The Graduated Plan entails initially making low monthly payments that gradually increase every two years over a 10-year repayment term (between 10 and 30 years for certain Consolidation Loans).
- All federal loans qualify
Increases every two years over the life of the loan by a fixed percentage
|Required Payment Minimum|
Payment must cover interest
|Required Payment Cap|
Highest payment cannot exceed three times the lowest payment
|Maximum Repayment Period|
Up to 10 Years for all loans except Consolidation Loans over $7,500
For Consolidation Loans, the repayment period is (for debt balance between):
10 Years (<$7.5K)
12 Years ($7.5–$10K)
15 Years ($10–$20K)
20 Years ($20K–40K)
25 Years ($40K–60K)
30 Years ($60K+)
Monthly payments always exceed interest under the Graduated Plan. However, if the borrower is unable to make payments, any unaccrued interest will be capitalized when:
Borrowers can switch to any other plan for which they are eligible
- Borrowers with highly-variable monthly incomes who need a low monthly minimum.
- Borrowers with high debt and expenses relative to income.
- Borrowers with high debt relative to income who do not qualify for an income-driven repayment plan.
- Total amount paid in interest under this plan will typically be greater than total interest paid under Standard Plan.
- Since payments are initially low (and may just cover interest), interest accumulates more rapidly.
- Because borrowers can always pay more than the minimum, borrowers with highly-variable monthly incomes can use this plan to secure a low monthly payment and make larger payments during months they have a higher income.