Student Loan Repayment Options: What You Should Know Before Choosing

• The Standard Plan is the default option with fixed monthly payments, while the Graduated Plan begins with smaller payments that go up every two years.

• Extending your repayment period can lower your payments, but you’ll end up paying more in interest over the long run.

• You can switch repayment plans if your financial situation changes.

A student loan repayment plan is an agreement between you and your lender about how you will pay back your loan. It outlines how much you’ll pay each month and how interest will be added to what you owe.

The U.S. Department of Education offers several repayment options, such as the:

• Standard Repayment Plan: Fixed payments for years, but up to 30 if you consolidate.

• Extended Repayment Plan: Spread over up to 25 years.

• Graduated Repayment Plan: Payments increase every 2 years, typically over 10 years.

• Income-Driven Repayment Plans: Based on income, lasting 20-25 years.

• Income-Sensitive Repayment Plan: Payments based on income, lasting up to 10 years.

Each plan fits different financial situations, making payments easier to manage. Some may also offer a loan forgiveness program after enough qualifying payments.

Ahead, you will learn more about these various student loan repayment options, how to choose the best plan, and what to do if making payments becomes difficult.

Related

• Parent PLUS Loan Repayment Options

• I Haven’t Paid My Student Loans in Years — Can I Never Pay?

• Guide to Refinancing Your Student Loans

The Federal Student Aid offers repayment plans including standard, extended, graduated, income-driven, and income-sensitive. Each one works differently and is suited for specific financial situations.

Let’s take a closer look at each and how they fit your financial needs:

Standard Repayment Plan

The Standard Repayment Plan is a straightforward option where you make the same monthly payment for 10 years. It helps you pay off your federal loan faster and reduces the amount of interest you pay overall.

• Best for: If you want to pay off your loan quickly and save on interest.

• Duration: You’ll finish paying it off in 10 years.

• Eligible for Forgiveness: This plan is not eligible for loan forgiveness under federal student loan programs, including the PSLF program.

Related: Standard Repayment Plan – How It Works and If It’s Right for You

Extended Repayment Plan

The Extended Repayment Plan lets you take up to 25 years to pay off your loan, which makes your monthly payments smaller. It’s a good choice if you need lower payments to fit your budget, especially if you have a high loan balance.

• Best for: If you need smaller payments because of other expenses or a lower income.

• Duration: You’ll have up to 25 years to finish paying off your loan, which can make your monthly payments much lower than shorter plans.

• Eligible for Forgiveness: Payments made under the Extended Repayment Plan do not count toward loan forgiveness programs like PSLF or IDR forgiveness options.

Related: How to Apply for the Extended Repayment Plan to Lower Loan Payments

Graduated Repayment Plan

With this plan, your payments start out low and go up every two years. It can be a good choice if you expect to make more money as you move forward in your career.

• Best for: Borrowers who think their income will grow steadily over time.

• Duration: Usually 10 years, but up to 30 years if you consolidate loans.

• Eligible for Forgiveness: This plan is not eligible for loan forgiveness under federal student loan programs, including the PSLF program.

Related: How to Apply for the Graduated Repayment Plan for Federal Loans

Income-Driven Repayment Plans

There are four types of Income-Driven Repayment (IDR) plans: SAVE plan, PAYE, IBR, and ICR. These plans adjust your payments based on how much you earn and your family size.

• Best for: If you want your loans to be qualified for student loan forgiveness.

• Duration: You’ll make payments for 20-25 years, depending on the plan.

• Eligible for Forgiveness: Yes, through the Public Service Loan Forgiveness program and IDR Forgiveness (e.g., after you’ve made your final monthly payment under an IDR Plan).

Related: Income-Driven Repayment for Student Loans – How it Works

Income-Sensitive Repayment Plan

The Income-Sensitive Repayment Plan adjusts your payments based on your income each year and is available only for FFEL loans. It’s intended as a temporary solution to help you manage payments when your income is low.

• Best for: If you have FFEL loans and need short-term payment flexibility.

• Duration: Payments last up to 10 years, but since it’s a temporary plan, it’s best to consider it as a last resort, especially if you are not eligible for the other repayment plans.

• Eligible for Forgiveness: This plan does not offer loan cancellation and may lead to higher interest costs over time.

Related: Income-Sensitive Repayment Plan – How It Works and Who Qualifies

1. Look at Your Income and Financial Situation

Start by thinking about how steady your income is. If you have a stable income, the Standard Repayment Plan could be a good choice, offering fixed payments that help you pay off the loan faster with less interest.

Tip: If your income might change in the future, choose a flexible plan now and switch to a different one later as your situation improves.

2. Think About Your Career

Consider where your career is heading. If you expect to make more money over time, the Graduated Repayment Plan could be a good option since the monthly payment amount starts low and increases every two years.

If you’re working in public service or for a non-profit, an IDR plan combined with PSLF might be better. PSLF allows borrowers in public service to have their loans forgiven after 10 years of qualifying payments.

Tip: If your income will rise significantly later in your career, be ready to switch to a plan that helps you pay off the loan faster when you’re financially stable.

3. Use a Repayment Calculator

Using the loan simulator from studentaid.gov can help you see what each plan will cost. You can enter your loan details, including your interest rate, to compare how much you’ll pay each month, how much interest you’ll end up paying, and if you qualify for loan forgiveness. This tool gives you a clear idea of the costs for each option.

Tip: Try different scenarios in the simulator, like income changes or faster repayment, to see how small adjustments can impact your total cost.

1. Brian – Recently Graduated Engineer with a Higher Income

Brian has a degree in Mechanical Engineering and landed a high-paying job with an annual salary of $80,000. He has $50,000 in federal student loans, made up of Direct Subsidized and Unsubsidized Loans.

His primary goal is to become debt-free as soon as possible. He’s already saving for a down payment on a home and doesn’t want his student loans hanging over his head.

With Brian’s higher income, he chooses the $530 monthly payments on the Standard Repayment Plan. This plan will have him debt-free in 10 years and minimize the total interest he will pay over time.

Since his main goal is to pay off her loans quickly, the 10-Year Standard Repayment plan offers the shortest repayment term without sacrificing too much of his monthly cash flow.

2. Sarah – Paralegal with Moderate Loans and Lower Starting Salary

Sarah is a paralegal, with a starting salary of $42,000 per year. She has $28,000 in federal student loans, mainly through Direct Subsidized Loans.

She is looking for a way to keep her monthly payments low so that she can afford to rent a place closer to her school and set aside some money for classroom supplies. She then applied for a graduated repayment plan.

With the Graduated Repayment Plan, her initial payments would be around $163 per month and would gradually increase every two years. Since her salary is likely to rise over time with experience and tenure, this plan gives her more flexibility in the short term without stretching her loan term too long.

3. David – Teacher Planning for Family

David is in his early 40s and is an elementary school teacher, earning $55,000 per year. He still has $50,000 in federal student loans from his undergraduate and graduate degrees.

He and his spouse plan to have children soon, and he wants to lower his monthly payments to free up money for family expenses like daycare and healthcare. Although his income is stable, he wants to balance loan repayment with family needs.

The Extended Repayment Plan catches David’s interest. He applied for it to reduce monthly payments to around $300, spread out over 25 years. The plan allowed him to manage family expenses while staying on track with his loans.

Though it will cost more in interest, the lower payments provide immediate relief.

As a student loan lawyer with years of experience working with borrowers, I often recommend looking into grace periods, deferment, forbearance, or adjusting your repayment plan if you’re struggling to make a student loan payment.

If you have private student loans, you may also contact your lender directly to explore alternative repayment options.

Here’s a brief look at the different options:

• Grace Periods and Deferment: You may have a six-month grace period after graduation or dropping below half-time. If you’re already in federal student loan repayment, deferment allows you to pause payments temporarily, especially for unemployment or financial hardship. Interest doesn’t accumulate on subsidized loans during deferment.

• Forbearance Options: Forbearance allows you to pause or reduce payments for a short time, but interest will still accumulate. It’s a temporary solution that could increase the overall cost of your loan. Learn additional insights by checking out our forbearance guide.

If you miss payments for 270 days, your loan goes into default. This can lead to wage garnishment, a damaged credit score, and losing access to repayment plans and other benefits.

To prevent default, explore How to Get Student Loans Out of Default, contact your loan servicer, or consider a direct consolidation loan. These options can help you adjust your payments before a default occurs.

There are many student loan repayment plans to choose from. Depending on your financial situation, you have the option to pick a Standard, Extended, Graduated, Income-Driven, or Income-Sensitive repayment plan.

Each plan affects your monthly payments, the amount of interest you’ll pay, and whether you qualify for loan forgiveness. If you’re unsure which repayment plan is best for you, we can help you understand your options.

Book a consultation with our student loan lawyers today. You can also subscribe to our newsletter to stay updated on student loan repayment tips and options.