How to Repay Your Student Loans

Learn about the different repayment plans for federal student loans, including several based on your income.

By , Attorney

If you have federal student loan debt, you might feel like you're stuck in your current repayment plan. But you probably have more options than you think. As of late 2020, the U.S. Department of Education offers eight different programs for repaying what you borrowed. Private student loans, though, are different.

Which repayment plan you can—and should—pick depends largely on what type of federal student loans you have, as well as your circumstances. Not all loans qualify for every repayment plan, and not every alternative is right for all borrowers.

What Kind of Student Loans Do I Have?

Again, different repayment plans apply to federal and private student loans. The options discussed in this article are available for federal student loans. Use the National Student Loan Data System (NSLDS) to find out what federal loans you have.

Federal Family Education Loans (FFELs)

Private lenders made these loans before July 1, 2010, but they're no longer available. The federal government guarantees FFELs, which means the government reimburses the lender if you default.

Federal Direct Loans

Loans that the federal government makes directly are called, as you might expect, federal Direct Loans.

School-Issued Federal Loans

Perkins Loans were available to undergraduate, graduate, and professional students until September 30, 2017, but the program has since expired. Repayment plan options for federal Perkins Loans are different than those for federal Direct Loans or FFELs. Ask your school about repayment options if you have a school-issued federal student loan, like a Perkins Loan.

What Repayment Plans Are Available for Federal Student Loans?

The basic repayment plans available for federal student loans are a standard repayment plan, a graduated repayment plan, and an extended repayment plan.

Standard Repayment Plan

Under the standard repayment plan, you'll make the same monthly payment for the life of the loan. With this kind of plan, you'll normally pay off your loan in the shortest amount of time—up to ten years. (For Consolidation Loans, though, the repayment period is up to 30 years.)

So, you'll pay the most per month but the least amount of interest over the loan term.

Graduated Repayment Plan

Under a graduated plan, your payments start low and increase during the repayment period, usually every two years. This option might be appropriate if your income is low when you graduate but will likely increase quickly.

Like with a standard repayment plan, the timeline is up to ten years except for FFEL Consolidation Loans and Direct Consolidation Loans, which can have a repayment term of up to 30 years. Because you carry a larger balance at the beginning of the repayment period, you'll end up paying more interest than under a standard repayment plan.

Extended Repayment Plan

An extended plan allows you to have fixed or graduated payments stretched over a period of up to 25 years. To be eligible for this plan, you must have an outstanding loan balance of more than $30,000.

Student Loan Income-Based Repayment Plans

Several income-driven plans are available if your income is low or unstable, or you have moderate income with very high student loan debt. Your payment amount under an income-driven repayment plan is generally a percentage of your discretionary income.

Income Based Repayment Plan (IBR)

For the IBR plan, you must have a high debt relative to your income. The payments generally are:

  • 10% of your discretionary income if you're a new borrower on or after July 1, 2014 (but never more than the ten-year standard repayment plan amount) or
  • 15% of your discretionary income if you're not a new borrower on or after July 1, 2014 (again, never more than the ten-year standard repayment plan amount).

If you haven't paid off your loan after 20 years (new borrowers on or after July 1, 2014) or 25 years (if you're not a new borrower on or after July 1, 2014), the government will forgive the remaining balance.

Income Contingent Repayment Plan (ICR)

Under the ICR plan, your payment is the lesser of:

  • 20% of your discretionary income or
  • what you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income.

Like with all of the income-driven repayment plans, you'll have to reapply every year, and the payment amount will likely be adjusted. The government will forgive the remaining balance if you haven't paid off your loan after 25 years.

Pay As You Earn Repayment Plan (PAYE)

With PAYE, your maximum monthly payments are 10% of your discretionary income. The government will forgive the remaining balance if you haven't paid off your loan after 20 years.

Revised Pay As You Earn Repayment Plan (REPAYE)

Like PAYE, with REPAYE, your maximum monthly payments will be 10% of your discretionary income. The main differences between PAYE and REPAYE are:

  • To qualify for PAYE, you must be a new borrower on or after October 1, 2007, and must have received a disbursement of a Direct Loan on or after October 1, 2011. For REPAYE, any Direct Loan borrower with an eligible loan type can pick this plan.
  • Under PAYE, if you're married, your spouse's income or loan debt will be considered only if you file a joint tax return. Under REPAYE, your income and your spouse's income or loan debt will be considered, whether you file taxes jointly or separately (subject to some limited exceptions).

Under REPAYE, if you haven't paid off the loan after 20 years (if all loans were for undergraduate study) or 25 years (if any loans were taken out for graduate or professional study), the government forgives the balance.

Income Sensitive Repayment Plan (ISR)

In this plan, your payments are based on your annual income. The ISR plan is available only to low-income borrowers and only for FFEL loans. Because FFELs were discontinued in 2010, recent borrowers aren't eligible for an ISR plan.

How to Pick a Student Loan Repayment Plan

Your loan servicer will automatically enroll you in a Standard Repayment Plan unless you decide on another plan. Here's one approach for choosing a repayment plan:

Consider an Income-Driven Plan If You Qualify for Public Service Loan Forgiveness

Under the Public Service Loan Forgiveness (PSLF) program, your federal Direct Loans or Direct Consolidation loans are forgiven after you make 120 qualifying monthly payments under a qualifying repayment plan while:

  • working full-time for the government
  • working full-time for a nonprofit organization that's tax-exempt under Section 501(c)(3) of the Internal Revenue Code
  • working full-time for a nonprofit organization that isn't tax-exempt, but the organization's primary purpose is to provide certain types of qualifying public services, or
  • volunteering full-time with AmeriCorps or the Peace Corps.

All of the income-driven repayment plans count as qualifying repayment plans for PSLF. So, if you're eligible for PSLF, consider an income-driven plan: IBR, ICR, PAYE, or REPAYE (but not ISR because you can't qualify for PSLF with this plan).

Also, you should submit a certification form every year or whenever you change jobs. The Department of Education will then let you know if you're on track for PSLF. And you can use this tool to assist you in completing the forms required for this program.

You can also qualify for PSLF if you choose the ten-year standard repayment plan, but if you're in this plan the entire time you're working towards PSLF, you won't have a remaining balance left to forgive after you've made 120 qualifying PSLF payments.

If PSLF Isn't an Option, Consider the Standard Repayment Plan (If You Can Afford It)

Under the Standard Repayment Plan, you'll pay off your loans in ten years or less. So, you'll pay less interest and get out of debt quicker than another repayment plan.

If You Can't Afford the Standard Repayment Plan, Look Into Other Plans

One way to figure out which of the other plans might work for you is by using the Department of Education's repayment estimator or by contacting your loan servicer. Find out who your loan servicer is by logging in here.

Switching Repayment Plans

Keep these tips in mind when considering different repayment plans.

  • Don't wait to switch payment plans until you're seriously behind in your payments. If you're in default on your loans, many of these options won't be available to you. For most federal student loans, you're in default if you haven't made a payment in more than 270 days.
  • You aren't locked into the plan you choose. If you switch plans and you're not happy with it, you can change again.

Payment Relief for Private Student Loans

Private student loans aren't eligible for the repayment plans discussed in this article. If you have private student loans, contact your lender, loan holder, or loan servicer to learn about your repayment options.

Getting Help

To learn more about federal student loans in general, including the various repayment plans covered in this article, visit the U.S. Department of Education's Federal Student Aid website or call your loan servicer.

If you need help dealing with your servicer or want more information about available student loan repayment and forgiveness options, consider consulting with a student loan attorney or debt settlement attorney who deals with student loans.

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