There are several types of loan repayment plans. Unless the borrower requests otherwise, loans are automatically placed in a standard repayment plan.

Standard Repayment

With the Standard Repayment option, payments are at least $50 a month for up to a maximum of ten (10) years (or when the loan is paid off).  This is the quickest option to repaying the Direct Loan(s).

Extended Repayment

To qualify for the Extended Repayment option, the borrower must have at least $30,000 in Direct Loans.  If qualified, the borrower will have up to twenty-five (25) years to repay the Direct Loan(s) using one of two options:

  • Fixed Repayment - Paying the same amount each month

  • Graduated Repayment - Begin with small payments each month,increasing every two years

Graduated Repayment

With the Graduated Repayment option, the borrower begins with small payments each month, increasing every two years for up to ten (10) years.

Income Contingent Repayment

With Income Contingent Repayment, payments will be calculated each year using your Adjusted Gross Income (and that of your spouse, if married), family size, and total amount of Direct Loan(s). Under this plan, the borrower will pay the lesser of the following:

  1. The amount you would pay if you repaid your loan in twelve (12) years multiplied by an income percentage factor that varies with your annual income, or

  2. Twenty percent (20%) of your monthly discretionary income.

If the borrower's payments are not large enough to cover the interest that has accumulated on their loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed ten percent (10%) of the original amount the borrower owed when they entered repayment. Interest will continue to accumulate but will no longer be capitalized.

The borrower has up to twenty-five (25) years to repay the Direct Loan(s). If the loan(s) has not been fully repaid within twenty-five (25) years, not including deferment or forbearance, the unpaid portion will be discharged.  The borrower may be required to pay taxes on the discharged amount.

Income Based Repayment

Under this plan the required monthly payment will be based on your income during any period when you have a partial financial hardship. Your monthly payment may be adjusted annually and the maximum repayment period under this plan may exceed 10 years. If you meet certain requirements over a specified period of time, you may qualify for cancellation of any outstanding balance of your loans.

Summary of Repayment Plans

To request a change in your current repayment plan, contact the Direct Loan Service Center at 888-877-7658 or your lender.

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