Students who have taken out federal loans have a lot of options when it comes to picking a repayment plan. The benefit of having so many choices is that the student is able to find the best plan that fits his or her budget. However, the other side of this double edge sword is that the more choices you have, the harder it becomes to discern which one is really the most ideal. Here are some things you should consider to make the best choice.

Pick the Plan that Pays Back the Least Amount in Interest

Most of the students who take out loans are going to school full-time and are working either a part-time or full-time job on top of it. Naturally, the biggest concern is their budget each month, which causes them to pick a plan that has the lowest monthly payment. Having just that little bit of extra cash in the moment feels good, and seems very rational as you just try to make ends meets. However, in the long run, it can come back to bite you.

What many borrowers overlook is the importance of looking at how much they will be paying back in interest. In some cases, getting the most amount of money forgiven could also mean getting the lowest monthly payment. For those that aren’t eligible for forgiveness, and have an average level of debt, you should look at what you can afford payment wise.

Calculate Your Budget and Pick a Plan You Can Afford

The first thing you should do is calculate your monthly budget, and see what you think you can afford for a monthly payment. If you can afford more than the lowest payment, you should consider taking a higher monthly payment. Basically, the faster you pay back what you owe, the less you will have to pay in interest. This could mean a difference of thousands of dollars.

By using the Department of Education’s student loan repayment calculator, you can see just exactly how much you would be paying over a 10-year period. The calculator assumes a 5% increase in your income per year, and doesn’t make any adjustments for marital status or dependent status. If the borrower took out a $25,000 loan, under the standard plan, this person would have a $265 monthly payment, paying back 31,820. Under a graduated plan, they would start out paying $150 a month, increasing to $450 to pay back a total of $33,578. But with certain income driven plans, the monthly payment can be even lower depending on your estimated yearly earnings, and the total you pay back could be as low as $11,000 while the rest of the balance is forgiven in some cases.

When it comes down to it, you should consider your own situation to determine what is best for you. If you are going to have a high amount of debt but don’t expect a significant increase in your income, then forgiveness may be the way to go. Just make sure not to get lax on revisiting your plan, for your financial situation will most likely change from year to year, and this could mean you need to take another look at your plan. All in all, if you stick with finding the plan where you pay back the least amount over time, you should have no problem making a good decision.