For many borrowers, their student loan repayment plan dictates a significant portion of their monthly budget. Given that life circumstances and financial situations change, you might find yourself wondering if it's possible to change your student loan repayment plan.

The simple answer is yes; it is possible to change your student loan repayment plan. However, the process and eligibility requirements can be quite complex, with varying regulations depending on the type of loan you have.

Types of Student Loans

Federal student loans are borrowed directly from the U.S. Department of Education. They have fixed interest rates, flexible repayment options, and certain provisions for loan forgiveness. Federal loans are further divided into Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

Private student loans are non-federal loans, made by a lender such as a bank, credit union, state agency, or school. Private student loans often have variable interest rates and fewer repayment options than federal loans.

The ability and process to change your repayment plan largely depends on which of these categories your loan falls under as well as the student loan repayment start date.

Changing Repayment Plans for Federal Student

Borrowers are automatically placed in a standard plan, where you'll make fixed ten years payments. However, you can switch to a different plan at any time, and there are no fees for doing so.

You can switch between these plans depending on your long-term financial goals. The Standard Plan may help you pay off loans quickly but with higher monthly payments. Graduated and Extended Plans lower payment per month, but you end up paying more in the long run due to accumulated interest.

To change your federal loan repayment plan, contact your loan servicer. They will provide guidance on the available plans and their eligibility requirements.

Changing Repayment Plans for Private Student Loans

Changing repayment plans for private student loans is more challenging because private lenders are not required to offer the same variety of repayment options as federal loans. However, some private lenders may offer flexibility depending on your circumstances.

Repayment Options: Private lenders may offer options such as interest-only payments, partial interest payments, or deferred payments. However, these options may extend loan life and increase the total amount paid.

Refinancing: If you're unhappy with your private loan repayment plan, one potential option is refinancing. This involves taking out another loan with a different lender (or the same lender, in some cases) to get rid of the previous one. Keep in mind that refinancing requires a good credit score and a stable income. Also, if you refinance a federal one, you will lose federal benefits such as income-driven repayment and loan forgiveness.

To explore your options for changing your private loan repayment plan, reach out to your lender. They can provide information on any possible repayment options or potential for refinancing.

Important Considerations

Cost: Lowering your monthly payment could mean you pay more over the life of the loan due to extended repayment period and interest accumulation.

Loan Forgiveness: Some repayment plans qualify for loan forgiveness programs, while others do not. Make sure to consider this if you plan to apply for Public Service Loan Forgiveness (PSLF) or other similar programs.

Income-Driven Recertification: If you opt for an income-driven repayment plan, remember you need to re-certify your income and family size annually.

Refinancing Risks: Refinancing can lower monthly payments, but it can also mean losing specific federal loan benefits. Plus, not everyone will qualify for refinancing.

FAQs

Can I change my student loan repayment plan at any time?

Yes, if you have federal loans, you can typically change your repayment plan at any time. Just contact your loan servicer to discuss the available options. For private student loans, your ability to change your repayment plan will depend on the specific policies of your lender.

How often can I change my repayment plan?

For federal loans, there's no limit on how often you can change your repayment plan. However, keep in mind that each change can affect the length of your loan term and the total amount of interest you'll pay over time. Moreover, keep an eye on when does student loan repayment start for this matter. For private loans, the frequency of changes will depend on the specific terms set by your lender.

Does changing my repayment plan affect my credit score?

Simply changing your repayment plan on your existing loans typically does not impact your credit score. However, if you choose to refinance your loans, your credit score may be impacted as the lender will conduct a hard credit inquiry.