What is the Graduated Repayment Plan?

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

If you need a little extra help and are exploring other ways to pay off your student loans, consider the gradual repayment plan.

What is the progressive repayment plan?

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

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

Under this plan, your payments will never be less than the amount of accrued interest on your payments. Your payouts will also never be more than three times any other payout.

Which loans are eligible for progressive repayment?

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

  • Subsidized direct loans.
  • Direct unsubsidized loans.
  • Direct Loans PLUS.
  • Direct Consolidation Loans.
  • Federal Subsidized Stafford Loans.
  • Unsubsidized Federal Stafford Loans.
  • FFEL PLUS loans.
  • FFEL consolidation loans.

How the progressive repayment plan is calculated

If you choose the progressive repayment plan and you have an unconsolidated loan, the US Department of Education will determine your payments; In general, your payments will start at around 50% of what you would pay on the Standard Refund Plan and end at around 150% of what you would pay on the Standard Refund Plan.

If you have a consolidated loan, however, your payment schedule will be 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 will repay over 12 years. This repayment period increases as your total loan balance increases.

The Ministry of Education’s loan simulator can help you determine if the progressive repayment plan is a good option for your student loans. Since everyone’s repayment structure is a little different, your needs might warrant a different repayment plan.

Is the progressive repayment plan a good idea?

The progressive repayment plan is not an income-driven repayment plan. If your income does not increase over time, you will still be liable for increased payments towards the end of your plan.

The progressive repayment plan is a good idea if:

  • You expect a steady increase in your income. For entry-level workers, the progressive payment plan is a good option as you slowly start earning more during 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 progressive repayment plan is ideal for borrowers who still want to stay on a 10-year schedule.

You should skip the progressive repayment plan if:

  • You want low monthly payments. If you earn very little and don’t expect your income to grow much, consider enrolling in an income-driven repayment plan. Your payments could be as low as $0, depending on your income and family size.
  • You are on the right track for PSLF. Only income-driven repayment plans are eligible for the public service loan exemption. Since the Tiered Repayment Plan is not PSLF eligible, your payments will not be counted if you eventually switch to a PSLF track.

Next steps

If you are considering opting for the progressive repayment plan, make sure it suits 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 quickly as possible, get the lowest monthly payment, or pay off your loans on a certain date.

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