Your guide to student loan repayment plans

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Ask a Lender
July 5, 2017 | Updated September 25, 2017


Key Points

Selecting the right plan for repaying your student loans

  • Private student loans are not eligible for federal repayment plans.
  • Federal Perkins Loans are repaid through your school, but you can consolidate a Perkins Loan into a Direct Consolidation Loan.
  • Basic repayment plans have higher monthly payments but lower overall costs.
  • Income-based repayment forgives any remaining loan balance after certain conditions and payments are met.

Facing your student loans can be one of the scariest parts of graduating from college. Fortunately, there are several repayment plans available to help you settle your student debt in a manageable manner.

Federal vs. private repayment

Private and federal student loans are repaid differently. Private student loan repayment is handled by a lender, often a bank. While private loans are not eligible for federal repayment plans, many lenders offer flexible repayment programs. You may wish to compare lenders to see if refinancing or consolidating your private student loans can save you money.

Federal student loan repayment programs apply to federal Direct, Stafford, PLUS and federal family education loans (FFEL), as well as federal Consolidation Loans. Perkins loans are issued and managed by your school, so contact that student loan office to explore repayment options. If you hold at least one Direct Loan in addition to a Perkins Loan, you can consolidate them into a Direct Consolidation Loan that is then eligible for federal repayment programs. Remember that this will void your Perkins Loan Cancellation and Discharge benefits, so make this decision with care.

There are eight federal student loan repayment options for non-Perkins loans — three basic plans and five income-driven plans.

Basic repayment plans

If you have federal loans, you are automatically enrolled in the Standard Repayment Plan upon graduation. You may switch plans – it’s free to do so. Contact your loan servicer to change your repayment plan. 

With the three basic plans, you repay your loan in full over its term; there is no loan forgiveness. While the monthly payments are higher than income-based plans, you save money in the long run by paying less in interest.

Standard plan

Available to all borrowers, the Standard Plan consists of fixed monthly payments over a 10-year repayment term. For Consolidation Loans, repayment terms are 30 years.

Graduated plan

Available to all borrowers, the Graduated Plan starts with lower amounts and increases over time to carry higher long-term costs. Repayment terms are 10 years or 30 years for Consolidation Loans.

Extended plan

The extended plan is available to all borrowers, though Direct and FFEL borrowers must have more than $30,000 in outstanding loans to qualify. Monthly payments are fixed or graduated over a repayment term of up to 25 years.

The right plan depends on your initial income and repayment capabilities. Say, for example, you have a Direct Subsidized Loan of $20,000 with a 3.5 percent interest rate and 10-year term. On the Standard Plan, you pay a fixed $198 a month, for a total of $23,733 paid. With the Graduated Plan, your initial payment is $110 a month, rising incrementally to $330 a month for a total of $24,641 paid over the term of the loan.  ies. s to qualify. Monthly payments are fixed or graduated over a repayment term of up to 25 years. 

Income-based repayment plans

Five federal income-based repayment plans calculate your monthly payment based on your discretionary income — that is, the difference between income and 150 percent of your state’s poverty line based on family size, according to the U.S. Department of Education. With income-based repayment, your remaining loan balance is forgiven after all required payments are made over the term of the loan. You are required to pay taxes on the forgiven balance.

Pay as You Earn

Available to borrowers with a high debt-to-income ratio, this plan has monthly payments of no more than 10 percent of discretionary income over a term of 20 years.

Revised Pay as You Earn

Available to all borrowers with eligible loans, this plan has monthly payments of no more than 10 percent of discretionary income over 20 or 25 years.


Available for borrowers with high debt-to-income ratio, this plan has monthly payments of 10 or 15 percent of discretionary income over 20 or 25 years.


For borrowers with eligible loans, the Income-Contingent plan has monthly payments of no more than 20 percent of discretionary income over a term of 25 years.


Low-income borrowers with eligible loans have monthly payments dependent on annual income over repayment terms of up to 15 years.

Identify whether your loans and income level are eligible for income-based repayment plans on the U.S. Department of Education’s Federal Student Aid repayment chart. You will need to recertify — meaning report your income and family size — each year.

Selecting a plan

Use the Federal Student Aid Repayment Estimator to get a rough idea of how much your monthly payment would be under each plan. Also consider these factors before making your decision:

Your employer

Working for a nonprofit or government organization may make you eligible for federal Public Service Loan Forgiveness, which can eliminate your loan after 120 payments. To qualify, you must be enrolled in a federal income-based repayment program.

Marital status and family size

During the annual review, the payment formula looks at your family size, and your spouse’s income and debt in the annual income review, potentially affecting monthly payments.  

Debt-to-income ratio

Assess your loan balance alongside your current income and any expected changes in the years to come. Lower monthly payments are attractive, but typically translates into more money paid in interest over the life of your loan. That said, it’s wiser to spend more long term than face delinquency or default because you can’t afford monthly payments with a cheaper plan.

Private refinance or consolidation

Federal program terms are typically favorable compared to private consolidation or refinance options. In certain situations, however, private lenders can save you money. Once you consolidate or refinance a federal loan into a private loan, you lose all federal benefits or protections.

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