Absolutely! You have the flexibility to change your repayment plan as often as you like, even monthly if needed. While frequent changes aren’t generally recommended, you have the freedom to adjust your plan whenever your circumstances or financial goals shift, ensuring you’re in a plan the best fits your current needs.
For instance, some borrowers just starting out after college may prefer an income-driven plan for the first 1-3 years, then switch to a fixed-term plan with a set monthly payment. This approach can work well, but it’s essential to understand that the projections you see now might look different in three years.
One key consideration when changing plans is how accrued interest is handled, especially if you were in a plan with lower payments based on income. For example, if you had a $100,000 loan but were only paying $100 a month, interest may have accrued on the unpaid balance. In certain income-driven plans, there are government subsidies to help cover that interest, but not all plans offer this benefit.
When switching plans, there’s also a possibility that accrued interest may be added to your principal balance (this is known as capitalization). Although there are no balloon payments or tax implications from simply changing plans, capitalization can increase your principal, impacting the overall interest you’ll pay overtime. Make sure to review your options carefully to understand how switching might affect your total repayment. With SDS, you can easily explore alternative options at any time.
