Federal student loans offer a set selection of repayment plans that borrowers can choose from. Federal student loan borrowers may be assigned a repayment plan when they begin loan repayment, but they can change their repayment plan at any time without any fees.
Choosing the right repayment plan may feel overwhelming, but understanding the repayment plans can help. In this article, we’ll review the repayment plans available to federal student loan borrowers, listed below, and student loan refinancing options.
Student loan repayment options for federal loans explored here include:
• Standard Repayment Plan
• Extended Repayment Plan
• Graduated Repayment Plan
• Income-driven repayment Plans
The Standard Repayment Plan is 10 years and usually has the highest monthly payments but allows borrowers to repay their loans in the shortest period of time, which may help the borrower pay less in accrued interest over the life of the loan.
The Extended Repayment plan stretches out the repayment period for up to 25 years. Payments can be either fixed or may increase gradually over time. This repayment plan may be worth considering for borrowers who cannot meet the monthly payments on the Standard Repayment Plan.
On the Graduated Repayment Plan, the repayment period is 10 years, but the monthly payments start out low and then increase every two years. This plan may be worth considering for borrowers who have a relatively low income now, but anticipate that their salary may increase substantially over time.
Income-driven repayment plans tie a borrower’s income to their monthly payments. These options may be worth considering for borrowers who are struggling to make payments under the other payment plans or who are pursuing Public Service Loan Forgiveness.
You can take this quiz to get a better understanding of each option and see example scenarios that could be similar to yours. Want to skip to the answers? Check out overviews of the different repayment plans below.
Student Loan Repayment Plan Options for Federal Student Loans
Standard Repayment Plan
The Standard Repayment Plan is essentially the default repayment plan for federal student loans. This plan extends repayment over up to 10 years and monthly payments are set at a fixed amount. The interest on the loan remains the same as when it was originally disbursed, because federal loans have fixed interest rates.
One of the benefits of the Standard Repayment plan is that it may save you money in interest over the life of your loan because, generally, you’ll pay back your loan in the shortest amount of time (10 years) compared to the other federal repayment plans (20 to 30 years).
A common challenge associated with the standard repayment plan is that payments can be too high for some borrowers to manage. Remember that this is the default option when it comes time to set up a repayment plan, so if you would prefer another option, you’ll need to choose one when the time comes to start repaying your loan(s).
Student Loans Eligible for the Standard Repayment Plan
The following federal loans are eligible for the Standard Repayment Plan:
• Direct Subsidized Loans
• Direct Unsubsidized Loans
• Direct PLUS Loans
• Direct Consolidation Loans
• Subsidized Federal Stafford Loans
• Unsubsidized Federal Stafford Loans
• FFEL PLUS Loans
• FFEL Consolidation Loans
Extended Repayment Plan
If payments are too high for you to manage on the standard 10-year repayment plan, you can choose the Extended Repayment Plan for your federal loans, where the term is up to 25 years and payments are generally lower than with the Standard and Graduated Repayment Plans. With this plan you can also choose between fixed or graduated payments.
If you’re eligible, an Extended Repayment Plan can provide significant relief if you are struggling to pay your monthly loan payments by lengthening your term and potentially lowering your monthly payments.
This can help keep you out of default (which is important!). But it is important to remember that lengthening your loan term usually means you will be paying significantly more interest over the life of the loan — because it will take you longer to pay off your loan — and it may not give you the lowest monthly payments, depending on your circumstances.
Student Loans Eligible for the Extended Repayment Plan
The following federal loans are eligible for the Extended Repayment Plan:
• Direct Subsidized Loans
• Direct Unsubsidized Loans
• Direct PLUS Loans
• Direct Consolidation Loans
• Subsidized Federal Stafford Loans
• Unsubsidized Federal Stafford Loans
• FFEL PLUS Loans
• FFEL Consolidation Loans
Graduated Repayment Plan
With this plan, you would still pay your federal student loans back over a 10- to 30-year period, with lower payments at the beginning of the term that gradually increase every two years.
The idea behind the Graduated Repayment Plan is that a borrower’s income will likely increase over time, but may not be much at the start of their career.
Of course, the income boost may not happen. With this plan, because interest keeps accruing on the outstanding principal balance over a longer period of time, even though you’re making payments, the longer you take to repay your loan(s), the more interest you’ll wind up paying in the end. (Remember, more payments with interest = more interest paid total.) More information about eligibility for the Graduated Repayment Plan may be found here .
Student Loans Eligible for the Graduated Repayment Plan
The following federal loans are eligible for the Graduated Repayment Plan:
• Direct Subsidized Loans
• Direct Unsubsidized Loans
• Direct PLUS Loans
• Direct Consolidation Loans
• Subsidized Federal Stafford Loans
• Unsubsidized Federal Stafford Loans
• FFEL PLUS Loans
• FFEL Consolidation Loans
Income-Driven Repayment Plans
Each of the three plans listed above (Standard, Extended, and Graduated) are considered traditional repayment plans. Income-Driven Repayment Plans , though, are different because the student loan payment amount is based upon the borrower’s income and family size.
To be eligible for an income-driven repayment plan, you’d need to go through a recertification process each year and, each year, your monthly payment could change (increase or decrease) based upon your current income and family size.
Maximum payments are set at 10% or 20% of what’s considered your discretionary income (the difference between 150% of the poverty guideline and your adjusted gross income), depending on the loan and the plan. And, there are multiple types of income-driven plans, including:
• Income-Based Repayment Plan (IBR)
• Pay As You Earn Repayment Plan (PAYE)
• Revised Pay As You Earn Repayment Plan (REPAYE)
• Income-Contingent Repayment Plan (ICR)
A significant advantage of using income-driven repayment plans is that your payment can be adjusted to accommodate a lower income. And, in most cases, if you choose one of these plans, any remaining balance after 20 or 25 years may be forgiven if repayment has been satisfactorily made.
Again, the longer you extend your loan term, the more payments (with interest) you’ll be making. Not all loans qualify for this type of program; you’ll need to be vigilant about recertifying for this repayment program and regularly provide updated info to the federal government and, if the remaining portion of the debt is forgiven, you may owe taxes on that dollar amount.
Visit the Federal Student Aid website to understand which federal loans are eligible for each type of Income-Driven Repayment Plan.
Another Option to Consider: Student Loan Refinancing
Refinancing student loans with a private lender, allows borrowers to consolidate (that is, combine) the loans. This can help make repayment convenient because there will be just one monthly payment. And borrowers who qualify for a lower interest rate may be able to reduce the amount of money they spend in interest over the life of the loan.
You typically need a certain credit score to qualify, among other fairly standard lending qualifications (like income and employment verification, among other factors). Know that once federal student loans are refinanced with a private lender, they will become ineligible for federal repayment plans, programs like Public Service Loan Forgiveness, and other borrower protections like deferment or forbearance.
Repayment Plans for Private Student Loans
The repayment plans for private student loans are set by the lender. If you have private student loans, review the loan terms or contact the lender directly to review the payment options available to you.
The Takeaway
Borrowers repaying federal student loans have three traditional repayment plans to choose from (Standard, Extended, and Graduated) and four Income-Driven Repayment Plans to choose from. When selecting a repayment plan, consider factors like your current income and expenses, potential future income, and career goals. For example, borrowers pursuing Public Service Loan Forgiveness will need to switch to an income-driven repayment plan.
At SoFi, potential borrowers may qualify for a lower interest rate on their student loans. Applicants who want to increase their cash flow, can select a longer term to lower their payments, keeping in mind that this may mean paying more in interest over the life of the loan. If the goal is to pay off debt more quickly and pay less back in interest overall, potential borrowers can pick a shorter term. Keep in mind that, as mentioned above, refinancing federal student loans eliminates them from federal borrower protections and benefits.
SoFi offers student loan refinancing options with absolutely no fees.
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SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL MAY 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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