What Is a Graduated Repayment Plan for Student Loans?

How Graduated Student Loan Repayment Works

A college student calculates the cost of various student-loan repayment plans.
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Tom Werner / Getty Images

When you graduate from college, you might start with a salary that’s lower than what you can expect later in your career. As a result, the prospect of paying back student loans can be overwhelming. 

The graduated repayment plan is one among several options to lower your initial payments when your income is low. Over time, your monthly payment increases—the idea being that as your income and finances improve, you’re more able to handle the payments.

What Is the Graduated Repayment Plan?

Under the graduated repayment plan, your payments start low and then increase every two years, and the repayment term is determined by how much you owe in federal student loans.

This plan is designed so that payments track your ability to make them and is best suited if you expect to see your income increase over time.

How the Graduated Repayment Plan Works

As with other student loan repayment plans, you need to contact your loan servicer to set up a graduated repayment plan. Before you do so, use the Loan Simulator offered by the Department of Education to compare options and get an idea of what works best for you.

If you use the graduated repayment plan, your repayment term will be based on how much you owe in federal student loans overall. 

Total Federal Student Loans Graduated Repayment Plan Term
Less than $7,500 10 years
$7,500 - $9,999 12 years
$10,000 - $19,999 15 years
$20,000 - $39,999 20 years
$40,000 - $59,999 25 years
$60,000 or more 30 years

Your payments start low, covering at least the interest that’s accruing, and usually increase every two years. Payments step up in a way that allows you to pay off your total debt within the stated term. Note that the cap on payments throughout the term is three times greater than your lowest payment on the plan. 

You’ll pay more over time with graduated repayment than you would under a 10-year standard repayment plan.

Who Can Qualify for the Graduated Repayment Plan?

Any federal student loan qualifies for the graduated repayment plan, including loans from both the direct and FFEL programs. You can also include consolidation loans and PLUS loans in this student loan repayment plan. There are no income requirements or other restrictions.

It’s worth noting, however, that, generally speaking, this payment plan doesn’t qualify for Public Service Loan Forgiveness (PSLF).

Pros and Cons of the Graduated Repayment Plan

As you consider your situation, it’s important to consider your individual needs and compare the advantages and drawbacks associated with the graduated repayment plan.

Pros
  • More manageable payments, especially at the beginning of your repayment

  • All federal direct and FFEL loans are eligible

  • Plan eligibility is not based on income

  • Repayment term is based on total student loan indebtedness

Cons
  • You will pay more over time than you would with the standard 10-year student loan repayment plan

  • Graduate repayment doesn’t usually qualify for PSLF


Other Student Loan Repayment Options

The graduated repayment plan is only one of several student loan repayment options offered for federal loans. Depending on your situation, one of the income-driven plans, including those that are compatible with PSLF, might work better for you.

Additionally, if you have private student loans, or if you want a lower rate, you might be able to privately refinance your student loans. However, if you refinance, you may lose significant advantages associated with federal student loans, including the opportunity to participate in graduated repayment and income-driven repayment plans, the potential to qualify for public service or other loan forgiveness, and government relief options like 0% interest and the temporary suspension of payments.