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. In fact, there are eight different repayment plans for federal student loans. Private student loans, though, are a different story.
Read on to learn about the different repayment options that are available for federal student loans. (To learn basic information about student loans, see our Overview of Student Loans.)
Different repayment plans apply to federal and private student loans.
Loans issued by banks or the federal government. The options discussed in this article are available for federal student loans. Which specific repayment plans are available to you depends largely on what type of federal student loan you have. The two main types of federal loans are:
For details about which types of loans qualify for each of the repayment options discussed below, see the U.S. Department of Education’s website.
School-issued federal loans. If you have school-issued federal student loans, like Perkins Loans, ask your school about repayment options. Repayment plan options for federal Perkins Loan are different than those for federal Direct Loans or FFELs.
Private student loans. Private student loans are not eligible for the repayment plans discussed in this article. If you have private student loans, contact your lender, loan holder, or loan servicer to find out your repayment options.
Currently, the available basic repayment plans for federal student loans are:
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, the repayment period is up to 30 years.) This means you’ll pay the most per month, but the least amount of interest over the life of your loan.
Under a graduated plan, your payments start out low and increase during the repayment period—usually every two years. This is typically a good option 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.
An extended plan allows you 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.
There are a number of income-driven plans 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.
Under the IBR plan, the payments generally are:
If you haven't paid off your loan after 20 years (if you're a new borrower 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 cancel the remaining balance—though you might have to pay taxes on the canceled amount.
Under the ICR plan, your payment is the lesser of:
Like with all of the income-driven repayment plans, you'll have to reapply every year and the payment amount will likely be adjusted. If you haven't paid off your loan after 25 years, the government will cancel the remaining balance. Again, you might have to pay taxes on the canceled amount.
With PAYE, your maximum monthly payments are 10% of your discretionary income. If you haven't paid off your loan after 20 years, the government will cancel the remaining balance. You might have to pay income tax on any forgiven amount.
Like PAYE, with REPAYE, your maximum monthly payments will be 10% of your discretionary income. The main differences between PAYE and REPAYE are:
Under REPAYE, if you haven’t paid off the loan after 20 years (undergraduate loans) or 25 years (loans for graduate or professional study), the government cancels the balance. The forgiven amount is, again, considered taxable.
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.
With so many repayment options available to federal student loan borrowers, the trick is figuring out which of the eight major federal repayment plans you can choose from and, of those, which is best for your situation. Again, for details about which types of loans qualify for each of the repayment options discussed below, see the U.S. Department of Education’s website. For tips on where to start when selecting a plan, see How to Choose a Student Loan Repayment Plan.
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.