Federal Student Loan Repayment Plans: Which One Will Work for You?

With federal student loan repayment starting again on October 1, you may be wondering how you’re going to be able to resume payments. After all, it’s been over three years since millions of borrowers have had to submit a federal student loan payment. Fortunately, federal student loans have straightforward payment plans in place. Find out about the different plans, including income-based plans, to see which one may be right for you.

Standard Repayment Plan

The standard repayment plan is a straightforward and predictable way to repay your loans. The standard repayment plan essentially spreads out your loan to be paid within 10 years (up to 30 for Consolidation Loans). Since this plan is shorter than the rest, you’ll be paying less over time than other plans. All borrowers are eligible for this plan.

Things to note: the monthly payments on this plan are typically higher than the other repayment plans which may be challenging for borrowers with lower income or in the event of a financial hardship. Also, if you are seeking Public Service Loan Forgiveness, however, the standard repayment plan is likely not ideal for you. PSLF forgives the remaining balance after 120 qualifying payments (i.e., 10 years of repayment).

Graduated Repayment Plan

For this plan, you can expect your monthly payments to start at a lower amount and increase every two years. For recent grads who may just be entering the job market, this plan is a good choice if you expect your salary to increase over time. The plan is usually set to have your loans paid off in the span of 10 years but can be extended up to 30 years for consolidated loans.

Things to note: this plan, like the standard repayment plan, is not ideal for those seeking PSLF. Ideally, your salary will increase as you progress into your career, but this is not the case for all borrowers.

Extended Repayment Plan

This plan is only for those who have more than $30,000 in outstanding debt. Payments may be fixed or graduated, with the aim to have your loans paid off within 25 years. With consistent payments on the Extended Repayment Plan, any remaining loan balance may be forgiven after 25 years This payment plan can mean paying less in monthly payments, offering flexibility for borrowers.

Things to note: forgiveness under this plan may be considered taxable income so it’s important to factor that into your financial planning. Also, with this plan taking longer, you might end up paying more interest over time than other plans.


The newest repayment plan, put into place shortly after the Supreme Court decision, is available for any Direct Loan Borrower. Under this plan, your monthly payments will be 5% of your discretionary income, and payments are recalculated each year based on your updated income and family size. After 20 years (25 for graduate studies), you can expect your loans to be forgiven if you haven’t repaid your loans in full. Unlike the other plans listed above, this plan may be a good option for those seeking PSLF.

Things to note: this plan may not be the most efficient way to pay off your student loan debt, and you will likely pay more in interest than other plans. Also, you may have to pay income tax on any amount that is forgiven.

Pay As You Earn (PAYE)

This plan is designed to make monthly payments more affordable since payments will be calculated based on your income and family size and cap your monthly payments at 10% of your discretionary income making sure your payments stay affordable.

Things to note: you must have been a new borrower on or after October 1, 2007 and must have received a disbursement of a Direct Loan on or after October 1, 2011.

Income-Based Repayment Plan (IBR)

Like the SAVE plan, your monthly payments will be calculated based on your monthly income and are recalculated every year based on your current income, after you finish making those payments like the SAVE plan any forgiven debt will be considered taxable income.

Overall, there are many repayments plans for most borrowers to choose from. Be sure to do your research beforehand to pick the one that will work best for you!

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