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If you owe $30,000 or more in federal student loans and need extra time to pay them off, the Extended Repayment plan could help. This plan extends your loan terms to 25 years, which is 15 years more than the standard 10-year plan. It also allows you to make fixed or graduated payments during this time.
For most borrowers, though, the Extended Repayment Plan is an inferior option to an income-driven plan. Read on to find out why.
- How the Extended Repayment Plan works
- Fixed vs. graduated payments
- Which loans are eligible for Extended Repayment?
- Pros of the extended plan
- Cons of Extended Repayment
- Explore other student loan repayment options first
How the Extended Repayment Plan works
As its name suggests, the Extended Repayment Plan extends your student loan repayment terms — to 25 years, to be exact.
Lengthening your term will lower your monthly payments but increase your interest costs. Let’s say, for instance, you owe $50,000 at a 5.05% rate.
On the 10-year plan, your monthly payments would be $532 and you’d pay $13,786 in interest over the years. On a 25-year plan, your monthly payment would be $294 and you’d pay $38,126 in interest.
As you can see, extending your terms makes your monthly payments way more affordable, but it also increases your interest costs substantially.
You have to be comfortable with this trade-off before applying for Extended Repayment. That said, you can make extra payments to pre-pay your loan without penalty.
Fixed vs. graduated payments
When you apply for Extended Repayment, you have the option to select fixed or graduated monthly student loan payments.
- Fixed payments: Stay the same over the life of your loan.
- Graduated payments: Start low and increase every couple of years.
Fixed payments can be useful if you want to know exactly what you’ll be paying each month and budget accordingly. Graduated payments, on the other hand, might be better if you have a low income now but expect it to rise in the future.
Which loans are eligible for Extended Repayment?
The following loans are eligible for Extended Repayment as long as you owe $30,000 or more:
- 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
Note that Direct loans and FFEL loans are only eligible if you didn’t have an outstanding balance on one as of Oct. 7, 1998. What’s more, you must owe $30,000 on a Direct loan or FFEL loan individually; a $25,000 Direct loan and a $10,000 FFEL loan won’t qualify together, unless you’re able to combine them first via a Direct consolidation loan.
Pros of the Extended plan
The Extended Repayment plan can be useful if you’re looking for relief on your student loan payments. Because you’ll be extending your terms to 25 years, you won’t have to pay nearly as much from month to month.
This extension might be especially useful if you’ve got low-interest loans (e.g., less than 4% or 5%) and would rather invest your extra money than pay off your student loans quickly.
If you’re carrying loans with a higher interest rate, though, it’s probably not your best option.
Cons of Extended Repayment
The Extended Repayment plan has a few potential downsides, so it probably shouldn’t be your first choice of student loan plans.
Might not be as helpful as income-driven repayment
For one, it’s probably not as beneficial as an income-driven repayment plan, such as Pay As You Earn or Income-Based Repayment.
Income-driven plans also extend your terms to 20 or 25 years, but they calculate your student loan payment based on your income.
Depending on your situation, your payment could be as low as $0 per month on an income-driven plan. And if you still have a balance at the end of your term, it will be forgiven.
For these reasons, it’s probably better to explore income-driven repayment than to put your loans on the Extended Repayment Plan.
Doesn’t let you make progress toward Public Service Loan Forgiveness
Another downside of Extended Repayment is that your loan payments on this plan don’t count toward Public Service Loan Forgiveness (PSLF). PSLF is a program that forgives your federal student loans after 10 years of working in public service.
But if you put your loans on extended repayment, you won’t be making “qualifying payments” toward PSLF. So if you’re counting on this program, avoid the Extended Repayment Plan and opt for an income-driven repayment plan instead.
Will cost you a lot more interest overall
Whenever you add years to your student loan repayment plan, you’ll increase your interest costs as well. This increase might be worth it if you need relief on your monthly payments (or if you’re expecting to get a higher return on investments than you’ll be paying on student loan interest).
But in many cases, it’s better to avoid extra interest costs.
Explore other student loan repayment options first
Because of these potential downsides of the Extended Repayment plan, it’s worth exploring other student loan repayment plans before you apply. For many borrowers, an income-driven repayment plan will be a superior option.
You can also consider refinancing your student loans for new terms and better rates. Most refinancing providers offer loan terms between five and 20 years, so you can opt for a long term to make your loan payments more affordable.
Since refinancing is done through a private lender, refinancing federal student loans makes them ineligible for federal plans like Extended Repayment. For more on the risks and rewards of refinancing federal student loans, head to this guide.
Want better rates? Here are the best banks to refinance student loans:
| Variable rates start at... | Fixed rates start at... | Repayment terms | Welcome bonus | Check your rates | |
|---|---|---|---|---|---|
 | 4.54% | 4.49% | 5 - 20 years | $200 | Visit LendKey |
 | 4.99% | 4.47% | 5 - 20 years | $200 | Visit Earnest |
 | 4.22% | 3.97% | 5, 7, 10, 15, and 20 years | $120 | Visit Laurel Road |
 | 4.53% | 4.40% | 5 - 20 years | $100 or $200, depending on the amount you refinance | Visit Credible |
 | 5.09% | 4.74% | 5, 7, 10, 15, and 20 years | $100 | Visit SoFi |
 | 4.53% | 4.83% | 5, 7, 10, 15, and 20 years | $100 | Visit ELFI |