Your Student Loan Repayment Options
The Department of Education’s pause on federal student loans and interest accrual ends September 1, 2023. Payments will start back up in October 2023, so if you haven’t selected a repayment plan yet or are looking to adjust your payments to fit your current circumstances, now is the time to do your research.
Before you select your repayment plan, make sure you’ve created an account on your loan servicer(s)’ site and StudentAid.gov and provided your most up-to-date contact information. Your servicer’s website will also be where you confirm your repayment start date.
Borrowers have the option to choose one of four federal student loan repayment plans:
- Standard Repayment Plan: 10-year repayment period with set payments available for all borrowers
- Graduated Repayment Plan: Payments increase over a 10-year repayment period
- Extended Repayment Plan: Payments are fixed or graduated to pay off loans within 25 years
- Income-Drive Repayment (IDR) Plan: Payments are tied to your income with pay off period between 20-25 years.
To determine which repayment option is for you, decide what repayment goals are important to you.
1. I want to pay less interest.
Best Option: Standard Repayment
The Standard Repayment Plan, in which borrowers are automatically placed when entering repayment, means you’ll make set monthly payments over a 10-year period. This plan is one of the fastest ways to pay off your federal loans and accrues the least amount of interest.
Standard Repayment Plan Example*:
| Principal Balance (based on the National Average Student Loan Debt) | $37,338 |
| Interest Rate (based on the National Average) | 5.8% |
| Repayment Period | 10 Years |
| Fixed Monthly Payment | $410.79 |
| Total Interest Amount | $11,956.59 |
| Principal and Interest Paid After 10 Years | $49,294.59 |
2. I want low monthly payments.
Best Option: Income-Driven Repayment
With four options for Income-Driven Repayment available, these plans offer set monthly payments that are between 10-20% of your discretionary income. These payment plans are a good alternative for those whose income is too low to afford the standard repayment plan. These repayment plans extend your payback period over 20-25 years, but you’ll qualify for IDR forgiveness on your outstanding debt after that time period.
Income Driven Repayment Plan Example*:
| Principal Balance (based on the National Average Student Loan Debt) | $37,338 |
| Interest Rate (based on the National Average) | 5.8% |
| Yearly Income | $40,000 |
| Repayment Period | 15 Years |
| Monthly Payment (10-20% of Monthly Income) | $261-$385 |
| Total Interest Amount | $20.86K |
| Principal and Interest Paid After 10 Years | $58.2K |
3. I want to make low payments while earning more.
Best Option: Graduated Repayment Plan
With a Graduated Repayment Plan, your payments can start small regardless of your income. You could start with payments as low as the accruing interest and increase the total payment amount every two years to completely pay off your loan in 10 years. This option allows for more income available to you now, but you will pay more in interest compared to the standard repayment plan, and your monthly payments could double or even triple in size as you increase payments.
Graduated Repayment Plan Example*:
| Principal Balance (based on the National Average Student Loan Debt) | $37,338 |
| Interest Rate (based on the National Average) | 5.8% |
| Repayment Period | 10 Years |
| Graduated Monthly Payments | $234-703 |
| Total Interest Amount | $15.16K |
| Principal and Interest Paid After 10 Years | $52.5K |
4. I don’t want my income to influence my payments.
Best Option: Extended Repayment Plan
An Extended Repayment Plan can offer borrowers repayment periods up to 25 years, but to qualify, they must have at least $30,000 in federal student loans. Borrowers can choose fixed monthly payments or graduated extended payments. Unlike the IDR plans, extended repayment does not offer loan forgiveness, so you will have paid your loan off completely by the end of your term.
Extended Repayment Plan Examples*:
| Fixed | Graduated | ||
|---|---|---|---|
| Principal Balance (based on the National Average Student Loan Debt) | $37,338 | Principal Balance (based on the National Average Student Loan Debt) | $37,338 |
| Interest Rate (based on the National Average) | 5.8% | Interest Rate (based on the National Average) | 5.8% |
| Repayment Period | 25 Years | Repayment Period | 25 Years |
| Fixed Monthly Payment | $236 | Graduated Monthly Payment | $180-364 |
| Total Interest Amount | $33.46K | Total Interest Amount | $40.16K |
| Principal and Interest Paid After 10 Years | $70.8K | Principal and Interest Paid After 10 Years | $77.5K |
5. I plan to qualify for Public Service Loan Forgiveness (PSLF).
Best Option:Income-Drive Repayment
The Public Service Loan Forgiveness program offers tax-free loan forgiveness to full-time employees of the U.S. federal, state, local, or tribal government or qualifying not-for-profit organizations. To be eligible, borrowers must make 120 qualifying loan payments. IDR or Standard Repayment plans both qualify, but borrowers won’t benefit under this program under a standard plan since the loan would be paid off before it becomes eligible for forgiveness.
StudentAid.gov has the full list and details of federal student loan repayment plans. It also includes a Loan Simulator where you can calculate and adjust your monthly payments to fit your overall goals, meet your desired pay-off date, and even factor in new loans you may plan to acquire for additional education. You’ll also find more information regarding the Saving on a Valuable Education (SAVE) Plan.
Once you’ve selected the repayment plan that fits your goals, opt-in for automatic payments to avoid late payments, and you’ll even lower your interest rate by .25%. To enroll, log in to your online account and set your payments to automatic or call your lender if you run into any issues when trying to enroll online. Borrowers also have the option to prepay loans during their repayment period to help save on accruing interest and pay their loans off faster. Just be sure your servicer applies your additional payment(s) to your principal instead of your next payment.
*These calculators were created using StudentLoanPlans.app using the national averages for balances and rates. These calculations are made available to you as informational and educational tools for your independent use and are not intended to provide financial or investment advice. These calculators are not offers or representations and do not describe any particular products or services. Results depend on many factors, including the information you provide and we do not guarantee their applicability or accuracy in regards to your individual circumstances.
