Extended and Graduated Repayment Plans 2020 are Terrible

Extended and Graduated Repayment Plans 2021 Update

Extended and Graduated Repayment Plans: You really want to know why I suggest it as a very terrible idea. Read on, so as to help you understand why I say so. I will also be comparing Extended and Graduated repayment plans and I will be giving a full definition for each.

Graduated Repayment Plan

On this article you get to read on;

In almost every circumstance where you have student loans with over 5% interest, the Extended and Graduated repayment plans are a bad idea.

However, if you look at the stats from the federal government, hundreds of thousands of people use them.

Graduated Repayment Plan

The Graduated Repayment Plan features lower initial payments that increase every two years. Similar to the Standard Repayment Plan, the repayment period is typically no more than 10 years.

Under this plan, the range of your monthly payments will never be less than the amount of interest that accrues monthly or more than three times greater than any other payment.

It is good for someone looking to pay off their loans as quickly as possible while having a low starting income that is expected to grow throughout the 10 years repayment period.


  • 10 year repayment period allows you to free yourself of student debt more quickly than other options.
  • Payments rise over time, allowing new graduates to handle student loan payments on entry-level wages upon entering the workforce.


  • If your income doesn’t grow as expected, the higher payments toward the end of the loan repayment period may strain your finances.
  • You’ll pay slightly more over the life of the loan compared to the Standard Repayment Plan.

Extended Repayment Plan

Extended Repayment Plan

The Extended Repayment Plan allows you to extend the repayment period for up to 25 years. Monthly payments may be fixed or graduated and are generally lower than those found in the Standard Repayment Plan and Graduated Repayment Plan.

It is good for someone looking for a low monthly payment. However, you’ll end up paying a lot more interest over the life of the loan. Someone with a high income but with large financial obligations might also seek this payment plan.


  • Lower monthly payments than the Standard Repayment Plan and Graduated Repayment Plan, making the loans less burdensome on a monthly basis.
  • Monthly payments may be fixed or graduated, which gives you the flexibility to decide.


  • Not everyone is eligible. You must have more than $30,000 in outstanding Direct Loans.
  • Due to the longer repayment period, you will pay more interest over the life of the loan, when compared to a shorter repayment plan.

Read Also:

Extended and Graduated Repayment Plans as a Terrible Idea

If your interest rate is over 5%, why would you stretch out the loan and incur a ton of interest? Using the Extended or Graduated repayment plan, in this case, is not strategic, it’s usually just uninformed.

If you struggle to make adequate payments on your loans, then you should be using an income-driven option. Plan on refinancing?

You should be REPAYE because of the interest subsidies. If your income will remain low long-term, then you should be using PAYE and paying as little as possible.

What’s troublesome is that payments made on an Extended or Graduated repayment plan do not count towards student loan forgiveness.

I can’t tell you how many borrowers used this plan only to find out that they made years of unnecessary payments.

Ask yourself if you want to be out of debt one day? If so, DO NOT use the Extended or Graduated repayment plan. If you can’t get a quality refinancing rate, then use an income-driven plan.



1. Is extended graduated repayment right for you?

No, it isn’t, is because this repayment plan will likely result in you paying more interest than under any other option.

2. Choosing extended standard plan for lower monthly payments for a certain time and then refinance later?

Yes, you could use extended and then refinance later but the better option would be to consolidate for the 30 year standard plan, which is a lower monthly payment than extended.

3. When you both have a federal and private student loan debt, which plan should I choose?

For the federal debt, he could apply with a 0 income and get a 0 required payment on REPAYE with a 50% interest subsidy. This should save you a couple hundred bucks a year.

4. What about the Standard Repayment Plan for Consolidation Loans?

Maybe you didn’t know this, but the Level or Standard Plan for Direct Stafford and Direct Plus loans is typically 10 years. You can choose a Graduated or Fixed repayment option.

However, if you consolidate your loans, suddenly the repayment period can go as long as 30 years if you owe more than $60,000.

5. How to switch to extended graduated student loan repayment?

Contact your servicer to change to the extended or extended graduated repayment plan. You can change repayment plans at any time.

When you do, any interest you owe will be capitalized, or added to your balance. This will further increase the amount you repay.

It finally comes down to you refinancing or getting an income-driven repayment plan. There are normally 2 ways to pay back student loans.

One is the super aggressive refinance to a 5 to 7 year and make prepayments to be debt-free as soon as you can.

The second is to minimize payments under an income-driven option as much as possible and save for the tax bomb for long-term forgiveness over 20-25 years. So choose wisely.

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