So, I’ve been posting on Reddit recently, and keep getting told I’m making a mistake by trying to get the debt actually paid off, AND I’m in the wrong repayment plan (REPAYE and PAYE weren’t around when I was picking plans, so I went with IBR and stuck with it).  So, as a bit of personal education, and to help out anyone else trying to decide what to do, I’m putting together a series, looking at all the federal repayment plan options.  Each week (or every other week depending on how much research I can get done each weekend), I’ll post another guide to a single repayment plan, and provide examples of what it would cost monthly and over time based on my own debt numbers.

Standard Plan

This week, I figured I’d start with the easiest plan.  The standard plan is what you will get by default once you graduate with loans, unless you pick something different.

Term

Standard plans last for 10 years (120 payments).  If you have a consolidated loan, you may qualify for standard repayment terms of up to 30 years.

Minimum Payments

Your payments will be at least $50, and will be high enough to pay off your total loan amount within the time frame provided.  This number is calculated with the expectation that you will not make extra or larger payments over the course of the loan.

Additional Payments

Additional payments (payments over the minimum, or payments in addition to your minimum payment) are applied first to any outstanding interest, then to principle.  Unfortunately, when in federal loan territory, there doesn’t seem to be a way to apply extra payments directly to principle before you’ve paid down the interest, so you just have to suck it up and pay down any interest and then go into hitting the principle.

Interest

Interest compounds daily and is capitalized monthly.  In this way, you can calculate your interest just like you would with a credit card or a car payment.

Forgiveness

There is currently no forgiveness plan for anyone on a standard plan.

Real World Example

All three of the spouse’s loans are on standard plans (two private, and the one Nelnet), so his loans wouldn’t change at all.  According to my Nelnet, my loan repayment would be just over $4,072 per month, for a total of $4,772 per month.  Since I’ve already been in repayment for around three years, this means we would make 83 more payments, and pay $60,000 in interest.

So, this is the shortest plan possible, and the lowest interest rate.  Because the monthly payments are set, however, if you run into hardships you’d have to go into an income based repayment plan, or a deferment or forbearance.