What Is the Graduated Repayment Plan for Student Loans?

Graduated repayment lowers your monthly payments initially but can lead to big bills later.
Ryan LaneDec 4, 2020
What Is the Graduated Repayment Plan for Student Loans?

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The graduated repayment plan for student loans lowers monthly payments — potentially to as little as the interest accruing on your loans — and then increases the amount you pay every two years.

Graduated repayment may make sense if you want smaller payments but earn too much money for an . Otherwise, income-driven repayment is a better option because of its payment caps and loan forgiveness after 20 or 25 years of payments.

Any repayment plan that lowers your payments, even temporarily, will likely result in you paying more interest overall. If you can afford , it’s best to stick with that plan instead of graduated repayment.

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Graduated repayment amounts can start small, then rise substantially. For example, let’s say you have a $35,000 student loan with an interest rate of 4%. Under the graduated repayment plan:

Plug your own loan information into the Education Department’s  to get an idea of how your payments under graduated repayment would compare to other student loan repayment plans.

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Contact your to change to the graduated repayment plan for student loans. You can change repayment plans at any time. When you do, any interest you owe will be capitalized, or added to your balance. This will further increase the amount you repay.

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If you’re switching to graduated repayment because you make too much money for an income-driven repayment plan, consider refinancing your student loans instead. Refinancing could lower your payments without increasing the amount you repay overall, if you qualify for a lower interest rate.

is risky. You’ll lose access to income-driven repayment, loan forgiveness and other federal loan-specific benefits. Make sure you’re comfortable giving up those options before you refinance.

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