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A Comprehensive Guide to Repayment Options for Federal & Private Student Loan Debt

May 14, 2020

Finding it challenging to understand your student loan repayment options? No worries. I’ll simplify things for you.

For starters, private student loans and federal student loans have different repayment options. (You may know this already, but I meet plenty of folks who complain Navient won’t let them pay their private loan under the IBR plan.??‍♂️)

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With private loans, you have to make your payments as agreed. And when you can’t? Your only option is to ask for a forbearance.

Thankfully, federal student loans have many more options. But that’s a blessing a curse.

With so many repayment plan options available, how do you choose the best repayment for you?

Answering that question forces us to answer a lot of other questions, like:

  • What’s your marital status and family size?
  • How did you file your last income tax return?
  • Do you have Direct Loans, Federal Family Education Loans, or both?

I’d like to keep this post under 2,000 words. So I’ll save my answer to the “best student loan repayment plan” for another post.

TL:DR: Can’t afford your payment? For federal student loans, get into a repayment plan (REPAYE or IBR most likely) unless you have Parent Plus Loans, then look into loan consolidation. For private student loans? ??‍♂️. Beg?

Instead, here’s what we’ll cover today:

Without further delay…

Federal Student Loan Repayment Plans

Did you recently get a student loan statement in the mail that was for way more than you can afford? I know the feeling.

That’s what happened to me a few months after I graduated law school.

FedLoan sent me a bill that would take me almost 2 paychecks to pay off.

I freaked out at first. But then I was like, “I’m a lawyer. I can figure my student loan repayment options out.”

So that’s what I set out to do.

Here’s what I learned.

The U.S. Department of Education offers repayment plans that aren’t based on your income:

  • 10-year Standard Repayment plan
  • Graduated Repayment Plan
  • Extended Repayment Plan

And they also offer several plans that are based on your income:

  • Revised Pay As You Earn (REPAYE)
  • Pay As You Earn (PAYE)
  • Income-Based Repayment (IBR)
  • Income-Contingent Repayment (ICR)

Collectively, these plans are referred to as Income-Driven Repayment plans. They’re income driven because they’re based on 10 to 20% of your discretionary income.


Finally, the Department offers the Income-Sensitive Repayment plan.

The bill I got from FedLoan was what my payment would be under the 10-year repayment plan. The sum demanded was so high because the Standard plan pays your student debt in 10 years. None of the other payments are that aggressive in paying off your loan balance.

Since I couldn’t afford that payment, I had to switch to a different plan to get lower monthly payments.

What I soon found out is that not all loan types are eligible for the same repayment plans.

Let me explain.

Repayment Options for Direct Loans

You can pay most Direct Loans[footnote]The one exception is a Direct Consolidation loan that paid off a Parent Plus consolidation loan[/footnote] under every repayment plan except the Income-Sensitive plan.

In short, Direct Loans give you the most flexibility when it comes to repayment.

Sidenote: Both the IBR and PAYE plans require you to have a partial financial hardship to get into those plans.

Plus, if you work for the government or a nonprofit, Direct Loans are the only loans eligible for the Public Service Loan Forgiveness program.

Repayment Options for FFEL Loans

Federal Family Education loans are eligible for every repayment plan except REPAYE and PAYE.

Those two plans offer loan borrowers who are single or married but separated the lowest monthly payment.

So if you have FFEL loans, you’ll always pay more than you could under the REPAYE and PAYE plans.

Plus, FFEL loans aren’t eligible for the PSLF program.

There’s good news though.

You can make your FFEL loans eligible for the better repayment plans and qualify them for forgiveness by consolidating them into a Direct Consolidation loan.

Related: Three Reasons Why You Should Consolidate Student Loans

Sidenote: Wondering what’s the difference between FFEL loans and Direct Loans? In short, FFEL loans were made by private banks and guaranteed by the government. So if you defaulted on the loan, the federal government would pay the bank, and then take control of your student loan. With Direct Loans, the federal government is your lender. The FFEL loan program ended almost a decade ago.

If you decide not to consolidate, I think income-based repayment is the right choice for you.

Repayment Options for Parent Plus Loans

A word:

Payment options for Parent Plus loans suck.

First, unless you consolidate your Parent Plus loan debt into a Direct Consolidation loan, your Parent Plus loan isn’t eligible for the income-driven repayment plans.

Second, even if you do consolidate, your student loan payments would still be high.

Parent Plus loans and consolidation loans that paid off Parent Plus loans are eligible only for the Income-Contingent Repayment plan. And I’ve said before, the ICR plan is the worst.

Sidenote: Other student loan lawyers have reported that if you consolidate a consolidation loan that paid off a Parent Plus loan, the new consolidation loan would be eligible for the other repayment plans. They say loan servicers don’t know what loans were included in the first consolidation loan. They focus on the options for the new loan. I’ve never seen this done, so I have no opinion on its efficacy.

Best Low-Income Student Loan Repayment Options

When your income is low, and you have federal loans, Income-Driven Repayment is a blessing.

No matter your income, you’ll always get a payment amount you can afford. And that’s true no matter if your student loan debt is $10 thousand or $100 thousand.

Download: Income-Driven Repayment Request Form [OMB No. Date 10/31/2018][footnote]Despite the form date having lapsed, this is still the most up to date form as of February 13, 2019.[/footnote]

There are tradeoffs, however.

First, the repayment periods for IDR plans last 12 months at a time. So every 11 months you need to reapply (what your loan servicer refers to as “recertification”).

Second, while you’re in an IDR plan, the interest rate is still there. By the time, your income increases, your student loan debt may have doubled.?

Related: The Effect of Capitalized Interest on a Student Loan

Student Loans and Marriage

Trying to decide the best repayment plan to get into when you’re married is tough.

So many questions that influence my advice:

  • Are both spouses working?
  • How much do they earn?
  • Did they file their taxes jointly?
  • Do both spouses have federal student loan debt?
  • What type of federal loans do they have?

The questions go on from there.

Still, despite the number of questions I’ll ask, for married borrowers I’m typically deciding between two plans.

The IBR plan and REPAYE plan.

One of those two plans are usually going to (a) be a plan they’re eligible for, and (b) offer a plan payment amount they can afford.

Private Student Loan Repayment Options

Let’s make this quick.

There aren’t many options if you’re struggling with the monthly amount your private student loans are demanding,

As you likely already know, you can call and ask for a lower payment, and they might give you one — but it will only last for a few months. Once that period ends, you’ll have to call back in to ask for it again.

Of course, the contractual interest rate is continuing to run during that time. So the forbearance payments you’re making aren’t likely lowering the balance.

In that case, what do you do?

Some people decide (or better put, their wages decide) they can no longer offer to keep making the monthly payments.

So they stop paying and hope to negotiate a settlement at some point.

And sometimes, they hire me to help with their private student loan debt settlements.

I’ve had some success:

If you decide to go that route, here’s a video where I discuss what to expect:

Settlement aside, let’s quickly go over your options for when you need payment assistance with your private student loans

Sallie Mae Repayment Options

When you’re having difficulty making your monthly payment, Sallie Mae offers you forbearance for up to 3 months at a time.

There’s no form to complete.

You merely need to call Sallie Mae’s customer service to set it up.

You will need to make a good faith payment of $50 per loan, with a maximum of $150 per account to get the forbearance.

Navient offers 4 programs when you can’t afford the payment on your private student loans:

  1. Interest-only
  2. Rate Reduction
  3. Extended Repayment and
  4. Term and Rate Modification

Interest only

With the interest-only plan, your monthly payment will be as low as the amount of interest that accrues on your loan each month.

You can remain in the interest-only period for up to 4 years.

Rate Reduction

The Rate reduction program reduces your interest rate and monthly payment for 6 months.

Your eligibility for this program is based on you and your cosigner’s financial information. They may ask for proof of income.

Finally, Navient may ask for 3 qualifying payments before they enroll you in the program.

Extended Repayment

The Extended Repayment plan lowers your monthly payment by stretching out your payment period. So instead of your payments being based on you paying the loan off in a 10-year repayment period, you’ll pay it off over 15.

Term and Rate Modification

This program is a combination of the Extended Repayment plan and the Rate Reduction program.

Under this program, Navient may extend your repayment period and drop your interest rate.

Wells Fargo

When you’re faced with financial hardship due to unemployment or unplanned medical expense, Wells Fargo offers three repayment options:

  • Postponing payments for 2 months
  • Interest only payments and
  • Loan modification (temporary or permanent reduction of payment amount)

Contact Wells Fargo’s customer service at 1-800-658-3567 to learn more about these options.

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