all right so there are like an
unnecessary number of federal student
loan repayment plans out there so in
this video I'm breaking down all eight
ish plans and you know why I say 8-ish
when we get into the video and
I'll be talking about the terms
conditions the pros cons similarities
differences all that kind of stuff in
this video to help make your student
loan repayment process just hopefully a
little bit less confusing
hey wealth builders what's up it's Akeiva
welcome back to another episode of the
bemused where we are making sense of
money for the bewildered and confused
young adult if you're new around here
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when we post new helpful videos just
like this one so like I mentioned
federal student loans can be really
really confusing and it can be a little
bit overwhelming in terms of the
information that's out there to sift
through to determine how to best pay off
your student loans and a big part of
repayment process is actually choosing a
repayment plan so currently there are
eight ish different plans to choose from
when it comes to repaying federal
student loans now not all eight options
are available to all borrowers it
depends on the kind of loan you have and
for the purposes of this video I'm gonna
go through all eight plans but I'm also
gonna be focusing more so on plans that
are relevant to direct unsubsidized and
subsidized student loans which is a type
of loan that most of us have nowadays
especially if you are a relatively new
borrower within the past decade or so
and I'll also be touching on direct
Parent PLUS loans because I know a few
of us including myself have those loans
as well that we deal with and so I want
to make sure that I cover things that
are more specific to those kinds of
loans as well there's a lot of
information in this video if you guys
see me looking down it's because there's
just a lot of information and I want to
make sure that I am NOT misspeaking
or mixing up anything so the eight plans are the
standard repayment plan the graduated
repayment plan the extended repayment
plan the pay-as-you-earn
they revised pay-as-you-earn so many
plans like for what reason
there's income based repayment income
contingent repayment and then income
sensitive repayment are you confused yet
because I'd be too some of these plans
are as they denote in the name somewhat
tied to your income and others are not
so let's start with the first three
plans which do not have to do with your
income the first plan is the standard
repayment plan and this is probably the
most popular plan this is a plan that
most lenders will default you to if you
don't choose any other option so
borrowers who have direct subsidized and
unsubsidized loan any PLUS loan whether
it's a direct plus loan to the student or a
Parent PLUS loan most student loans
qualify for this plan that includes also
consolidation loans like Ffel loans
included so this payment plan is a ten
year standard amortization repayment
plan plain and simple nice and vanilla
and your monthly payment amount is fixed
for that ten-year repayment period one
thing you'll hear pretty often about
this plan is that this is the plan that
results in the fastest payoff or paying
the least amount of interest over the
life of the loan which is technically
true but if you've seen my other videos
on student loans and the best strategy
for repaying them you'll know why that
is not necessarily the truth in a lot of
cases but if you're solely sticking to
the plan and sticking to the payments of
the plan outlines then technically yes
this plan usually results in paying the
least amount of interest over the life
of your repayment and that is what makes
this plan so popular that's why they
default borrowers into this plan unless
you choose something else and this is
why this plan is typically available for
all borrowers regardless of the type of
federal loan that you have now let's
move on to the graduated repayment plan
and the thought process behind this plan
is that your payment's start off really
low and then they graduates the idea is
that coming out of school you're
probably going to be making less than
you are a few years out of school so basically the
more you make the higher your payments
get overtime and the payment period on
this is also 10 years but you will pay
more in interest following this plan
because your payments are so little to
begin with and they're not enough to
really hit the principal balance of your
debt in the beginning so over the life
of the loan even though it is the same
10-year period as a standard repayment
plan you're gonna pay more in interest
over the life of the loan and if you're
using this for a consolidation loan
there's actually more time that you can
get for the payment plan period so
sometime between 10 years and 30 years
depending on your consolidated loan
balance but for most borrowers it's
going to be 10 years there it is the
extended repayment plan and this is
where I said it's 8ish because within
the extended repayment plan you can have
fixed or you can have graduated payments
so it's kind of like two plans in one
this is actually the plan that I'm on
currently I'm on the extended graduated
repayment plan so it stretches out my
time period for repayment and it also
graduates my payments where they start
low and then they get higher every few
years and again all direct subsidized
and unsubsidized loan borrowers and all
PLUS loan borrowers are eligible for
this plan and the three plans that I've
kind of gone through so far however in
order to do the extended plan you must
have a student loan balance of at least
$30,000 which if you guys have been
around here for a while know that I
clearly do have over and above thirty
thousand dollars of federal student
loans
so the repayment time on this plan is 25
years so like I said it just stretches
it out from 10 years to 25 years giving
you more time to pay it off and
obviously because you're taking a longer
time to pay it off you're also going to
be paying more in interest over the life
of the loan if you stick solely to that
plan and
payments that are outlined for you as I
mentioned on this channel before do I
intend on taking the full 25 year
repayment period to pay off my loans
absolutely not but I'm using this plan
for strategic reasons and those strategic
reasons I've outlined in the video that
I mentioned before that I've linked in
the cards with my strategy as to how I'm
going to pay off my student loans in the
fastest way possible all right quick
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so those are the first three plans and
now let's go into the rest of the plans
the other five which are based on your
income is
we shape or form and these are the types
of plans that people who are pursuing
public service loan forgiveness are
going to want to look into so now let's
talk about the next two plans which are
the pay-as-you-earn plan or paye as
it's called and the revised
pay-as-you-earn
or the repaye as it's called first
let's talk about who's eligible for
these two plans so people who have
direct subsidized and unsubsidized loans
which like I said is the majority of us
out there the majority of loans out
there and also direct PLUS loans that
are made to students so this is where I
really want to stress that for Parent
PLUS loans there are really only three
repayment options because none of the
other plans I'm going to talk about our
open to parent borrowers they are only
open to student borrowers who have
Direct PLUS loans under both of these
plans your payment amount is going to be
10% of your discretionary income and for
the purpose of these plans discretionary
income is defined as the difference
between your annual income and a hundred
and fifty percent of the poverty
guidelines for your family size and your
state of residence so that poverty
guideline is going to depend on the
state that you live in and the size of
your family now it's pretty much all the
income driven plans you have to
recertify your income on an annual basis
and understandably so recertify how much
you make and how many people are in your
family every single year because that's
going to determine what your new
payments going to be for that year going
forward but also keep in mind that you
don't have to wait until the year is up
to recertify your income for example in
this current climate where a lot of
people are losing their jobs you can go
ahead and recertify your income at any
time especially for income drop so you
want to want to go ahead and submit that
recertification application to your loan
servicer so that you can get those
payments lower another big point with
these two plans is that if your loans
are not repaid in full by 20 years after
the beginning of your repayment the
remaining balance will be forgiven so if
you don't pay off your loans 20 years
the remaining balance gets forgiven now
it's important to note that that is
going to be considered taxable income to
you so if they forgive twenty thousand
thirty thousand dollars of your loans
just know that you're gonna have to
report that on your tax return and
people
here to foot the tax bill for that loan
forgiveness if you're not under public
service don't forgiveness
let's differentiate this is not public
service don't forget is talking about
this is just standard anybody taking
advantage of this plan loan forgiveness
public service loan forgiveness it's
different at any amount that's forgiven
is not taxable so what is the actual
difference between the pay-as-you-earn
plan and the revised pay-as-you-earn
plan so there are three major
differences
one is that with the revised pay as you
earn plan your loan balance is actually
forgiven after 25 years for any loans
that you took out for graduate school so
it's 20 years for all of your undergrad
loans twenty-five for all of your grad
school loans and then also a really big
difference and this is something that I
actually touched on in a previous video
about how many shakin eyes taxes are
going to change once we get married
later this year is that what the
pay-as-you-earn plan once you get
married and you're filing taxes together
it's going to affect your repayment
amount so with the pants you earn if you
file separately you won't have to count
your spouse's income with yours when you
are determining your student loan
payments but with the revised pay as you
earn you have to count both spouses
income whether you file jointly or
separately so if you want to avoid
having a spouse's income conjoined with
yours and for the purpose of calculating
your loan payments the paye option
would be the way to go versus the repaye a third key difference between the
pay-as-you-earn plan and the revised
pay-as-you-earn plan is that with the
pays you earn plan that monthly payment
is actually capped to a max of whatever
your payment would have been under the
ten-year repayment plan but with the
revised things you earn plan your your
amount is just strictly based off of
your income so that can go as sky high
above what you would have paid under the
standard repayment plan that's possible
so that's a third key difference between
the both of these
now for income-based repayment so the
income-based repayment plan is actually
pretty similar to the payee plan with
the major exception that consolidation
loans qualify for this repayment plan
your monthly payments similarly will be
either 10 or 15% of your discretionary
income depending on when you take out
your loans will depend on whether it's
10 percent or whether it's 15 percent
and any remaining balance that you have
on your student loan account will be
forgiven after either 20 or 25 years
depending on again when you took out the
loan will be either 20 or 25 years and
again you'll have to pay taxes on any
amount that's forgiven after that time
similar to the payee plan your payment
is never going to be higher than it
would be under the standard repayment
plan and if you're married your spouse's
income will only count if you file a
joint return so filing taxes separately
is one way to get around that of course
there are different pros and cons to
filing jointly versus filing separately
and so you want to think through those
things as well before making that kind
of decision now for income contingent
repayment now this plan your monthly
payments will be the lesser of 20% of
your discretionary income or the amount
that you would pay on a repayment plan
with a fixed payment over 12 years
so this payment plan in particular can
get pretty confusing because it's not
just like 20% of this or 10% of that it
can either be 20% of your discretionary
income or the amount that you would pay
on a repayment plan with a fixed payment
of 12 years so there's a lot of math
involved with this one and any
outstanding balance on your loans gets
forgiven after 25 years this plan of
course has a lot of similarities to the
ones before it but one major kind of
back-end a loophole is that remember how
I talked about in the beginning that
Parent PLUS borrowers really have only
three options with this plan they
technically have a little bit of a
workaround if and only if that Parent
PLUS loan gets consolidated into a
direct consolidation loan because that
kind of loan then qualifies for this
repayment plan so that's kind of a
backwards way
to do it if that makes sense for your
situation again if you don't file taxes
jointly with your spouse then you have
nothing to worry about in terms of their
income being lumped together with yours
for the purpose of determining your
monthly payments last but not least is
the income sensitive repayment plan now
I feel like not a lot of borrowers or at
least you know new borrowers who are in
school within the last decade take
advantage of this plan because it's
mostly for ffel borrowers people who have
ffel PLUS loans or ffel consolidation
loans or subsidized unsubsidized
Stafford Loans which is different from
the Direct Loans that most borrowers get
nowadays but it's worth noting because
some of them might still be floating
around out there so the monthly payment
under this plan is based on your annual
income but the loan that needs to be
paid in full within 15 years this one
really doesn't have a rhyme or reason
literally they say on the website like
the formula for determining what your
monthly payment amount is it's gonna
vary from lender to lender so there is
no one way to calculate payments under
this method and like I said not a lot of
people will use this anyway because not
a lot of people have loans that qualify
but that's the eighth and final
repayment method so all the information
that I covered in this video you can
find online at studentaid.gov I will
have a link in the description box below
if you want to read through it and have
even more resources to kind of guide you
through this process and also as I said
so many times before if you want to
actually compare and contrast what your
payments would be with the different
student loan plans using your specific
federal student loans go again to
student aid gov and use their federal
student loan repayment simulator I will
also have a link to that in the
description box below that way it takes
a lot of the guesswork out of everything
and you can easily see a side-by-side
comparison of the different plans that
you are eligible for and your payments
under each of those plans and that will
help guide you as to which repayment
plan is best for your specific situation
and now as a final reminder like I've
said before in this video and in other
videos just because you choose a student
loan repayment plan
doesn't mean that one you have to stick
with it for the life of your repayment
you can change repayment plans at any
time as long as you qualify for them so
it's not like a set it and forget it you
do have the option to choose different
payment plans or switch your payment
plan it's pretty much at anytime you
want and also just because you have a
repayment plan doesn't mean that you
have to make payments according to that
plan depending on your situation
especially if you're not pursuing like
public service loan forgiveness or
something like that and it makes sense
to just kind of pay your debt off as
quickly as possible
you can always pay above and beyond the
minimum that is required under your
chosen student loan repayment plan so
I'm not sure if this video made you more
confused or gave you some clarity but
either way
leave your thoughts and comments down in
the description box below I know this
can be a really heavy really confusing
topic and that is why the Department of
Education has created these tools the
repayment simulator and everything like
that to help streamline the process and
give you guys the information that is
most helpful for you if you enjoy the
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this one thanks for watching and we'll
see you guys in the next video
