Credible takeaways
- Federal student loan borrowers can choose from eight different repayment plans, depending on their eligibility.
- The Standard Repayment plan is the quickest and least expensive option overall for federal borrowers who can afford it.
- Most private lenders offer flexible repayment options while you’re in school and during your grace period, though terms can vary.
Many people who earn degrees have student loans to repay. Depending on your type of debt, it's helpful to explore private and federal student loan repayment plans to find the best approach to becoming debt-free.
This guide explains different repayment options for both private and federal student loans so you can decide what's best for your needs.
Federal student loan repayment plans
If you have federal student loans, you can change your repayment plan as needed. Here are the options available to you.
1. Standard Repayment plan
Key benefit: Fastest and least expensive plan
The Standard Repayment plan is the default plan for federal student loans unless you select a different one. Under this plan, you’ll make the same fixed payment (at least $50 each month) for 10 years and pay off your entire loan balance at that time. If you have a Direct Consolidation Loan, you’ll make fixed payments between 10 and 30 years under the standard plan, depending on how much you owe.
The Standard Repayment plan may have higher monthly payments compared to other options, but the payments never change and your interest costs may be lower over time.
2. Graduated Repayment plan
Key benefit: Payments start low and gradually increase every two years
The Graduated Repayment plan is designed for borrowers who expect their income to grow over time. Like the Standard Repayment plan, the graduated plan also allows you to become debt-free after 10 years (or 10 to 30 years for Direct Consolidation Loans). The big difference is that your payments start out lower and go up every two years. The goal is for your payments to rise as your income does.
Under this plan, your payments won’t exceed three times the amount of any other payment, and they’ll never be less than the interest that accumulates between payments.
3. Extended Repayment plan
Key benefits: Lower monthly payments over 25 years
Direct Loan borrowers and Federal Family Education Loan (FFEL) borrowers are eligible for the Extended Repayment plan if they meet certain conditions. You must not have had an outstanding balance on a Direct Loan on or after Oct. 7, 1998, and you’re required to have more than $30,000 in outstanding Direct Loan debt. The same applies to FFEL program loans.
Payments on this plan may be graduated or fixed and are designed to allow you to repay your entire balance over 25 years. Because the repayment period is longer, your monthly payment is lower than what it would be on the Standard or Graduated Repayment plans. However, the extra years of interest you pay will result in higher total interest costs over time.
4. Saving on a Valuable Education (SAVE) plan
Key benefit: Subsidized interest and loan forgiveness after as little as 10 years
Starting in July 2024, the SAVE repayment plan will allow borrowers with undergraduate loans to pay only 5% of their discretionary income each month. Borrowers with both undergraduate and graduate loans will pay a weighted average between 5% and 10% of their discretionary income. The method used to calculate income is different from other income-driven plans, exempting income up to 225% of the poverty line instead of 150%. Some borrowers will have a $0 payment under the plan.
This plan also comes with an interest subsidy that covers any unpaid interest accrued that month as long as you make a full payment. This means your loan balance won’t get bigger as long as you make your payments on time. This is a huge advantage since loan balances can grow on other income-driven plans, even for those making steady payments.
Starting in February 2024, borrowers with original loan balances of $12,000 or less can get loans forgiven after as few as 10 years. For every $1,000 borrowed above this amount, the repayment term increases by one year.
Note:
This plan provides faster loan forgiveness than many other income-driven plans and may be the most affordable for many student borrowers.
5. Pay As You Earn (PAYE) plan
Key benefit: Payments set at 10% of your income and forgiveness after 20 years
Pay As You Earn (PAYE) is an income-driven plan that caps monthly payments so you’re never paying more than you would on the Standard Repayment plan. Payments are 10% of your discretionary income, and your remaining loans are forgiven after 20 years of eligible payments. To qualify, your monthly payment must be below what it would be on a standard 10-year repayment plan.
You can use the PAYE plan as long as you were a new borrower with no outstanding Direct Loans or FFEL balances on or after Oct. 1, 2007. You must also have received a Direct Loan disbursement on or after Oct. 1, 2011.
This plan comes with lower monthly payments than some of the other income-driven plans and also provides forgiveness in 20 years instead of the 25 years other plans require.
6. Income-Based Repayment (IBR) plan
Key benefit: Payments capped at 10% to 15% of your income and forgiveness after 20 or 25 years
If you were a new borrower on or after July 1, 2014, your monthly payments on the Income-Based Repayment (IBR) plan will be capped at 10% of your discretionary income; otherwise they will equal 15%. New borrowers can also have loans forgiven after 20 years while others will get forgiveness after 25 years of payments.
Like the PAYE plan, your monthly payment must be below what it would be on the Standard Repayment plan to qualify. Just be aware that it’ll take you longer to repay your loan under the IBR plan compared to the standard plan, which means you’ll end up paying more interest over time.
7. Income-Contingent Repayment (ICR) plan
Key benefit: Parents with PLUS loans can access forgiveness under this plan
With this income-driven plan, your payments will equal the lesser of 20% of your discretionary income or the amount you'd pay on a fixed repayment schedule lasting 12 years, adjusted based on income. After 25 years of eligible payments, any remaining loan balance will be forgiven.
This plan is the only income-driven repayment option for borrowers with parent PLUS loans. Parents will need to consolidate their PLUS loan into a Direct Consolidation Loan and apply for the Income-Contingent Repayment plan in order to be eligible for forgiveness.
Taking these steps could open the door to forgiveness of parent debt either through the ICR plan or Public Service Loan Forgiveness (PSLF). With PSLF, your loans can be forgiven after as little as 120 payments made while working full-time for a qualifying not-for-profit or government agency.
8. Income-Sensitive Repayment (ISR) plan
Key benefits: FFEL program loans are eligible
Borrowers with subsidized and unsubsidized federal Stafford Loans, as well as those with FFEL PLUS or Consolidation Loans can become eligible for the Income-Sensitive Repayment plan. Under this plan, your debt is paid off over a maximum period of 10 years, and your payments can increase or decrease based on your income.
If you have FFEL program loans that aren’t managed by the Department of Education, contact your specific lender for more information. Note that federal Direct Loans are not eligible for the ISR plan.
Related: How To Get Student Loan Repayment Help
Private student loan repayment options
Private student loan repayment options differ from federal plans. Generally, you'll commit to a loan term when you first receive the loan funds and must repay your debt according to that schedule. However, you should know that many private lenders usually offer a few choices for repayment while you’re in school. Here's what they might look like:
- Immediate repayment: You can begin making immediate payments of your debt for the full standard monthly payment. This approach can help you become debt-free faster and save you in interest costs, but making large payments as a student may be difficult.
- Interest-only repayment: You'll start making payments right away with this option, but will pay only enough to cover interest charges that accrue each month. Your balance won't go down, but it also won't go up since you won't be incurring unpaid interest that's tacked onto what you owe.
- Partial interest repayment: A partial interest repayment (or fixed interest repayment) lets you pay part, but not all, of the interest due. If you don't have a lot of money but you want to minimize the unpaid interest that accrues and that is eventually added onto your balance, this option can work.
- Full deferment: With this approach, you do not make any payments while in school and during deferment after graduation (which usually lasts for several months). Interest keeps growing and is capitalized, or added onto your balance, so it must be paid eventually.
Private lenders don’t usually let you change your repayment plan after borrowing — you have to stick with the payment term and monthly payment you agreed to. But you can change your loan terms by refinancing.
Refinancing might make sense if you can qualify for a lower interest rate and more favorable loan terms. Just remember to avoid refinancing your federal loans if you plan on taking advantage of benefits like forgiveness and income-driven repayment.
All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | SoFi Disclosures | Read more about Rates and Terms
How to choose the right repayment plan
To choose the right repayment plan:
- Consider your budget: You don't want to be stuck with payments that are higher than you can comfortably afford.
- Decide on your priorities: Would you prefer a low monthly payment, even if that means paying more interest over time? Or do you want to keep total borrowing costs as affordable as you can?
- Determine your eligibility: You'll need to consider whether you are eligible for a federal student loan repayment plan based on the date you borrowed and the amount you owe, among other factors.
- Look at your monthly payment and total costs for all options: Compare the rates and terms to understand what repayment would look like under each plan. Online tools like student loan calculators or Federal Student Aid's loan simulator can make it easier to compare costs.
- Choose the plan that fits your budget and goals: The plan you choose should be affordable based on your monthly income and help you achieve your goals, whether that's working toward loan forgiveness, becoming debt-free faster, or making low payments while having enough left to invest.
