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I've got about $36,000 in Stafford Loans at 3.75% fixed interest rate. i;ve been paying on the graduated repayment plan for a few years now, and have recently had a windfall that my wife and I would like to use to pay down the loan by about $6000. If I pay down the loan, then change my payment plan, will the new payment amount be based on my original loan amount and the start date of repayment, or will it be based on the paid down balance and the number of years that are left on the loan?

Or to put it differently, If I change payment plans after paying down, will I get a lower monthly payment, or keep a monthly payment at a rate as if I had not paid down the loan?

More Background: I've been paying more than required most months for the past few years, but my graduated repayment plan is about to move to the next tier. My gut is to keep the windfall so that when the repayment bumps up a notch, I've got extra funds to cover it, Wife strongly prefers to get the debt smaller. Wife is currently raising young kids, but should be contributing to the household income more in about 30 months. No credit card debt, mortgage at 4.875 fixed, 20 year term. I may pull in a bonus, but can't expect a raise at work until the economy improves more.


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