If you have borrowed federal student loans, it’s important to understand that you have a number of repayment options available to you.
Which repayment plans are available to you will depend on a number of factors, including the specific types of loans you have borrowed, when you borrowed them, and your income. Additionally, each repayment plan comes with its own potential benefits and drawbacks which you should understand before opting into any of them.
Below, we answer all of the questions you may have about different student loan repayment plans so that you can feel confident that you are choosing the best possible option for your student loans.
What are student loan repayment plans?
Student loan repayment plans are specific repayment options for federal student loans. Repayment terms, payment amounts, and eligibility requirements are all established by law. Your student loan servicer is responsible for helping you understand which repayment plans you are eligible to enroll in, and also for guiding you on the pros and cons of each.
What are the different repayment plans?
In total, there are eight different student loan repayment plans. They are typically broken into two groups.
Traditional Repayment Plans
Income-Driven Repayment Plans
- Revised Pay as You Earn Repayment Plan (REPAYE)
- Pay as You Earn Repayment Plan (PAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
- Income-Sensitive Repayment
How do you change repayment plans?
If you would like to change your student loan repayment plan, all you need to do is contact your student loan servicer. Your servicer will help you understand which repayment plans your particular loans are eligible for, and can help you understand the potential pros and cons of enrolling in each plan.
Are there any fees for changing repayment plans?
No. You should never be charged any fees for changing your student loan repayment plan. You can change your repayment plan as many times as you’d like free of charge. That being said, different repayment plans may make you eligible for different benefits, such as forgiveness, and changing plans may “reset” the clock. Before making any changes, it’s important to understand how changing your plan may affect your goals.
Will my interest rate change?
No, changing your student loan repayment plan will not impact your interest rate in any way. For this reason, longer repayment will typically lead to you paying a greater amount in interest compared to shorter repayment.
Which repayment plan is the right one for you?
Ultimately, which repayment plan is right for you will depend on a number of factors. Before choosing any plan, ask yourself: What are your goals? Do you want to save as much money as possible while repaying your student loans? Do you want or need lower monthly payments? Both? The answers to these questions will help to inform your decision.
If you want to pay off your loans as quickly and cheaply as possible…
Then Standard Repayment is likely your best option. Under Standard Repayment, you will make level payments for 10 years, at which point your loans will be paid in full. This is the shortest repayment term, which means you will pay less in interest compared to other repayment plans. You will, unfortunately, not be eligible for student loan forgiveness.
If you have a low income and need lower monthly payments…
Then an income-driven repayment plan could be a good fit for you. Income-Based Repayment, Income-Contingent Repayment, Income-Sensitive Repayment, REPAYE, and PAYE are all options. Each has its own repayment terms and eligibility requirements. Due to the extended payment terms offered by these plans, you will end up paying more in the form of interest compared to Standard or Graduated Repayment.
If you have high income but need lower monthly payments…
Unfortunately, if your income is too high, you may not qualify for income-driven repayment, or may find that those plans do not offer you any benefits. In this case, Graduated or Extended Repayment may offer alternatives that allow you to make lower monthly payments regardless of your income. You will, however, pay more in the form of interest over the life of the loan than you would under Standard Repayment.
It is important to note, however, that under Graduated Repayment your monthly payments will increase over time.
If you are looking for student loan forgiveness…
A number of repayment plans are designed to forgive student loans after payments have been made for a certain period of time. This includes Income-Based Repayment, Income-Contingent Repayment, REPAYE, and PAYE.
It is important to note that even if you receive student loan forgiveness, the extended repayment terms in these plans will typically mean that you will pay more over the life of the loan than if you were to opt into either Standard or Graduated Repayment.
Standard, Graduated, and Extended Repayment do not include student loan forgiveness. Neither does Income-Sensitive Repayment.