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The Graduated Student Loan Repayment Plan in 2016

The Graduated Repayment Plan is an excellent option if you are having trouble making monthly student loan payments now, but think you’ll be making significantly more money in the future.

This plan was crafted for college graduates, since they emerge from school with a high debt load, and low income, but are expected to start earning more and more money each year as they find their career path and receive regular pay raises.

According to Graduated Repayment Plan’s repayment schedule, your monthly student loan payments start low, but rise steadily every two years.

Dangers of the Graduated Repayment Plan

Please note that, unlike the Income-Based Repayment Plans, the Graduated Repayment Plans payment increases will go into affect whether or not your salary has actually increased.

This plan is not based, at all, on your salary, or even salary expectations, but simply on a calculation of how much you owe, how much you’ll start off paying, and how much your payments will rise every two years.

If you don’t anticipate that you’ll be receiving regular pay raises each year, you’ll want to sign up for one of the income-based repayment plans instead.

How Are Monthly Payments Calculated?

Under the Graduated Repayment Plan, your monthly Federal student loan payments will be:

  • Starting out low, but increasing in amount every two years
  • Structured to be paid off over the course of 10 years, unless you have a Direct Consolidation Loan or FFEL Consolidation Loan
  • Never less than the amount of interest that accrues between your payments (meaning that your debt cannot rise over time like it can with other payment plans)
  • Never more than 3 times higher than any other payment on the schedule (meaning your payments in years 9-10 won’t be more than 3 times higher than your payments in year 1 and 2)

Advantages of the Graduated Repayment Plan

The Graduated Repayment Plan is a great plan for certain circumstances, because:

  • Payments start low, so they’re extremely affordable for recent graduates, or those making low incomes at entry-level jobs
  • Payments rise relatively slowly (increasing only every 2 years) so you’ll have to start earning more money before your payments rise
  • Payments are always higher than the interest accumulating on your debt, so your debt cannot increase over time like it does with some of the other payment plans that allow you to pay off less debt than you’re accumulating on a monthly basis
  • The way that payments scale larger under this plan are relatively in line with the way that incomes scale when you get into a new career path – payments will increase as you’ll receive raises, keeping them affordable for you, even though they’re increasing

Disadvantages of the Graduated Repayment Plan

There are several serious disadvantages to the Graduated Repayment Plan, including:

  • Payments rise no matter what else occurs, meaning that even if you find yourself unemployed, stuck in a salary rut, or taking pay cuts, you’ll still be responsible for higher monthly payments
  • Payments get quite high toward the end of the process, being up to 3 times more expensive than you originally faced, which can be a difficult transition for anyone who isn’t extremely financially responsible
  • The payment schedule only allows you 10 years to pay off your entire debt, which could be impossible for anyone with a high debt load (and especially for students with a high debt load, and low expected salary)

Should I Sign Up For This Plan?

If you don’t make very much money now, but you think you’ll be making a boat load in the near future (4-5 years from now), then this would be an excellent plan for you.

The advantage that this plan offers over the Standard Repayment Plan is that your early payments are significantly lower, allowing you some financial breathing room while you’re getting yourself established in a new career, but the disadvantage it has over that plan is that if you don’t start making more money quickly (within 2 years), you may end up having difficulties making your monthly payments.

The advantage that this plan offers over the Income-Based Repayment Plans is that you’re able to guarantee your debt won’t increase, since monthly payments are at least as expensive as the amount of interest you’re racking up, protecting you from getting stuck into a never-ending debt cycle where you’re making payments, but not decreasing your overall debt.

Use the Repayment Estimator

To find out if this plan will work for you, I recommend using the Federal Government’s Repayment Estimator tool, which you’ll find here.

This tool will allow you to determine just how much your payments will be each month, during each year of the course of your loan, so you can find out how much you’ll need to set aside each month.

Combine the results of that tool with your expected annual income (use the Government’s Bureau of Labor Statistics website to get an estimate for income levels for your expected job), to determine whether or not this plan will work for you.

If you are risk-averse, afraid that you won’t receive regular raises, or certain that your income is unlikely to rise much throughout the course of the next 10 years, then do not sign up for this plan, but pick either the Standard Repayment Plan (if you can afford the payments) or one of the Income-Based Repayment Plans (which are far more flexible, as payments are based on actual income).

Only Federal student loans are eligible for the Graduated Repayment Plans, so don’t expect to sign up for this plan if you’re got Private Student Loan Debt.

If you need help paying off your Private loans, please visit our page about Private Student Loan Relief to find out what kinds of financial assistance is available to you.

The loans listed below are all part of either the William D. Ford Federal Direct Loan Program, or the Federal Family Education Loan (FFEL) Program, and are all eligible for the Graduated Repayment Plan:

  • Direct Unsubsidized Loans
  • Direct Subsidized Loans
  • Direct PLUS Loans
  • Direct Consolidation Loans
  • Unsubsidized Federal Stafford Loans
  • Subsidized Federal Stafford Loans
  • FFEL PLUS Loans
  • FFEL Consolidation Loans

Any loans not listed above are not eligible for the Graduated Repayment Plan.

Monthly Payments for Consolidation Loans

Under the rules of the Graduated Repayment Plan, Direct Consolidation Loans and FFEL Consolidation Loans are not limited to the 10 year repayment schedule like regular loans.

If you have a Consolidation loan and sign up for the Graduated Repayment Plan, your monthly payments will be:

  • Still starting out low, and still increasing every two years
  • Still never less than the amount of interest that accumulates between each payment
  • Still never more than 3 times the amount of any other payments
  • Structured to be paid off between 10 and 30 years, depending on how much debt you have (referred to as your level of Total Education Loan Indebtedness)

Total Education Loan Indebtedness

To find out how long you’ll get to pay off your Direct Consolidation or FFEL Consolidation loan under the Graduated Repayment Plan, you’ll have to first calculate the amount of your Total Education Loan Indebtedness (TELI).

To calculate your TELI, add up:

  • The total amount of money you owe on consolidated Federal student loans (Direct Consolidation Loans and FFEL Consolidation Loans)
  • The total amount of money you owe on Federal student loans that are not eligible for consolidation
  • The total amount of money you owe on Private student loans that are not eligible for consolidation

When you’re calculating this amount, the maximum amount of non-consolidation eligible loan debt you can include in the calculation is the amount you owe on your consolidation loan(s).

What that means is – if you owe $20,000 on your Federal consolidation loans, but you have $25,000 in private student loan debt, and $10,000 in Federal student loan debt that isn’t eligible for consolidation, you can still only count up to $20,000 of the $25,000 + $10,000 when determining your TELI.

Once you’ve calculated your TELI, refer to the table below to find out how long the Graduated Repayment Plan will give you to repay your consolidation loan:

Total Education Indebtedness

Your Repayment Period Will Be:

If Debt Is At Least:

But, Less Than:



10 years

$ 7,500


12 years



15 years



20 years



25 years


30 years

Remember, the table above only applies to Consolidation Loans (Direct and FFEL Consolidation Loans).

If you have any other type of loan, you will only get 10 years to pay it off under the Graduated Repayment Plan.

Questions? Comments?

For questions regarding this plan, or any other issues related to student loans, please feel free to post away in the comments section below.

I’ll do my best answer your question within 24 hours, and if I don’t know the answer, I’ll direct you to someone who does.

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Tim's experience battling crushing student loan debt led him to create the website Forget Student Loan Debt, where he offers advice on dealing with excessive student loans and advocates a cautious approach to funding education costs via borrowed money.