Federal college loans offer several repayment options. The one most people often hear of is deferment, which allows you to postpone paying back your loan, visit https://www.sofi.com/student-loans-payoff-calculator/ to get all the details. As long as you take out one, two, or three of these types of loans each year, your total monthly loan payment will be lower than it would be if you made only one payment each month. You’ll also avoid the interest accruing from your loans, which can add another $250 or more a month to your monthly loan payments.
It’s usually a good idea to apply for three types of deferment (with a lower interest rate than your original loan balance). This will lower your monthly payment by $5, $10, or $20 a month depending on the length of time you defer.
With the Federal Perkins Loan, the lowest annual rate is 3.4%, and the largest balance is $50,000. Perkins loans are available to anyone who qualifies under the federal government’s federal financial aid guidelines. The interest rate is variable and depends on your federal loan program, but it ranges from 2.9% to 9.8% in the first year, and 3.6% to 11.3% after that. You’ll also need to make 3.5-5.5% in monthly payments over the life of the loan.
Federal Direct Student Loans. The Federal Direct Stafford and Federal Direct Grad PLUS Loans are federal student loan programs. Federal Direct Stafford loans are the most widely used federal student loan program, at over 70% of all student loan debt. Federal Direct Grad PLUS loans are the least widely used federal student loan program, at around 2%. Both are offered by the federal government. Federal Direct Stafford loans are fully adjustable based on your income and family size. They can be paid back in 10, 25, or 40 years, depending on the type of loan you take out. They also offer income-driven repayment plans. You’ll pay your interest rate each month based on the amount of your income at the time you took out the loan.
With federal Direct Stafford loans, you may receive loans after graduation, depending on your college choice. These Stafford loans are also very flexible, with payment options for different types of loans. If you’re taking out a subsidized Stafford loan, you may choose to have it paid back by the first day of the first calendar year after graduation. If you’re taking out a unsubsidized Stafford loan, you may continue making payments on it throughout your education and repayment.
If you’re taking out a Perkins Loan, you’ll pay your interest rate each month based on your income each month throughout repayment. Perkins Loans are flexible and you have many repayment options for them.
If you are under 25, you’ll pay interest based on the balance on your federal Direct Unsubsidized Loan or Direct Subsidized Loan each month. If you are under 21 and still in school, your Parent PLUS Loan is interest free through school. Federal Direct PLUS Loans also have no repayment terms. If you take out a Direct Consolidation Loan, you’ll pay your interest based on your income each month throughout repayment. If you are under 21 and still in school, you’ll pay interest based on the balance on your federal Direct Unsubsidized Loan or Direct Subsidized Loan each month. You can also consolidate loans using the Direct Consolidation Loan Program.