The Graduated Repayment Plan offers lower initial payments that escalate every few years over a 12 to 30 year period. It is best for heavily indebted graduates in professions that offer lower starting salaries.
A repayment option that allows reduced payments for the first two, three or four years. It can lower initial monthly payments by as much as 40 percent. Select Step® is a graduated repayment plan offered by Sallie Mae.
This option is available for federal loans, and even some alternative loan providers offer graduated repayment. Under graduated repayment, payments are low (usually just enough to cover the loan's accruing interest) when the borrower first enters repayment. Periodically, the payments increase to pay off the loan in the standard 10 year repayment term. The idea of graduated repayment is to have low payments while a borrower is first entering the working world. Then, as income increases, the student loan payments also increase.
Under a graduated repayment schedule, the monthly payments are smaller at the start of the repayment period, and gradually become larger. The graduated repayment schedule cannot exceed 10 years (or 25 years for borrower eligible for extended repayment schedule), excluding in-school, grace, deferment or forbearance.
Method of repayment in which the borrower's payments gradually increase since it is assumed borrower earnings will also increase. Generally payments increase after the first 24 months of repayment. Back to glossary main page