Refinancing 2 March 2023

What Is The Graduated Repayment Plan?

Adding a Graduated Repayment Plan to your student loan can be beneficial as your career progresses and income increases. Check out its benefits and how it helps you pay off your student loan.

graduate repayment plan

Student loans are a necessity when it comes to laying out quality education for your expected career path. There are various repayment terms and plans offered to borrowers depending on the individual lender. The Graduated Repayment plan is one such option that allows you to repay your student loans after completing your studies. 

What is the Graduated Repayment Plan?

The Graduated Repayment Plan is a student loan repayment plan in which borrowers pay off their loans in smaller increments. This payment plan is available for federal student loans, helping borrowers to manage their debt more effectively. With the Graduated Repayment Plan, payments start out low and increase at set intervals as your income increases over time. Students should determine what they need in a repayment plan and how their current financial situation affects their ability to contribute towards minimizing the student loan within the best time possible. Getting acquainted with the following pros and cons of the graduated repayment plan will help guide you in deciding if it’s the best option for your situation.  

Pros & Cons of Graduated Repayment Plan

Borrowers opt for the graduated repayment plan for many reasons. The plan has the following potential benefits and drawbacks.


  • Repayment period
    The repayment period for the Graduated Repayment Plan is usually extended to up to 30 years, allowing you to pay off your loan over a longer period of time. This plan also makes it easier for borrowers who are typically living on a tight budget because the initial payments are lower than what would be required under the Standard Repayment Plan.
  • Most borrowers are eligible
    The graduated repayment is available to all federal direct loans. The plan’s eligibility is not limited to the income of the borrower.
  • Manageable for borrowers beginning their careers:
    The amount to be paid initially is little and thus manageable for graduates beginning their careers. The salary at this point is an entry-level amount that may be too little to pay a huge monthly loan repayment.


  • You might end up paying more
    Because the repayment period is longer and the payment amount increases over time, you will end up paying more interest on your loan in the long run. That’s why it’s generally recommended that borrowers use this plan only if they have no other options to manage their debt.
  • Can be unattainable with time
    Borrowers who are best suited for this plan are those who anticipate having a salary increase as the years go by, and that their experience in their respective career paths grows. If this is not the case and you experience stagnation, this plan can be unattainable especially when payments start to increase significantly.
  • Becomes ineligible for federal loan benefits
    Loans taken out under the Graduated Repayment Plan may not be eligible for forgiveness. Unlike other income-driven plans that can lead to loan forgiveness, the graduate plan does not qualify for Public Service Loan Forgiveness (PSLF).

Eligibility Requirements

It’s important to be aware of which student loans (whether Federal Stafford- or private loans) are eligible for the graduated repayment plan, so that you can make the best possible decision for your situation. 

Federal Student Loans

The government acknowledges that students who recently graduated have a difficult time securing jobs. This scenario delays graduates from putting their finances in order so that they’re able to start paying off the debt. The Graduate Repayment Plan is thus one of the best options for paying federal loans.

The federal student loans that are eligible for the Graduated Repayment Plan are:

  • Direct unsubsidized loans
  • Direct PLUS loans
  • Direct consolidation loans

 The Graduated Repayment Plan process for federal loans begins with smaller initial payments that increase every two years for 10 years. Consolidated- and unconsolidated loans are treated differently in that consolidated loans are designed to be cleared in 10 years. The term for unconsolidated loans is based on the total amount of federal student loan owed by the student and can span anywhere from 10–30 years.

Private Student Loans

Private loans do not offer the Graduated Repayment Plan specifically, but offer other similar repayment options such as the Interest-Only Payment Plan. The Interest-Only Payment Plan requires borrowers to make payments on the interest of the loan for a few years and thereafter make full payments for the rest of the loan balance. Alternatively, refinancing by private lenders is another plan that works the same as the graduated repayment plan as it helps you score a lower interest rate on your student loan.

How to Apply

Applying for a Graduated Repayment Plan is a simple process. To apply for the plan, the following steps will apply.

#1 Contact your loan servicer
You will need to contact your loan servicer and inquire about the repayment plan. Your lender can provide you with more information on how to apply and what is required.

#2 Submit your application
Once you have gathered all the necessary documentation that proves your income and financial situation, 

#3 Application approval
Once your application is approved, you will be able to start making reduced payments based on the graduated repayment plan. If you need further assistance with the application process, your loan servicer can help guide you through each step of the way.

Repayment Plan Alternatives

In the event that the Graduated Repayment Plan is not your preference, consider any one of the following alternatives that best suit your financial situation.  


Repayment PlanEligible
student loans
PaymentRepayment terms
Standard Repayment PlanDirect loanFixed paymentMin: 10 years
Max: 30 years (if loan is consolidated)
Extended repayment planAll federal loansFixed or graduated


25 years
Pay As You Earn repayment plan (PAYE)Direct loans, Grad PLUS loans, Direct consolidation loan10% of discretionary income20 years
Revised Pay As You Earn repayment plan (REPAYE)Direct loans, Grad PLUS loans, Direct consolidation loan10% of discretionary income20 years (undergraduate study)
25 years (graduate/
professional study)
Income-based repayment plan (IBR)Direct loans, Grad PLUS loans, Direct consolidation loan10–15% of discretionary income20–25 years
Income-driven repayment plan (IDR)Direct loans, Perkins Loans10–15% of discretionary income20–25 years
Income-sensitive repayment planDirect loans, Grad PLUS loans, Direct consolidation loanBased on annual income15 years

Standard Repayment Plan

The Standard Repayment Plan is the basic plan for federal loans and it enables borrowers to pay a fixed amount throughout the lifetime of the loan. Borrowers pay a set amount of money every month over a 10-year period.

Extended Repayment Plan

The Extended Repayment plan is an alternative option for borrowers with large amounts of student loan debt. It allows borrowers to extend the repayment term up to 25 years, making monthly payments more manageable while increasing overall interest costs. 

Pay As You Earn Repayment Plan (PAYE)

The Pay As You Earn repayment plan, or PAYE, is a type of income-driven repayment plan that typically offers borrowers the lowest payment amount and longest repayment term. PAYE caps payments at 10% of discretionary income while offering loan forgiveness after 20 years of qualifying payments.

Revised Pay As You Earn Repayment Plan (PAYE)

The Revised Pay As You Earn Repayment Plan, or REPAYE, is an income-driven repayment plan that offers borrowers the longest repayment term and lowest payment amount of all current federal student loan plans. It caps payments at 10% of discretionary income while offering loan forgiveness after 20 years of qualifying payments for undergraduate loans and 25 years for graduate loans.

Income-based Repayment Plan

The Income-Based Repayment plan, or IBR, is an income-driven repayment plan that offers borrowers with high student loan debt a more affordable payment option. It caps payments at 15% of discretionary income and provides loan forgiveness after 20 to 25 years of qualifying payments.

Income-Driven Repayment Plan

The Income-driven Repayment Plan helps a student pay off their loan by basing their monthly payment on their salary. The monthly payments are calculated as a percentage according to each borrower’s monthly income.

Income-Sensitive Repayment Plan

The Income-Sensitive Repayment plan is an alternative payment option for borrowers with Federal Family Education Loan Program (FFELP) loans who cannot make their full payments. It allows borrowers to adjust the repayment term and monthly payment based on income, making it easier to stay current on their loan payments.

Tips for Choosing the Right Repayment Plan

It is important to take a few things into consideration before settling on the Graduated Repayment Plan or any other plan. The factors to consider include:

Monthly payments

The amount you will be able to set aside per month will be determined by your cash flow. After deducting your expenses from your total income, then you can tell how much you will set aside to direct towards paying off the student loan.

Long-term goals

You may want to pay off your student loan as fast as you can to move forward to the next big financial commitment such as a mortgage. Your long-term goals may mean getting out of debt as quickly as possible to ensure that you get the freedom to enjoy your entire income without having huge debts to pay.

Employment situation

If you plan to get to work immediately after graduation and climb up the career ladder in the next few years, then a graduate plan can be a good option. If your employment situation means low-income jobs then you can opt for plans that require you to make the least amount of payments.

The overall cost

Some plans might lead to you paying a higher interest rate over time even if the monthly payment is low. Other plans may mean that you pay larger monthly payments at present time and consequently save on interest, which means you may take the least time possible to pay off the debt.

Loan forgiveness

Not all repayment plans are eligible for loan forgiveness. If loan forgiveness is ultimately the path you wish to follow, consider loans that remain eligible for loan forgiveness. Depending on what you are putting into consideration, whether it is your income level or your overall cost of paying off your loan, always consult your loan servicer. A loan servicer will let you know about all the repayment plans and advise you accordingly on the best one for you.


Are graduate student loans forgiven?

Graduate student loans are forgiven after 20 years for undergraduate study and 25 years after graduate/professional study. Any outstanding amount on your loan balance is automatically forgiven.

Which is the best income-driven plan?

The Pay As You Earn repayment plan (PAYE) is the better income-driven plan because it lowers your payments to up to 10% and offers a shorter term of up to 20 years rather than the 25-year term offered by the other income-driven plans.

How long after graduation do I have to start paying back the loan?

Federal student loans give students a grace period of six months. This means that you’ll start making payments for your student loan six months after graduation.

Final Thoughts

The Graduated Repayment Plan is the best alternative for a person struggling with loan payments or earning more than the required income to qualify for income-driven repayment. It helps to minimize the total interest charged on your student loan while decreasing the total amount of time it would have taken to repay your student loan. Although the Graduated Repayment Plan has its advantages and its setbacks, borrowers should take those factors into consideration before deciding on a plan that works best for their situation.