The US government has provided a great opportunity in the form of student loans to individuals who are looking to pursue higher education at their desired academic institutions. However, it is important that you select the right loan repayment plan that suits your monthly income and your personal preferences. The choice of loan repayment plan is made when you initiate repaying your student loan. There are several types of repayment plans for student loans, including:

  • Standard loan repayment plan
  • Pay-as-you-earn plan
  • Income-sensitive repayment plan
  • Income-driven repayment plan
  • Graduated loan repayment plan
  • Extended loan repayment plan

Extended Loan Repayment Plan

As the name implies, under extended loan repayment plan the borrower pays back the principal amount and the interest charged over an extended time period, usually extending up to 25 years. The repayment term depends on the type of loan, the principal amount borrowed, and borrower’s personal preferences.

Extended loan repayment plans are very similar to standard plans, except that the repayment term is stretched over a longer period. Under this plan, the amount of monthly repayment is decreased, which increases a borrower’s ability to make timely monthly payments. However, the amount of interest paid by the borrower is higher when compared to standard loan repayment plan.

What Types of Student Loans are Eligible for Extended Repayment Plan?

The following types of student loans can be paid back using the extended repayment plan.

  • Direct PLUS loans
  • FFEL PLUS loans
  • Direct and FFEL consolidation loans
  • All direct subsidized and unsubsidized loans
  • Federal Stafford loans, both subsidized and unsubsidized

In addition to the type of loan, there are some other requirements as well which must be fulfilled in order to repay the loan using the extended plan. The total outstanding balance should be at least $30,000 or more. Also, borrowers who want to pay their FFEL or Direct loans using this plan should make sure that have no outstanding balance as of October 7th 1998, or on the day they acquired the loan after October 7th, 1998.

How does the Repayment Work?

Under extended repayment plan, borrowers have the liberty to pay off their loans over 25 years instead of 10 years. They can choose any of the following two modes of repayment.
1. Fixed Repayment Plan
As the name indicates, the amount of monthly payments remains fixed over the repayment term with this type of repayment plan. However, interest capitalization during the repayment term may result in small changes in monthly repayments.
2. Graduated Repayment Plan
With this plan, monthly repayments increase gradually over the repayment term. You may start with a low monthly payment and may increase the amount as your paying capacity increases. Generally speaking, the repayment amount is revised every two years.

What are the Benefits of Extended Loan Repayment Plan?

With an extended repayment plan, students can repay their loans in smaller monthly payments as compared to standard repayment plans. Also one can opt for the graduated mode of extended repayment plan if they have a lower monthly income but they anticipate that it will increase after some time.  However, it is important to remember that with an extended repayment term, the overall interest paid on the principal amount is increased.