Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.
Choosing a Student Loan Repayment Option
It’s never too early to think about student loan repayment. Whether you’re still in college, or you recently graduated and are in the ‘grace period’ before repayment begins, strategizing now can help you weigh the options.
If you’ve graduated and are already working and making payments, it can be a good idea to re-evaluate your repayment plan over time. As your financial circumstances change, the way you’d like to manage your student loans may also shift.
Before considering your options, take inventory of all your student loans. Be sure to list the principal, the interest rate, the repayment period, and the servicer for each loan.
All federal student loans issued in recent years have fixed interest rates, but private student loans or older federal student loans may have variable rates. If the rate is variable, be sure to note that as well.
Different Student Loan Repayment Options
Once you understand the details of your student loans, it’s time to think about your repayment options. The simple choice if you have federal student loans is the Standard Repayment Plan. It’s the “default” repayment plan, so unless you sign up for another option, this is the plan you’ll have. Under the Standard plan, you typically pay a fixed amount every month for up to 10 years.
There is no “standard repayment plan” for private student loans; the interest rate may vary based on market factors, and your repayment term might be shorter or longer.
The federal government also offers graduated and extended repayment plans for borrowers. With the Graduated Repayment Plan, payments start smaller and grow over time, while the Extended Repayment Plan stretches repayment over a period of up to 25 years and payments may be either fixed or graduated.
Opting for the Standard Repayment Plan may work for you, but for some borrowers, it’s not the most cost-effective choice. These borrowers may be eligible for special federal programs that can reduce the amount they owe monthly based on financial circumstances, and in some cases, forgive balances if they meet certain requirements.
Or some borrowers might be able to find a more competitive interest rate by refinancing their loans through private lenders.
💡 Quick Tip: Often, the main goal of refinancing is to lower the interest rate on your student loans — federal and/or private — by taking out one loan with a new rate to replace your existing loans. Refinancing makes sense if you qualify for a lower rate and you don’t plan to use federal repayment programs or protections.
Here’s an overview of some student loan repayment options that may help if you are choosing a repayment plan:
1. Student Loan Consolidation
Federal student loan consolidation allows you to combine multiple federal student loans into a single new loan. You can’t consolidate private student loans using this federal program.
When you consolidate your federal student loans into a Direct Consolidation Loan, your new loan’s interest rate will be the weighted average of all your old student loans’ interest rates, rounded up to the nearest eighth of a percent. This means your interest rate won’t necessarily be lower than the rate you were paying before consolidation on some of your student loans.
When you consolidate, you’ll also have the option to select a new repayment plan. The standard plan would still be available, but consolidation can also be a first step toward other plans of action, like student loan forgiveness or income-driven repayment.
2. Student Loan Forgiveness
While President Biden’s federal student loan forgiveness program — which would have canceled up to $20,000 in student loan debt for eligible borrowers — was blocked by the Supreme Court in late June 2023, there are other available forgiveness plans that certain borrowers may be able to take advantage of. For instance, some federal student loans and Direct Consolidation Loans are eligible for modified payment plans that forgive outstanding student loan balances.
Health care professionals, teachers, military service members, and those employed full-time by qualifying nonprofit or public service organizations may be eligible for certain federal student loan forgiveness programs.
For instance, under the Public Service Loan Forgiveness (PSLF) program, those who have worked for qualified employers, such as the government or some nonprofit agencies and have made 10 years of payments on a qualified income-driven repayment plan, can apply for forgiveness of all of their remaining federal student loan balances. That forgiveness is not considered taxable income.
3. Income-Based Repayment
If the payments under the Standard Repayment Plan seem too high, federal student loans offer a variety of income-based repayment plans, which tie the amount you pay to your discretionary income.
These income-driven repayment plans, which come in a variety of configurations, may help lower your monthly payments. In some cases, however, you might end up paying more over the life of the loan than you would have on the Standard Repayment Plan. That’s because with low monthly payments that stretch out over more years, you could be paying more in interest over time.
However, under the new Saving on a Valuable Education (SAVE) income-driven repayment plan introduced by the Biden Administration at the end of June 2023, any unpaid interest would be covered by the government (meaning the interest would not accrue) as long as you make your monthly payments. This plan also aims to reduce a borrower’s monthly payments by half.
Additionally, with income-driven repayment plans, you may be eligible for some student loan forgiveness programs if the remainder of your student loans aren’t paid off after 20 to 25 years (and in some cases under the new SAVE plan, after 10 years) of consistent, on-time payments.
4. Student Loan Refinancing
Refinancing student loans through a private lender offers the opportunity to consolidate multiple student loans into a single payment and potentially decrease your interest rate or lower your monthly payment.
Loan repayment terms vary based on the lender, and borrowers with better credit and earning potential (among other financial factors that vary by lender) may qualify for better terms and interest rates.
One important thing to know about refinancing, however, is that once you refinance a federal student loan into a private loan, you can’t undo that transaction and later consolidate back into a federal Direct Consolidation Loan.
This can be relevant for professionals in health care or education where federal student loan forgiveness plans are offered, or for those considering long-term employment in the public sector.
In addition, refinancing federal student loans with a private lender renders them ineligible for important borrower benefits and protections, like income-driven repayment and deferment.
💡 Quick Tip: When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.
Can You Change Your Student Loan Repayment Plan?
If you have federal student loans, it is possible to change your repayment plan at any time, without any fees. You’ll have the option to choose from any of the federal repayment plan options, including income-driven repayment plans.
There is less flexibility to change the terms of a private student loan. Some private lenders may offer alternative payment plans for borrowers. Check with your lender directly to see what options may be available to you.
SoFi Student Loan Refinancing
Refinancing is another avenue that can result in a new repayment plan. An important consideration, however, is that refinancing federal student loans will remove them from any federal programs or protections, so this won’t be the right choice for everyone.
Federal student loan borrowers have the ability to change their repayment plan at any time, without being charged any fees. There are different plans to choose from and you can look for one that suits your situation and needs.
Changing your repayment plan is a bit more challenging for private student loans, though some private lenders may offer alternative options for borrowers. Refinancing is another option that could allow some borrowers to adjust their repayment terms.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
What student loan repayment options are available to me?
Borrowers with federal student loans can choose from any of the federal repayment plans, including the standard 10-year repayment plan, or income-driven repayment options, including the new SAVE plan introduced by the Biden Administration at the end of June 2023, which is designed to make student loan debt more manageable.
For private student loans, repayment options will be determined by the lender.
What is a standard repayment plan for student loans?
The Standard Repayment Plan for federal student loans is fixed monthly payments over a period of 10 years. For consolidation loans, repayment may extend up to 30 years.
How long is a typical student loan repayment?
The typical student loan repayment period may vary from individual to individual. The Standard Repayment Plan for federal loans is 10 years, but income-driven repayment plans or Direct Consolidation loans may have a term of up to 25 to 30 years.
The repayment terms for private student loans vary by lender.
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SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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