of on-time repayment.
Refinancing your student loans could also help you reduce your monthly payments and/or interest rate. But if you refinance to a private student loan, you’ll no longer have access to federal repayment plans or forgiveness programs. Refinancing is only a good idea if you’re confident you’ll make enough income to keep up with your payments.
Before selecting a repayment plan, explore all your options. As you compare the plans, take a bird’s-eye view of both the short- and long-term results of your decision. Use our student loan repayment calculators to help.
The extended plan might be a lifesaver if you’re hovering near default. But you also must be prepared for up to 25 years of student loan payments.
Of course, even if you extend your repayment terms, you can always pay off your student loans faster. An extra payment here and there can go a long way toward getting out of debt.
If the extended repayment plan seems right for you, contact your student loan servicer.
Anna Baluch contributed to this report.