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Federal loans allow you to stop or reduce your payments in some circumstances, such as by enrolling in grad school, for up to three years — which is known as deferment. Deferment on private student loans varies by lender, and not all lenders offer it.

One thing you generally don’t want to do is simply stop making payments on your student loan. Whether your loans are federal or private, this puts you at risk of default, which can have a number of negative consequences.

Read on to learn more about student loan deferment, including what it is, how it works, its pros and cons, plus some alternative ways to get student debt relief.

What Is Student Loan Deferment?

Student loan deferment allows qualified applicants to reduce or stop making payments on their loans for up to three years. If you have a subsidized federal loan, no interest accrues during the deferment period. If you have an unsubsidized federal loan, interest will accrue and will be added to the loan amount (or capitalized) at the end of the deferment period.

Deferments are available on federal loans including Direct Loans, FFEL Program loans, and Perkins Loans.

Private student loans may or may not offer deferment options to borrowers. If you have questions about your private student loan, you’ll want to check in with your lender directly.

How Does Student Loan Deferment Work?

If you have a federal student loan and are no longer in school at least half-time, you will need to apply to defer payments on your student loan. This usually involves submitting a request to your student loan servicer. You will also likely need to provide documentation to show that you meet the eligibility requirements for the deferment (more on eligibility requirements below).

If you have an unsubsidized federal student loan and are granted deferment, interest will continue to accrue during the deferral period. You will have the option to either pay the interest as it accrues or allow it to accrue and be capitalized (added to your loan principal balance) at the end of the deferment period.

Deferments are available on federal loans including Direct Loans, FFEL Program loans, and Perkins Loans.

If a private lender offers deferment, they will likely have their own forms and requirements.

Why Defer Student Loans

Applying for deferment may make sense if you are facing short-term difficulty paying your student loans, since a deferment can provide you with the opportunity you need to stay afloat financially. And, if you have a subsidized loan, deferment won’t make your loan any more expensive in the long run.

Deferring student loans also won’t directly impact your credit score.

Why Not Defer Student Loans

If you’re able to stay on top of your loan payments, then deferment likely doesn’t make sense. If you think that you may have long-term difficulty making your monthly loan payments, deferment may not be the best option, either.

If you have an unsubsidized federal loan, interest will continue to accrue during deferment. At the end of the deferment period, this interest will be capitalized on the existing loan amount (or the principal loan value). Moving forward, interest will be calculated based on this new total. So essentially, you are accruing interest on top of interest, which can significantly increase the amount of interest owed over the life of the loan.

Pros and Cons of Student Loan Deferment

Student loan deferment can help borrowers who are struggling financially, but it may not be the right choice for everyone. Here are some pros and cons to consider when evaluating deferment options for federal student loans.

Pros	Cons
Borrowers are able to temporarily suspend or lower the monthly payments on their student loans.	On most federal student loans, interest continues to accrue. This may significantly increase the total cost of borrowing over the life of the loan.
Borrowers may qualify for deferment for periods of up to three years.	Because interest may continue to accrue during deferment, other options — like income-driven repayment plans — may be more cost-effective in the long term.

Types of Student Loan Deferment

For federal student loans, there are a few different deferment options. Here are the details on some of the most common reasons borrowers apply for deferment.

In-School Deferment

Students who are enrolled at least half-time in an eligible college or career program may qualify for an in-school deferment. If you are enrolled in a qualifying program at an eligible school, this type of deferment is generally automatic. If you find the automatic in-school deferment doesn’t kick in when you are enrolled at least half-time in an eligible school, you can file an in-school deferment request form.

Unemployment Deferment

Those currently receiving unemployment benefits, or who are actively seeking and unable to find full-time work, may be able to qualify for unemployment deferment. Borrowers can receive this deferment for up to three years.

Note that under the new ‘Big, Beautiful Bill,” loans made after July 1, 2027 are no longer eligible for deferments based on unemployment hardship.

Economic Hardship Deferment

This type of deferment may be an option for borrowers who are receiving merit-tested benefits like welfare, who work full-time but earn less than 150% of the poverty guidelines for your state of residence and family size, or who are serving in the Peace Corps. Economic hardship deferments may be awarded for a period of up to three years.

Note that under the ‘Big, Beautiful Bill,’ loans made after July 1, 2027 are no longer eligible for deferments based on economic hardship.

Military Deferment

Members of the U.S. military who are serving active duty may qualify for a military service deferment. After a period of active duty service, there is a grace period in which borrowers may also qualify for federal student loan deferment.

Cancer Treatment Deferment

Individuals who are undergoing treatment for cancer may qualify for deferment. There is also a grace period of six months following the end of treatment.

Other Types of Deferment

There are other situations and circumstances in which borrowers might be able to apply for deferment. Some of these include starting a graduate fellowship program, entering a rehabilitation program, or being a parent borrower with a Parent PLUS Loan whose child is enrolled in school at least half-time.

Consequences of Defaulting on Federal Student Loans

If you simply stop making payments as outlined in your loan’s contract, you risk defaulting on your student loan. Default timelines vary for different types of student loans.

Most federal student loans enter default when payments are roughly nine months, or 270 days, past due. Federal Perkins Loans can default immediately if you don’t make any scheduled payment by its due date.

Consequences of defaulting on federal student loans includes:

•  Immediately owing the entire balance of the loan

•  Losing eligibility for forbearance, deferment, or federal repayment plans

•  Losing eligibility for federal student aid

•  Damage to your credit score, inhibiting your ability to qualify for a car or home loan or credit cards in the future

•  Withholding of federal benefits and tax refunds

•  Garnishing of wages

•  The loan holder taking you to court

•  Inability to sell or purchase assets such as real estate

•  Withholding of your academic transcript until loans are repaid

Consequences of Defaulting on Private Student Loans

The consequences for defaulting on private student loans will vary by lender but could include repercussions similar to federal student loans, and more, including:

•  Seeking repayment from the cosigners of the loan (if there are any cosigners)

•  Calls, letters, and notifications from debt collectors

•  Additional collection charges on the balance of the loan

•  Legal action from the lender, such as suing the borrower or their cosigner

To avoid these negative consequences, it’s best to contact your lender as soon as you think you may miss a payment. Your lender may be more willing to work with you prior to your loan entering default.

Recommended: Private Student Loan Consolidation

Who Is Eligible for Student Loan Deferment?

To be granted a deferment on federal loans, borrowers need to meet certain criteria.

You may be eligible if you’re:

•  Enrolled at least part-time in college, graduate school, or a professional school

•  Unable to find a full-time job or are experiencing economic hardship

•  On active military duty serving in relation to war, military operation, or response to a national emergency

•  In the 13-month period following active duty

•  Enrolled in the Peace Corps

•  Taking part in a graduate fellowship program

•  Experiencing a medical hardship

•  Enrolled in an approved rehabilitation program for the disabled

Borrowers who re-enroll in college or career school part-time may find that their federal student loans automatically go into in-school deferment with a notification from their student loan provider.

Loans may also keep accruing interest during deferment — depending on what types of federal student loans the borrower holds. Borrowers are still responsible for paying interest if they have a:

•  Direct Unsubsidized (Stafford) Loan

•  Direct PLUS Loan

If you don’t pay the interest during the deferment period, the accrued amount is added to your loan principal, which increases what you owe in the end.

Recommended: Student Loan Deferment in Grad School

What if You Have Private Student Loans?

Private lenders aren’t required to offer deferment options, but some do. For example, some might allow you to temporarily stop making payments if you:

•  Lose your job

•  Experience financial hardship

•  Go back to school

•  Have been accepted into an internship, clerkship, fellowship, or residency program

•  Face high medical expenses

Typically, even while a private student loan is in deferment, the balance will still accrue interest. This means that in the long term, the borrower will pay a larger balance overall, even after the respite of deferment.

In most cases, even with accrual of interest, deferment is preferable to defaulting. Borrowers with private loans could contact the lender to ask what options are available.

The Limits of Student Loan Deferment

Keep in mind that deferment is not a panacea. By definition, it’s temporary. Federal student loan borrowers will ultimately need to go back to making payments once they are no longer deferment-eligible. For example, a borrower’s deferral might end if they leave school, even if their ability to pay has not improved.

Federal loans can only be deferred for up to three years. With private loans, there may not be an option to defer at all, and if it is an option, the limit may be no more than a year.

Other Options for Reducing Federal Student Loan Payments

Besides student loan deferment, you have other choices if you can’t afford the total cost of your monthly payments. Here’s a look at some alternatives to deferment.

Income-Driven Repayments

For a longer-term solution, you may want to consider an income-driven repayment plan.

If you qualify, you may be able to reduce your monthly payment based on your income. Enrolling in an income-driven repayment plan won’t have a negative impact on your credit score or history. On certain income-driven repayment plans, student loan balances can be forgiven after 20 or 25 years, depending on the payment plan that the borrower is eligible for.

Starting on July 1, 2026, income-driven repayment plans PAYE, ICR, and SAVE will be replaced by a new Repayment Assistance Plan (RAP). The existing IDR plans will be eliminated by July 1, 2028. With RAP, payments range from 1% to 10% of adjusted gross income with terms up to 30 years. After the term is up, any remaining debt will be forgiven.

Forbearance

Student loan forbearance is another way to suspend or lower your student loan payments temporarily during times of financial stress, typically for up to nine months in a 24-month period under the new Repayment Assistance Plan. Generally, forbearance is not as desirable as deferment, since you will be responsible for accrued interest when the forbearance period is over no matter what type of federal loan you have.

When comparing deferment vs. forbearance, you’ll want to keep in mind that there are two types of forbearance for federal student loan holders: general and mandatory.

General student loan forbearance is sometimes called discretionary forbearance. That means the servicer decides whether or not to grant your request. People can apply for general forbearance if they’re experiencing:

•  Financial problems

•  Medical expenses

•  Employment changes

General forbearance is only available for certain student loan programs, and is only granted for up to nine months at a time. At that point, you are able to reapply for forbearance if you’re still experiencing difficulty. General forbearance is available for:

•  Direct Loans

•  Federal Family Education Loan (FFEL) Program loans

•  Perkins Loans

Mandatory forbearance means your servicer is required to grant it under certain circumstances. Reasons for mandatory forbearance include:

•  Serving in a medical residency or dental internship

•  The total you owe each month on your student loan is 20% or more of your gross income

•  You’re working in a position for AmeriCorps

•  You’re a teacher that qualifies for teacher student loan forgiveness

•  You’re a National Guard member but don’t qualify for deferment

Similar to general forbearance, mandatory forbearance is granted for up to nine month periods, and you can reapply after that time.

Another Option to Consider: Refinancing

Depending on your personal financial circumstances, another long-term solution could be student loan refinancing. This involves applying for a new loan with a private lender and using it to pay off your current student loans. Qualifying borrowers may be able to secure a lower interest rate or the option to lengthen their loan’s term and reduce monthly payments. Note that lengthening the repayment period may lower monthly payments, but will generally result in paying more interest over the life of the loan.

Refinancing could be a good option for borrowers with strong credit and a solid income, among other factors. Unlike an income-driven repayment plan, your monthly payment wouldn’t change based on your income.

Either way, you’ll want to keep in mind that refinancing federal student loans with a private lender means you no longer have access to any federal borrower protections or payment plans. So, if you are taking advantage of things like income-driven payment plans or deferment, you likely don’t want to refinance. But for other borrowers, student loan refinancing might be a useful solution.

If you have more than one student loan, refinancing could also simplify your repayment process.

Recommended: A Guide to Refinancing Student Loans

The Takeaway

If you take out a federal student loan and at some point need to pause or reduce your payments, you may be able to qualify for deferment, forbearance, or an income-driven repayment plan. Each option has its pros and cons.

If you’re considering a private student loan (or refinancing your federal loans), keep in mind that private loans don’t come with government-sponsored protections like forbearance and deferment. However, private lenders may offer hardship and deferment programs of their own.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

How long can you defer student loans for?

Depending on the type of deferment you are enrolled in, federal loans can be deferred for up to three years. Private student loans may not offer an option to defer payments, and if they do, the limit will be set by the individual lender.

Why would you defer student loans?

Deferment can be helpful if you are facing a temporary financial hurdle because they allow you to pause or reduce your payments for a period of time.

Are there any reasons not to defer student loans?

Most loans will continue to accrue interest during periods of deferment. When the deferment is over, this accrued interest is then capitalized on the loan. This means it’s added to the existing value of the loan. Moving forward, interest is charged based on this new total. This can significantly impact the total amount of interest that a borrower has to pay over the life of a loan.

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If you’re on the standard 10-year repayment plan and your federal student loan payments are high relative to your income, a student loan income-driven repayment plan may be an option for you.

Income-driven repayment bases your monthly payments on your income and family size. Due to recent legislation, your options for income-driven plans will be changing over the next few years.

Read on to learn about which repayment plans are currently available and what to expect in the near future.

What Is an Income-Driven Repayment Plan?

Income-driven student loan repayment plans were conceived to ease the financial hardship of government student loan borrowers and help them avoid default when struggling to pay off student loans.

Those who enroll in the plans tend to have large loan balances and/or low earnings. Graduate students, who usually have bigger loan balances than undergrads, are more likely to enroll in a plan.

The idea is straightforward: Pay a percentage of your monthly income above a certain threshold for 20 or 25 years. On the Income-Based Repayment (IBR) plan, you are then eligible to get any remaining balance forgiven.

Income-driven repayment plans are also the only repayment options that will help you qualify for the Public Service Loan Forgiveness program. (Standard Repayment also qualifies, but you probably wouldn’t have any debt left to forgive after 10 years.)

In mid-2025, about 12.3 million borrowers were enrolled in an income-driven repayment plan.


💡 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 may make sense if you qualify for a lower rate and you don’t plan to use federal repayment programs or protections. Note that refinancing with a longer term can increase your total interest charges.

How Income-Driven Plans Differ from Standard Repayment?

So, how do income-driven repayment plans work? Do income-driven repayment plans accrue interest? And how do they compare to the Standard Repayment Plan?

Income-driven repayment adjusts your monthly student loan payment in accordance with your income and family size. It also extends your loan terms to 20 or 25 years. These plans are meant to provide relief for borrowers who have trouble affording payments on the standard plan. If your income changes, your monthly payments will change along with it.

Your loans do accrue interest on an income-driven plan, but the IBR plan offers some relief. Specifically, the government will pay any interest charges that your monthly payments don’t cover on subsidized loans for up to three years. However, you’re responsible for all the interest after this three-year period. You always have to pay the interest that accrues on unsubsidized loans.

By contrast, the Standard Repayment Plan doesn’t calculate your monthly payments based on your income. Instead, it gives you a fixed monthly payment based on a 10-year repayment term (or a 10- to 30-year term for Direct Consolidation Loans). By making this payment each month, you’ll pay off your full balance at the end of your term. The minimum payment on the Standard Plan is $50.

Federal student loans automatically go on Standard Repayment unless you apply for an alternative. If you prefer an income-driven plan, you can apply for it on the Federal Student Aid website.

Types of Income-Driven Repayment Plans

There are currently three income-driven repayment plans open to borrowers: Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn. The SAVE plan is no longer available, and a new plan called the Repayment Assistance Plan will be introduced in the summer of 2026. Here’s a closer look at each plan.

Pay As You Earn Repayment Plan (PAYE)

PAYE is currently available to borrowers, but it’s set to close and won’t be accepting new enrollments on or after July 1, 2027. Since PAYE will be shutting down, you’ll have until July 1, 2028 to switch to Income-Based Repayment or the new Repayment Assistance Plan.

To qualify for PAYE, you must be a new borrower as of October 1, 2007 and have received a Direct loan disbursement on or after October 1, 2011. Plus, you’re only eligible if your monthly payment on PAYE is less than what it would be on the Standard 10-year plan.

PAYE sets your monthly payments to 10% of your discretionary income and extends your loan terms to 20 years. Find out more about how PAYE compares to REPAYE (which is now closed).

Income-Based Repayment Plan (IBR)

While most of the current income-driven repayment plans will close in the coming years, IBR will remain open and available to current borrowers. If you’re currently on SAVE, PAYE, or ICR, you have the option of switching to IBR when (or before) your plan gets shut down.

On Income-Based Repayment, you’ll pay 10% of your discretionary income each month on a 20-year term if you first borrowed after July 1, 2014. If you borrowed before that date, your monthly payment percentage will be 15% and your repayment term will be 25 years.

IBR will forgive your remaining balance if you still owe money at the end of your term (after the Department of Education finishes updating its systems). PAYE and ICR no longer offer loan forgiveness, but you can get credit for your PAYE and ICR payments if you switch to IBR.

Income-Contingent Repayment Plan (ICR)

The Income-Contingent Repayment plan is the only income-driven option for borrowers with Parent PLUS loans (and you have to consolidate first). It sets your payments to 20% of your discretionary income and has a repayment term of 25 years. Note that the discretionary income calculation for ICR is different (and less generous) than the one used for the other income-driven plans.

Similar to PAYE, the deadline to enroll in ICR is July 1, 2027, and you have until July 1, 2028 to switch to IBR or RAP. Otherwise, you’ll automatically be moved to RAP. If you’re a parent borrower, you may want to enroll in ICR while you still can. Parent loans are not eligible for RAP, so you won’t have an income-driven repayment option if you miss the ICR enrollment deadline.

Income-Sensitive Repayment Plan

The Income-Sensitive Repayment plan is open to low-income FFEL borrowers. Direct loans, which replaced FFEL loans in 2010, are not eligible. On Income-Sensitive Repayment, your monthly payments will increase or decrease based on your annual income. You’ll make payments on your loans for up to 10 years.

SAVE Plan (Saving on a Valuable Education)

The SAVE plan is no longer available, but some SAVE borrowers remain in limbo as they wait to see what’s next for their student loans. Introduced by the Biden administration in 2023, the SAVE plan offered lower monthly payments and faster loan forgiveness than the other income-driven options.

It was struck down by legal challenges from Republican-led states, and SAVE borrowers were placed in an interest-free forbearance starting in the summer of 2024. Interest started accruing again on August 1, 2025, and the DOE is encouraging borrowers to switch to an alternative plan.

However, some SAVE borrowers are waiting it out to extend their forbearance as long as possible. Those who don’t make a move may end up in IBR and see their payments resume in mid-2026. SAVE will be eliminated completely by June 30, 2028.

RAP Plan (new Repayment Assistance Program)

The Trump administration’s “One Big Beautiful Bill” created the RAP program and will implement it starting in the summer of 2026. Existing borrowers will be able to access RAP or IBR, while new borrowers as of July 1, 2026 will only have RAP or the new Standard Repayment Plan.

While the existing IDR plans use discretionary income, the new RAP will base your payments on your adjusted gross income (AGI). Depending on your income, you’ll pay 1% to 10% of your AGI over a term that spans up to 30 years.

If you still owe money after 30 years, the rest will be forgiven. The government will cover unpaid interest from month to month, as well as make sure your loan’s principal goes down by at least $50 each month.

All borrowers are required to pay at least $10 per month on RAP. This plan may offer lower monthly payments than the current IDR options, but you could also pay more interest over the life of the loan due to the longer repayment term.

How Income-Based Student Loan Repayment Works

In general, borrowers qualify for lower monthly loan payments if their total student loan debt at graduation exceeds their annual income.

To figure out if you qualify for a plan, you must apply at StudentAid.gov and submit information to have your income certified. The monthly payment on your income-driven repayment plan will then be calculated. If you qualify, you’ll make your monthly payments to your loan servicer under your new income-based repayment plan.

You’ll generally have to recertify your income and family size every year or allow the DOE to access your tax information and recertify for you. Your calculated income-based payment may change as your income or family size changes.


💡 Quick Tip: When rates are low, refinancing student loans could make a lot of sense. How much could you save? Find out using our student loan refi calculator.

Pros and Cons of Income-Driven Repayment

Pros

•   Borrowers gain more affordable student loan payments.

•   Any remaining student loan balance is forgiven after 20 or 25 years of repayment on the Income-Based Repayment plan.

•   An economic hardship deferment period counts toward the 20 or 25 years.

•   The plans provide forgiveness of any balance after 10 years for borrowers who meet all the qualifications of the Public Service Loan Forgiveness (PSLF) program.

•   The government pays all or part of the accrued interest on some loans in some of the income-driven plans for a period of time.

•   Low-income borrowers may qualify for payments of zero dollars, and payments of zero still count toward loan forgiveness. On the new RAP option, the minimum monthly payment will be $10.

•   The IBR plan and new RAP plan offer some interest benefits if your monthly payments don’t cover your full interest charges.

Cons

•   Stretching payments over a longer period means paying more interest over time.

•   Forgiven amounts of student loans are free from federal taxation through 2025, but usually the IRS treats forgiven balances as taxable income (except for the PSLF program).

•   Borrowers in most income-based repayment plans need to recertify income and family size every year.

•   If a borrower gets married and files taxes jointly, the combined income could increase loan payments.

•   The system can be confusing to navigate, especially with all the legal challenges and recent legislation.

Other Student Loan Repayment Options

If you’re wondering, “Is an income-driven plan good for me?” consider the fact that income-driven repayment plans aren’t your only option for paying back student loans. Here are a few alternatives that are currently available.

Standard Repayment Plan

The Standard Repayment Plan involves fixed monthly payments over 10 years. Starting in the summer of 2026, the new Standard Plan will have fixed payments over a term that’s based on your loan amount. Your term will be 10 years if you owe less than $25,000 and go up to 25 years for balances over $100,000.

Graduated Repayment Plan

The Graduated Repayment Plan spans 10 years for most loans, but it can go from 10 to 30 years for consolidation loans. On Graduated Repayment, your monthly payments start out low and increase every two years. Like the current Standard Plan, you’ll be out of debt at the end of your term. However, you’ll end up paying more interest on this graduated plan. Graduated Repayment may be a good fit for borrowers whose income is low starting out but expect it to increase over time.

Extended Repayment Plan

Extended Repayment gives you 25 years to pay back your loans, but you must owe more than $30,000 and have borrowed after October 7, 1998. You can choose fixed payments or graduated payments. Unlike IBR, there’s no loan forgiveness at the end of the Extended Plan. Your monthly payments will go down when you extend your term, but you’ll pay more interest overall.

How to Qualify for Income-Driven Repayment

You can apply for income-driven repayment on the Federal Student Aid website. The process typically takes about 10 minutes. Here’s more on how to change your student loan repayment plan to an income-driven one.

Required Documentation

When you apply for an IDR plan, you can upload documentation verifying your income or allow the DOE to access your tax information and import it into your application. Along with sharing your income, you’ll need to provide your mailing address, phone number, and email. If you’re married, you’ll also provide your spouse’s financial information.

Annual Recertification Process

Every year, you have to recertify, or update, your income and family size so your loan servicer can adjust your monthly payments accordingly. This recertification is required even if your income or family size hasn’t changed.

If you fail to recertify your plan, your servicer will no longer base your payments on your income. Instead, you’ll pay the amount you would on the standard 10-year plan. If you fail to recertify IBR, you’ll have the added consequence of interest capitalization, meaning your interest charges will be added to the principal balance of your loan.

You can recertify your plan on the Federal Student Aid website by uploading documentation of your income. Alternatively, you can allow the DOE to access your federal tax information and automatically recertify your plan for you.

If you don’t give your consent for this (or aren’t eligible for auto-recertification), you’ll have to manually recertify your plan each year.

The Takeaway

Income-driven repayment can offer relief if you’re struggling to afford your monthly payments. These plans adjust your monthly student loans bills based on your income while giving you a lot more time to pay back your debt. Plus, income-driven plans (and the current Standard Plan) are the only plans that qualify for PSLF. A downside of IDR plans, however, is that you’ll likely pay more interest with an extended term.

Your options for IDR will also be changing due to recent legislation from the Trump administration. Most of the current plans will be shut down, leaving only Income-Based Repayment for current borrowers or the new Repayment Assistance Plan. For those who borrow after July 1, 2026, the only income-driven plan option will be the Repayment Assistance Plan. Staying informed about these changes will help you decide which income-driven repayment plan is best for you.

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.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Is income-based repayment a good idea?

For borrowers of federal student loans with high monthly payments relative to their income, income-based repayment can be a good idea. Just be aware that your options will be changing in the coming years.

What is the income limit for income-based student loan repayment?

Some income-driven repayment plans require that your monthly payments be less than on the standard 10-year plan. You’ll generally meet this guideline if your student loan debt is higher than your discretionary income or makes up a big portion of your income.

What are the advantages and disadvantages of income-based student loan repayment?

The main advantage is lowering your monthly payments, with the promise of eventual loan forgiveness on the IBR plan if all the rules are followed. Plus, income-driven plans are essentially the only ones that qualify for PSLF. A disadvantage is that you have to wait for 20 or 25 years depending on the plan you’re on and how much you owe. You’ll likely also pay more interest on this longer term.

How does income-based repayment differ from standard repayment?

With the standard repayment plan, your monthly payments are a fixed amount that ensures your student loans will be repaid within 10 years. Under this plan, you’ll generally save money over time because your monthly payments will be higher. With income-driven repayment, your monthly loan payments are based on your income and family size. These plans are designed to make your payments more affordable. If you still owe a balance after 20 or 25 years on IBR, the remaining amount is forgiven.

Who is eligible for income-based repayment plans?

With the PAYE and IBR plans, in order to be eligible, your calculated monthly payments, based on your income and family size, must be less than what you would pay under the standard repayment plan. Under the ICR plan, any borrower with eligible student loans may qualify. Parent PLUS loan borrowers are also eligible for this plan if they consolidate their parent loans first.

How is the monthly payment amount calculated in income-based repayment plans?

With income-based repayment, your monthly payment is calculated using your income and family size. Your payment is based on your discretionary income, which is the difference between your gross income and an income level based on the poverty line. The income level is different depending on the plan. For IBR, your monthly payment is 10% or 15% of your discretionary income, depending on when you borrowed.

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