What Is A Plan 1 Or Plan 2 Student Loan? (2024)

FAQs

What is Plan 1 or Plan 2 student loan? ›

Plan 2 refers to a student loan taken out from September 2012 onwards, in England or Wales. Older loans (from England or Wales) and loans taken out in Northern Ireland, are called plan 1 loans.

There are penalties for overpaying my loan/mortgage

With some loans, there may be early redemption penalties for clearing debts early – this can mean they are prohibitively expensive to clear. In that case if you have spare cash and only these debts, you should follow the logic of someone who is debt-free.

Best repayment option: standard repayment. On the standard student loan repayment plan, you make equal monthly payments for 10 years. If you can afford the standard plan, you'll pay less in interest and pay off your loans faster than you would on other federal repayment plans.

Most borrowers with federal student loans are eligible for the SAVE plan. There is no income limit to qualify. If you have certain types of federal student loans, such as Perkins or FFELP loans, you may have to consolidate them before you can get on any IDR plan, including SAVE.

If you work full time for a government or nonprofit organization, you may qualify for forgiveness of the entire remaining balance of your Direct Loans after you've made 120 qualifying payments—i.e., 10 years of payments. To benefit from PSLF, you need to repay your federal student loans under an IDR plan.

Borrowers who have reached 20 or 25 years (240 or 300 months) worth of eligible payments for IDR forgiveness will see their loans forgiven as they reach these milestones. ED will continue to discharge loans as borrowers reach the required number of months for forgiveness.

If you are financially able to do so, it may make sense for you to pay off your student loans early to save money on interest. Lenders typically call this “prepayment in full.” Generally, there are no penalties involved in paying off your student loans early. However, make sure you know how much you currently owe.

Paying off student loans early can benefit you financially, but it should typically come second to building your emergency fund and retirement savings. People with private student loans or without other debt tend to benefit more from paying off student loans early.

Key Points. Interest can make student loans more expensive, while inflation can make that debt harder to manage alongside other bills. Paying off some of your debt during your studies could ease the burden later on and save you money on interest.

If you have federal student loans, they may be either subsidized or unsubsidized loans. It's typically best to focus on your unsubsidized loans first since they accrue interest during school and your grace period.

Which student loan type has the most benefits? ›

Federal loans generally provide lower interest rates with access to forbearance, deferment, income-driven repayment (IDR) plans and student loan forgiveness programs. Most federal loans don't require a credit check, making them an ideal choice for all borrowers.

Best overall: College Ave

College Ave gets our nod for the best private student loan because this lender checks all the boxes. They provide loan amounts that vary from as low as $1,000 to the total cost of your entire school-certified expenses like tuition, fees and housing.

If you borrowed $12,000 or less, you'll receive loan forgiveness after making the equivalent of 10 years of payments. (This amount of time is called your repayment term.)

Under the SAVE plan, sub-baccalaureate borrowers, similar to low-income borrowers, are likely to benefit from considerable loan forgiveness. This is driven by a greater share of income being protected – resulting in lower monthly payments, increased liquidity, and lower total payments overall.

There is no income limit to be eligible for the Saving on a Valuable Education (SAVE) Plan. To determine if you would qualify for a lower monthly payment amount under the SAVE Plan, check out Loan Simulator or contact your loan servicer.

A subsidized loan is your best option. With these loans, the federal government pays the interest charges for you while you're in college.

Student loans don't go away after seven years. There is no program for loan forgiveness or cancellation after seven years. But if you recently checked your credit report and wondered, “why did my student loans disappear?” The answer is that you have defaulted student loans.

For you, on what are called plan five loans, you will only repay if you earn over 25,000 pounds a year. If you earn less, you do not pay anything back and you will repay 9% of everything you earn above that amount, so earn more, you pay more, earn less, you pay less for.

On the Standard Plan, your monthly payments are a fixed amount of at least $50 each month. The exact payment amount is calculated so that you pay off the entire loan amount (including the interest that accrues) before the end of your repayment period.