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What is the graduated repayment plan for student loans?

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If you take out federal student loans, you’re automatically enrolled in the standard repayment plan, which gives you consistent payments over 10 years. While it’s a common option, it’s not the only way to repay student loans. The graduated repayment plan is one alternative plan that starts out your payments low and increases them over time.

If you need a little extra help and you’re exploring alternative ways to repay your student loans, consider the graduated repayment plan.

What is the graduated repayment plan?

The graduated repayment plan is a type of federal student loan repayment plan that slowly increases your monthly payment over time.

Your payments start off low and typically increase every two years. You’ll still pay off your loans in 10 years (or up to 30 years if you consolidated your loans), but the plan anticipates that your income will increase over those 10 years.

Under this plan, your payments will never be less than the amount of interest that accrues on your payments. Your payments will also never be more than three times greater than any other payment.

What loans qualify for graduated repayment?

Most federal loans are eligible for the graduated repayment plan, including:

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

How the graduated repayment plan is calculated

If you choose the graduated repayment plan and you have a nonconsolidated loan, the U.S. Department of Education will determine your payments; in general, your payments will start out around 50 percent of what you’d pay on the standard repayment plan and will finish around 150 percent of what you’d pay on the standard repayment plan.

If you have a consolidated loan, however, your payment timeline will look slightly different. If you have less than $7,500 in consolidated loans, your repayment period will still be 10 years. If you owe between $7,500 and $10,000, you’ll repay over 12 years. That repayment period increases the larger your total loan balance.

The Department of Education’s Loan Simulator can help you determine if the graduated repayment plan is a good option for your student loans. Since everyone’s repayment structure is a bit different, your needs might warrant a different repayment plan.

Is the graduated repayment plan a good idea?

The graduated repayment plan isn’t an income-driven repayment plan. If your income doesn’t increase over time, you’ll still be on the hook for the increased payments near the end of your plan.

The graduated repayment plan is a good idea if:

  • You’re expecting a steady increased income. For entry-level workers, the graduated payment plan is a good option as you slowly start to earn more over the course of your career.
  • You want to be out of debt quickly. With some alternative repayment plans, your student loan debt could be with you for up to 25 years. The graduated repayment plan is ideal for borrowers who still want to stay on a 10-year timeline.

You should skip the graduated repayment plan if:

  • You want low monthly payments. If you’re earning very little and aren’t anticipating your income to grow much, consider enrolling in an income-driven repayment plan. Your payments could be as low as $0, depending on your earnings and family size.
  • You’re on track for PSLF. Only income-driven repayment plans are eligible for Public Service Loan Forgiveness. Since the graduated repayment plan isn’t eligible for PSLF, your payments won’t get counted if you eventually move to a PSLF track.

Next steps

If you’re thinking about choosing the graduated repayment plan, make sure that it’s in line with your needs. The Federal Student Aid Loan Simulator can help you choose the best repayment plan for you based on your goals: whether you want to pay off your loans as soon as possible, get the lowest monthly payment or pay off your loans by a certain date.

Learn more:

Written by
Dori Zinn
Contributing writer
Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy.
Edited by
Student loans editor