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What’s the Best Student Loan Repayment Plan?

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In a Nutshell

The best federal student loan repayment plan is the plan that works for you. You'll automatically start out in the standard repayment plan, but you'll have the ability to change to a student loan repayment plan that's based on your income.

Written by the Upsolve Team.  Reviewed by Attorney Andrea Wimmer
Updated November 28, 2021


The student loan repayment plan that works for you! 

The best federal student loan repayment plan for student loan borrowers is simply a payment plan that works for them. Repayment plans are not one size fits all. There are specific factors that are taken into consideration when determining the best repayment payment plan for you, like your annual income, the total amount of your debt, family size, and your current financial situation. 

Knowing the key differences, benefits, and financial impact of the different federal student loan repayment programs will empower you to choose the option that empowers you to take charge of your finances. What’s most important is to know that you are not locked into the standard repayment plan, which often comes at a higher monthly payment than other repayment plans. The bottom line is, you have options!

What Are the Different Federal Student Loan Repayment Plans

This article will break down the different loan federal student loan repayment plan options available for borrowers with federal student loans. These options provide an attractive alternative to the automatically assigned standard repayment plan, making monthly payments more affordable - giving you a more realistic approach to paying down your student loan debt. 

Repayment plan options for private loans differ from the ones mentioned in this article. If you have private student loans, your repayment options are set by your lender; it’s best to contact your loan servicer to discuss options for repayment. Your lender will be your first stop to determine eligibility for different repayment plan options.

Just Graduated? You Get a Grace Period Before Repayment Starts.

The good news is that you won’t have your first payment due immediately after graduating. Instead, there is a 6-month grace period. Don’t use this as an excuse to not worry about your student loans for 6 months. Now is the time to research your options and get yourself into the best repayment plan for you.  

Standard Repayment Plan for Federal Student Loans

After the grace period expires, federal student loans automatically enter into the standard repayment plan if you don’t choose another payment plan beforehand. The standard repayment plan requires you to make fixed monthly payments to pay off your loan in 10 years or within 10 to 30 years for consolidation loans. Every borrower is eligible for the standard repayment plan.

Until recently, payments under the standard repayment plan did not count as qualifying payments for folks working in the public sector and seeking public service loan forgiveness (PSLF).

To summarize, the standard repayment plan allows you to pay off your federal student loans at a fixed monthly payment in 10 years or within 10 to 30 years for consolidation loans. All borrowers are automatically enrolled in this plan when your federal student loans go into repayment.

Federal Student Loan Graduated Repayment Plan

All borrowers are eligible for the Graduated Repayment plan. Unlike the standard repayment plan, your monthly student loan payments will increase over time. Your monthly payments will start off lower at first and then increase every two years. This payment plan will ensure that your federal student loans are paid off within 10 years or within 10 to 30 years for consolidated loans.

Federal student loans eligible for the graduated repayment plan include:

  • Direct subsidized and unsubsidized loans;

  • subsidized and unsubsidized federal Stafford loans;

  • all plus loans;

  • all consolidation loans (direct or FFEL).

Like the standard repayment plan, this is not ideal for those seeking public service loan forgiveness because it is generally not a qualifying repayment plan for PSLF.

The graduated repayment plan is a student loan repayment plan where payments start off low and then increase gradually over the life of the loan. This plan will ensure that your federal student loan is paid off within 10 years or within 10 to 30 years for consolidation loans. Here, borrowers will pay more over the life of the loan because of higher accruing interest in the initial years when monthly payments are lower. All borrowers are eligible for the graduated repayment plan.

Extended Repayment Plan for Federal Student Loans

Borrowers will be eligible for the extended repayment plan if they have one of the following loans:

  • Direct subsidized and unsubsidized loans;

  • subsidized and unsubsidized federal Stafford loans;

  • all plus loans;

  • all consolidation loans (direct consolidation loans or FFEL).

*If you are a direct loan borrower, you must have more than $30,000 in outstanding direct loans to qualify for the extended repayment plan.

Under this plan, your federal student loan monthly payments will be lower than both the standard repayment plan and the graduated repayment plan. However, since the loans are paid off within 25 years, you will pay more over the life of the loan. Monthly payments under this plan can be fixed (the same monthly payment over 25 years), or lower monthly payments at the beginning and higher monthly payments towards the end. 

Revised Pay As You Earn Repayment Plan (or REPAYE) for Federal Student Loans

Federal student loan borrowers are eligible for the REPAYE plan if they have any of the following direct loans:

  • Direct subsidized and unsubsidized loans;

  • direct plus loans made to students;

  • direct consolidation loans that do not include plus loans (direct or FFEL).

Monthly payments under the REPAYE plan are 10% of your discretionary income. If you are married, both your and your spouse's discretionary income and federal student loan debt will be considered in calculating your monthly payment. Monthly payment amounts are recalculated yearly where you will update your discretionary income and family size each year, regardless if that information has changed.

The outstanding loan balance of your federal student loan will be forgiven if it is not repaid in 20 years (undergraduate loans) or 25 years (graduate loans). The REPAYE program is an income-based repayment plan and may be an ideal option for those seeking public service loan forgiveness (PSLF).

Pay As You Earn Repayment Plan (PAYE) for Federal Student Loans

To qualify under this plan, you must meet several requirements:

  • You must be a new federal student loan borrower on or after October 1, 2007, and

  • you must have received a disbursement of a direct federal student loan on or after October 1, 2011.

The following direct loans are eligible for this repayment plan:

  • direct subsidized and unsubsidized loans;

  • direct plus loans made to students;

  • direct consolidation loans that do not include parent plus loans (direct or FFEL).

Like the REPAYE plan, the pay as you earn (PAYE)  repayment plan calculates monthly payments at 10% of your discretionary income. Monthly payments are calculated according to your income and family size; that information will need to be updated annually. However, the PAYE plan requires you to have high debt relative to your income. But in contrast with the REPAYE plan, your spouse's income and federal student loan debt will be considered only if you file a joint tax return. 

With the PAYE plan, you would have a lower monthly payment than the standard repayment plan. In fact, you would never pay more than you would pay under the 10-year standard repayment plan. If after 20 years of making monthly payments, you haven't paid off your federal student loan, the outstanding balance will be forgiven. 

Federal student loan income-based repayment plan (IBR)

To be eligible for the income-based repayment federal student loan repayment plan, borrowers must have high debt relative to your income. Depending on when you received your first loans, your monthly payments will be either 10% or 15% of your discretionary income. Each year, monthly payments are recalculated based upon your income and family size. This information will need to be updated each year even if your income and family size has not changed. Like the PAYE loan repayment option, your spouse's income will only be taken into consideration if you file a joint tax return. With an IBR plan, your monthly payment amount would never be more than what you would have paid under the 10 year standard repayment plan. 

After the 20 or 25 year loan term, depending on when you received your first federal student loans, any outstanding balance on your federal student loan will be forgiven.

Federal student loan income – contingent repayment plan (ICR)

If you are a direct loan borrower with a direct subsidized and unsubsidized loan, direct plus loan (made to students), or a direct consolidation loan, you are eligible for this federal student loan repayment plan.

Monthly payments are either: 20% of your discretionary income OR the amount you would pay on a federal student loan repayment plan with a fixed payment over 12 years, adjusted according to your income.

Your monthly payment amount is recalculated every year based upon your income, family size, and the total amount of your direct loans; your income and family size must be updated every year.

The outstanding balance of your federal student loans under the ICR plan will be forgiven if not repaid within 25 years. This plan may be advantageous to parent borrowers, who do not qualify under the income-based repayment plan – parent borrowers can access this plan by consolidating their parent plus loan into a direct consolidation loan.

Let’s Summarize...

There are many options available to you to make your federal student loan monthly payments. Your default repayment option is the 10 year, standard repayment plan. However, you are not stuck with this monthly payment option. You can call your loan servicer and get into any of the following federal student loan repayment programs: 

  • Graduated repayment plan 

  • Extended repayment plan 

  • Revised Pay as you earn repayment plan (REPAYE) 

  • Pay as you earn repayment plan (PAYE)

  • Income-based repayment plan (IBR) 

  • Income-contingent repayment plan (ICR)

The important takeaway here is that the repayment plan that will work best for you will depend upon your income, your marital status, family size, and the length of the repayment term.

Taking all factors into consideration will help you make the best choice to repay your federal student loans. Your lender will be in the best position to communicate with you what types of loan(s) you have and the repayment options available to you that will compliment your financial situation.



Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

Attorney Andrea Wimmer

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Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor. While in private practice, Andrea handled... read more about Attorney Andrea Wimmer

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