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Standard Repayment Plan
Federal Direct and FFELP loans offer a host of repayment options, including a standard repayment plan. This is the plan most federal loan borrowers are placed on unless they request a different option. Under this plan, you pay a fixed monthly amount for 10 years -- or less if a small amount was borrowed. When it comes to the standard repayment plan, which is true?
- Payments under this option vary from month-to-month.
- This option allows for very low loan payments.
- This option requires higher loan payments than other federal plans.
“C” is correct. By making higher payments, borrowers also pay less interest over the life of these loans. Federal loans don’t charge a penalty for early payment. Regularly paying a little more than is required will save you money. Always include a note asking that these extra funds be applied to the loan’s principal.