Graduated Repayment Plan for Federal Student Loans

If you’ve borrowed federal student loans and find yourself unable to make payments under the Standard Repayment plan, you can opt into a variety of other repayment plans designed to make it easier for you to repay your student loans. The Graduated Repayment plan is one common option you might pursue.

Below we answer all of the most common questions about Graduated Repayment so that you can make a more informed decision about whether or not it is right for you.

What is the Graduated Repayment Plan?

Under Graduated Repayment, you will make lower monthly payments at the start of repayment, but these payments will grow in size the longer you are in repayment. Payments increase every two years, and are at their highest in the final years of repayment. The idea is that you will have lower monthly payments when you first graduate, when your income is likely to be at its lowest, and higher monthly payments once your income has increased.

Like Standard Repayment, Graduated Repayment is designed to be completed after 10 years of monthly payments (or 120 payments in total). Consolidation Loans may have longer terms, and can be repaid within 10 to 30 years.

What types of loans are eligible for the Graduated Repayment Plan?

All federal student loans are eligible for Graduated Repayment. This includes:

How long will repayment last?

Graduated Repayment lasts for 120 payments, or 10 years, not including any periods of deferment or forbearance. If you have consolidated multiple loans, then Graduated Repayment may last from 10 to 30 years depending on how much debt you have consolidated.

How much will I pay?

If you opt into Graduated Repayment, the monthly payments that you make at the beginning of repayment will be lower than what you would have paid under Standard Repayment. However, as you get closer to the end of repayment, your monthly payments will ultimately end up being higher than they would have been under Standard Repayment, which would have remained consistent over time.

Exactly how large your payments will be will depend on how much you have borrowed and your interest rates. That being said, no payment can ever be more than triple the amount of any previous payment

Because of the lower monthly payments at the start of repayment, you will ultimately end up paying more in interest under Graduated Repayment than you would have under Standard Repayment. You would pay less in interest, however, compared to Extended Repayment or other income-based options, because you are still repaying the loans within 10 years. For this reason, Graduated Repayment can be an excellent middle ground.

That being said, you can always make additional payments in order to pay off your student loans faster, even under Graduated Repayment. This can help you save money in the form of interest, and free you from your debt faster.

Can my loan be forgiven?

The Public Student Loan Forgiveness (PSLF) Program is designed to forgive student loans after a borrower has made 120 consecutive payments. Because Graduated Repayment is designed to be complete after 120 payments, you will unfortunately not be eligible for forgiveness under this repayment plan.

If you would like to pursue student loan forgiveness, then an income-driven repayment plan such as the ones below may be a better option:

  • Income-Based Repayment (IBR)
  • Income-Contingent Repayment (ICR)
  • Income Sensitive Repayment

Pros and Cons of Graduated Repayment

Pros of Graduated Repayment:

  • Lower monthly payments at the start of repayment can be helpful for recent graduates with low income
  • Gradual increases in payments will (ideally) match up with increases in income
  • You will complete repayment within 10 years, freeing you from your debt sooner than under extended repayment plans and limiting how much additional interest you pay

Cons of Graduated Repayment:

  • Because of lower payments at the start of repayment, you will pay more in interest over the life of the loan compared to Standard Repayment
  • If your income stagnates or doesn’t grow in line with increased payments, it can be difficult to meet later payments

How to Apply for Graduated Repayment

If you would like to opt into Graduated Repayment, all you need to do is contact your student loan servicer. They will help you understand whether or not your loans are eligible for this repayment plan, and can answer any questions you may have.

Alternatives to Graduated Repayment Plan

Not sure whether or not Graduated Repayment is the right repayment plan for you? You have a number of other options to choose from. Depending on the specific types of loans that you have borrowed and your income, you may be eligible for: