I know it varies from person to person, but I’d love to hear your thoughts on the best or most popular repayment plan.
I graduated in 2020, and this month I’ll be making my first student loan payment. I have over $25,000 in federal student loans with Nelnet (all Direct Loans).
I’ve heard that income-driven repayment plans are quite popular, but I’m not sure which one to choose. There are so many repayment options out there, and new programs like SAVE are adding to the complexity. It’s all a bit overwhelming.
The easiest way to deal with it is to look at what you have coming in and what your spending is, cut or limit any expenses for a short time (preferably less than 5 years), and then fully address the payments.
The income-driven repayment plan and SAVE have the same issue in that their goal is to reduce monthly payments. I understand that this is fantastic news in the short run and on the surface, but the government and banks stand to gain greatly from it. They urge you to accrue debt and pay interest over time. People frequently make payments that are so small that they simply cover interest and never even make a dent in the loan’s principle. Balances are even rising occasionally.
The easiest way to approach it is to assess your income and costs, reduce or eliminate any spending for a brief period of time (ideally less than five years), and focus entirely on the payment.
It can be difficult to decide which repayment option is best, but in my opinion, the standard repayment plan, which primarily serves students, is the best option. It has fixed monthly payments spread out over a ten-year period, making it ideal for borrowers who can afford higher monthly payments and who wish to pay off their loans faster.
Hello Steph,
The best way to repay depends on your money situation and goals. To pay off loans or credit cards faster, paying more than the minimum each month reduces interest costs. For mortgages, choose between fixed-rate or adjustable-rate based on stability and what you like.