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Repayment plans

Repayment plans are the structured repaying of funds that have been loaned to an individual, business or government over either a standard or extended period of time, typically alongside a payment of interest. Repayment plans are prominent within the financial industry of a national economy where liquid funds are in high demand to assist in investment opportunities, governmental expenditure or personal finance. The term first saw prominence with its use my the International Monetary Fund to describe it's form of financial loan repayment from individual nations. Typically, the term "repayment plan" refers to the system of Federal Student Aid in the United States of America, which assists in covering tertiary education expenses of domestic students.

History

Repayment plans have historically existed within the economies of the developed world here the financial markets are more established and have expanded over a longer period of time. During the expansion of the global economies during the 20th Century, the case for greater regulation and development of finances had grown substantially, with global debt increasing as nations invested domestically and internationally to fuel their own economic growth. Borrowed funds from both foreign governments and international financial institutions aided the growth of availability for liquid funds for world governments, while domestically, consumers saw lower interest rates, simultaneously making the attraction of loans more enticing. Repayment plans are thus often referred as loan repayment or debt financing strategies.

The International Monetary Fund is a global credit organisation. Dark green - Members of the IMF. Light Green - Members who have not committed to membership

Historically, the International Monetary Fund acted as the principal international credit body and has existed since 1945. It primarily operates as a credit organisation with a long-term goal of facilitating greater international financial stability between 189 countries globally
One of the functions of the International Monetary Fund is distributing loans to countries in financial crises while simultaneously aiming to improve general economic conditions globally. By issuing loans, the International Monetary Fund and the receiving nation agree upon a pre-specified repayment strategy called a 'system of conditionality'. The 'system of conditionality' operates similarly to the financial jargon of 'repayment plan' and refers to a plan cooperatively managed by both the International Monetary Fund and the receiving nation in overcoming the financial hardship which led the nation in seeking IMF assistance. For example, on May 3rd 2010, Eurozone countries alongside the IMF announced their intention to enforce a three year €110bn loan, with a 5.5% interest rate, with a 'system of conditionality' implemented i.e on a condition that austerity measures would be enacted by the Greek government in accordance with the life of the loan.

Recent years

Main article: Greek government-debt crisis

The Greek government debt-crisis

The collapse of the Greek national economy following the Global Financial Crisis of 2007-08 resulted in political instability, social exclusion and economic 'brain-drain' in Greece. Government policy and reform spanned 12 rounds of tax increases, spending cuts and a multitude of bailout loans by the International Monetary Fund in the years 2010, 2012 and 2015. It became the first developed country to fail to repay a IMF loan on loan repayment on time, following a delay of 20 days in late June 2015. National governmental debt approached €323bn by July 2015, below the OECD average, and since 2009, the debt had grown €18bn from €300bn to €318bn (a 6% increase overall). Months prior to the implementation of the Second Economic Adjustment Programme, leaders of Eurozone agreed to extend loan repayment periods from 7 years to a minimum of 15 years and to reduce interest rates to 3.5%. These changes succeeded a reduction in Greek primary deficit from €25bn in 2009 to €5bn in 2011. However, conditions of the recession had worsened despite the austerity measured implemented at the time, leading to a 7.1% fall in national GDP and a rise in unemployment from 7.5% in late 2008 to 19.9% in November 2011.

The Third Economic Adjustment Programme implemented from July 2015 to August 2018 was the last of the austerity programmes implemented by Greece in the attempt to recover from the effects of the Global Financial Crisis. An €86bn loan would be provided to Greece over the three-year period and assist in a final restructure of the Greek economy. It is not considered the last of the 'bailout programs' offered to Greece as the nation continues to receive loans from external creditors such as the IMF and continental banks including the European Investment Bank, Eurogroup and European Central Bank.

Federal Student Aid

Federal Student Aid refers to the United States' governments financial initiative in assisting domestic and international students access higher education. Payments begin after the graduation of a student, leave school or change if the students' rate of attendance is shortened. It covers a range of loans which cater to a diverse range of student needs.

• Subsidized and Unsubsidized loans refer to loans offered over a 4 year period to assist in covering costs associated with college, university, or any other form of tertiary education. Subsidized loans are granted to undergraduate students who have appropriately demonstrated financial need/hardship. Unsubsidized loans can be granted to both undergraduate and postgraduate students regardless of financial position. Both types of loans are subjected to a maximum loan period of 150% the education length (in years) i.e a four-year course would be subjected to a maximum loan period of six years, as well as a loan fee upon the granting of the loan and additional interest repayments upon progress of the loan commitment. Interest rates are calculated as a fixed rate over the life of the loan (5.05% for undergraduate Subsidized Loans and Unsubsidized Loans and 6.6% for graduate/professional Unsubsidized Loans).
• Direct PLUS loans are federal loans available to postgraduate and professional students, and the parents of those who attend schools who are participating in the Direct Loan Program including college or career schools. Adverse credit histories will negatively affect a student or parents' compatibility to receive the loan. The loan is subject to a repayment interest rate of 7.6% over the course of the loan.
• Federal Perkins Loan program are repayment plans available to undergraduate and graduate students who have demonstrated exceptional financial need and attended college or career school. The loan is subject to a fixed interest rate of 5%

The Federal government of the United States are not the only providers of student loans, as private student loans can also be obtained by student through banks, credit unions, state agencies and schools. Federal loans are subjected to fixed interest rates, no credit checks and and option to have the type of repayment plan selected. For example, the student may elect to to have their repayment connected to a percentage of their discretionary income. The student can have t