Student Loan Repayment Options: Find the Best Plan

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Borrowers can choose from four types of federal student loan repayment plans. But the best one for you will likely be the standard repayment plan or an income-driven repayment plan, depending on your goals.

  • Standard repayment lasts 10 years and is the best one to stick with to pay less in interest over time.

  • Income-driven repayment (IDR) options tie the amount you pay to a portion of your income and extend the length of time you’re in repayment to 20 or 25 years. When the term is over, you can get income-driven loan forgiveness for your remaining debt. IDR is best if you’re having difficulty meeting your monthly payment and need something more manageable. There are four types of IDR plans.

  • Graduated repayment lowers your monthly payments and then increases the amount you pay every two years for a total of 10 years.

  • Extended repayment starts payment amounts low and then increases every two years for a total of 25 years. Or you can choose a fixed version which splits payment amounts evenly over 25 years.

Before changing student loan repayment plans, plug your information into the Education Department’s Loan Simulator to see what you’ll owe on each plan. Any option that decreases your monthly payments will likely result in you paying more interest overall.

Here’s how to decide which payment plan is right for you:

If you want to pay less interest

Best repayment option: standard repayment.

On the standard student loan repayment plan, you make equal monthly payments for 10 years. If you can afford the standard plan, you’ll pay less in interest and pay off your loans faster than you would on other federal repayment plans.

How to enroll in this plan: You’re automatically placed in the standard plan when you enter repayment.

If you want lower monthly payments and student loan forgiveness

Best repayment option: income-driven repayment.

Income-driven plans set monthly payments between 10% and 20% of your discretionary income. Payments can be as small as $0 if you’re unemployed or underemployed and can change annually. Income-driven plans extend your loan term to 20 or 25 years, depending on the type of debt you have. At the end of that term, you get IDR student loan forgiveness on your remaining debt — but you may pay taxes on the forgiven amount.

The Education Department has announced another new IDR plan option that would cut payments by at least half and forgive some borrowers’ debt after 10 years, instead of 20 or 25. It’s not yet finalized or available to borrowers; rollout will begin at the end of 2023.

How to enroll in these plans: You can apply for income-driven repayment with your federal student loan servicer or at studentaid.gov. When you apply, you can choose which plan you want or opt for the lowest payment. Taking the lowest payment is best in most cases, though you may want to examine your options if your tax filing status is married filing jointly.

If income-driven repayment doesn’t make sense with your salary

Best repayment option: graduated student loan repayment plan.

If your income is high, but you want lower payments, a graduated plan may make sense for you.

Graduated repayment decreases your payments at first — potentially to as little as the interest accruing on your loan — then increases them every two years to finish repayment in 10 years.

If your income is high compared with your debt, you may initially pay less under graduated repayment than an income-driven plan. This could free up money in the short term for a different goal, like a down payment on a home, without costing you as much interest as an income-driven plan. You would still pay more interest than under standard repayment.

Initial payments on the graduated plan can eventually triple in size. You need to be confident you’ll be able to make the larger payments if you choose this plan. Generally speaking, it’s best to stick with the standard plan if you can afford it.

If you don’t want payments tied to your income

Best repayment option: extended student loan repayment plan.

The extended plan lowers payments by stretching your repayment period to as long as 25 years. You must owe more than $30,000 in federal student loans to qualify for extended repayment.

You can choose to pay the same amount each month over that new loan term — like under the standard repayment plan — or you can opt for graduated payments. Whether you choose equal or graduated extended payments, you’ll have a good idea of what you’ll pay each month in the future.

Extended repayment does not offer loan forgiveness like income-driven repayment plans do; you will pay off the loan completely by the end of the repayment term.

If you want to pay off your loans more quickly

To get rid of your debt sooner than your monthly payments allow, you can prepay loans. This will save you interest with any repayment plan, but the impact will be greatest under standard repayment. Just be sure to tell your student loan servicer to apply the extra payment to your principal balance instead of toward your next monthly payment.

If you need to temporarily pause payments

You may be able to temporarily postpone repayment altogether with deferment or forbearance. Some loans accrue interest during deferment, and all accrue interest during normal forbearance periods. This increases the amount you owe.

If your financial struggles are pay-related, income-driven repayment is a better option. Income-driven repayment plans can reduce payments to $0 — and those payments count toward forgiveness.

If you qualify for Public Service Loan Forgiveness

Best repayment option: income-driven repayment.

Public Service Loan Forgiveness is a federal program available to government, public school teachers and certain nonprofit employees. If you’re eligible, your remaining loan balance could be forgiven tax-free after you make 120 qualifying loan payments.

Only payments made under the standard repayment plan or an income-driven repayment plan qualify for PSLF. To benefit, you need to make most of the 120 payments on an income-driven plan. On the standard plan, you would pay off the loan before it’s eligible for forgiveness.

How to enroll in these plans: You can apply for income-driven repayment with your servicer or at studentaid.gov.

Have private student loans?

Private student loans don’t qualify for income-driven repayment, though some lenders offer student loan repayment options that temporarily reduce payments. If you’re struggling to repay private student loans, call your lender and ask about your options.

If you have a credit score in at least the high-600s — or a cosigner who does — there’s little downside to refinancing private student loans at a lower interest rate. Dozens of lenders offer student loan refinancing; compare your options before you apply to get the lowest possible rate.

How much could refinancing save you?

Note: This calculator assumes that after you refinance, you’ll make minimum monthly payments.

Student loan refinancing from our partners

SoFi Student Refinancing logo

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.

SoFi Student Refinancing logo

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.

Earnest Student Loan Refinance logo

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.

Earnest Student Loan Refinance logo

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.

Splash Financial Student Loan Refinance logo

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.

Splash Financial Student Loan Refinance logo

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.

Private lenders also refinance federal student loans, which can save you money if you qualify for a lower interest rate. But refinancing federal student loans is risky because you lose access to benefits like income-driven repayment plans and loan forgiveness. Refinance federal loans only if you’re comfortable giving up those options.

Enhance the uniqueness of this blog post by rewording it to offer a fresh perspective on the topic. Avoid repeating common phrases or ideas and strive to introduce new insights, examples, or viewpoints to engage the reader –

Borrowers can choose from four types of federal student loan repayment plans. But the best one for you will likely be the standard repayment plan or an income-driven repayment plan, depending on your goals.

  • Standard repayment lasts 10 years and is the best one to stick with to pay less in interest over time.

  • Income-driven repayment (IDR) options tie the amount you pay to a portion of your income and extend the length of time you’re in repayment to 20 or 25 years. When the term is over, you can get income-driven loan forgiveness for your remaining debt. IDR is best if you’re having difficulty meeting your monthly payment and need something more manageable. There are four types of IDR plans.

  • Graduated repayment lowers your monthly payments and then increases the amount you pay every two years for a total of 10 years.

  • Extended repayment starts payment amounts low and then increases every two years for a total of 25 years. Or you can choose a fixed version which splits payment amounts evenly over 25 years.

Before changing student loan repayment plans, plug your information into the Education Department’s Loan Simulator to see what you’ll owe on each plan. Any option that decreases your monthly payments will likely result in you paying more interest overall.

Here’s how to decide which payment plan is right for you:

If you want to pay less interest

Best repayment option: standard repayment.

On the standard student loan repayment plan, you make equal monthly payments for 10 years. If you can afford the standard plan, you’ll pay less in interest and pay off your loans faster than you would on other federal repayment plans.

How to enroll in this plan: You’re automatically placed in the standard plan when you enter repayment.

If you want lower monthly payments and student loan forgiveness

Best repayment option: income-driven repayment.

Income-driven plans set monthly payments between 10% and 20% of your discretionary income. Payments can be as small as $0 if you’re unemployed or underemployed and can change annually. Income-driven plans extend your loan term to 20 or 25 years, depending on the type of debt you have. At the end of that term, you get IDR student loan forgiveness on your remaining debt — but you may pay taxes on the forgiven amount.

The Education Department has announced another new IDR plan option that would cut payments by at least half and forgive some borrowers’ debt after 10 years, instead of 20 or 25. It’s not yet finalized or available to borrowers; rollout will begin at the end of 2023.

How to enroll in these plans: You can apply for income-driven repayment with your federal student loan servicer or at studentaid.gov. When you apply, you can choose which plan you want or opt for the lowest payment. Taking the lowest payment is best in most cases, though you may want to examine your options if your tax filing status is married filing jointly.

If income-driven repayment doesn’t make sense with your salary

Best repayment option: graduated student loan repayment plan.

If your income is high, but you want lower payments, a graduated plan may make sense for you.

Graduated repayment decreases your payments at first — potentially to as little as the interest accruing on your loan — then increases them every two years to finish repayment in 10 years.

If your income is high compared with your debt, you may initially pay less under graduated repayment than an income-driven plan. This could free up money in the short term for a different goal, like a down payment on a home, without costing you as much interest as an income-driven plan. You would still pay more interest than under standard repayment.

Initial payments on the graduated plan can eventually triple in size. You need to be confident you’ll be able to make the larger payments if you choose this plan. Generally speaking, it’s best to stick with the standard plan if you can afford it.

If you don’t want payments tied to your income

Best repayment option: extended student loan repayment plan.

The extended plan lowers payments by stretching your repayment period to as long as 25 years. You must owe more than $30,000 in federal student loans to qualify for extended repayment.

You can choose to pay the same amount each month over that new loan term — like under the standard repayment plan — or you can opt for graduated payments. Whether you choose equal or graduated extended payments, you’ll have a good idea of what you’ll pay each month in the future.

Extended repayment does not offer loan forgiveness like income-driven repayment plans do; you will pay off the loan completely by the end of the repayment term.

If you want to pay off your loans more quickly

To get rid of your debt sooner than your monthly payments allow, you can prepay loans. This will save you interest with any repayment plan, but the impact will be greatest under standard repayment. Just be sure to tell your student loan servicer to apply the extra payment to your principal balance instead of toward your next monthly payment.

If you need to temporarily pause payments

You may be able to temporarily postpone repayment altogether with deferment or forbearance. Some loans accrue interest during deferment, and all accrue interest during normal forbearance periods. This increases the amount you owe.

If your financial struggles are pay-related, income-driven repayment is a better option. Income-driven repayment plans can reduce payments to $0 — and those payments count toward forgiveness.

If you qualify for Public Service Loan Forgiveness

Best repayment option: income-driven repayment.

Public Service Loan Forgiveness is a federal program available to government, public school teachers and certain nonprofit employees. If you’re eligible, your remaining loan balance could be forgiven tax-free after you make 120 qualifying loan payments.

Only payments made under the standard repayment plan or an income-driven repayment plan qualify for PSLF. To benefit, you need to make most of the 120 payments on an income-driven plan. On the standard plan, you would pay off the loan before it’s eligible for forgiveness.

How to enroll in these plans: You can apply for income-driven repayment with your servicer or at studentaid.gov.

Have private student loans?

Private student loans don’t qualify for income-driven repayment, though some lenders offer student loan repayment options that temporarily reduce payments. If you’re struggling to repay private student loans, call your lender and ask about your options.

If you have a credit score in at least the high-600s — or a cosigner who does — there’s little downside to refinancing private student loans at a lower interest rate. Dozens of lenders offer student loan refinancing; compare your options before you apply to get the lowest possible rate.

How much could refinancing save you?

Note: This calculator assumes that after you refinance, you’ll make minimum monthly payments.

Student loan refinancing from our partners

SoFi Student Refinancing logo

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.

SoFi Student Refinancing logo

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.

Earnest Student Loan Refinance logo

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.

Earnest Student Loan Refinance logo

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.

Splash Financial Student Loan Refinance logo

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.

Splash Financial Student Loan Refinance logo

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.

Private lenders also refinance federal student loans, which can save you money if you qualify for a lower interest rate. But refinancing federal student loans is risky because you lose access to benefits like income-driven repayment plans and loan forgiveness. Refinance federal loans only if you’re comfortable giving up those options.

Student Loan Repayment Options: Find the Best Plan

Introduction

As a recent graduate, a new chapter of your life has just begun. You’ve completed your studies, received your diploma, and are now ready to embark on the next stage of your journey. However, one significant obstacle stands in your way – student loans. The burden of student debt can feel overwhelming, but there are options available to help you navigate the repayment process and find the best plan that suits your financial situation. In this comprehensive guide, we will explore the different student loan repayment options and provide you with valuable insights to make informed decisions about your future.

Understanding Your Student Loans

Before delving into the various repayment options, it’s essential to have a clear understanding of your student loans. There are two primary types of student loans: federal loans and private loans. Federal loans are issued by the government and come with unique benefits such as fixed interest rates, income-driven repayment plans, and loan forgiveness programs. On the other hand, private loans are provided by banks, credit unions, or other financial institutions and typically have higher interest rates and fewer repayment options compared to federal loans.

Federal Student Loan Repayment Options

1. Standard Repayment Plan: The standard repayment plan is the most common option for federal student loans. Under this plan, you will make fixed monthly payments over a period of 10 years until the loan is fully repaid.

2. Graduated Repayment Plan: The graduated repayment plan starts with lower monthly payments that gradually increase over time. This option is beneficial for borrowers who expect their income to rise steadily in the future.

3. Income-Driven Repayment Plans: Income-driven repayment plans base your monthly payments on your income and family size, making it more manageable to repay your loans. There are several types of income-driven plans, such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR).

4. Extended Repayment Plan: The extended repayment plan extends the repayment period from 10 years to 25 years, resulting in lower monthly payments. However, you will end up paying more in interest over the long term.

5. Public Service Loan Forgiveness (PSLF): If you work for a qualifying public service organization, you may be eligible for loan forgiveness under the PSLF program. After making 120 qualifying payments, the remaining balance on your loans will be forgiven.

Private Student Loan Repayment Options

Private student loans typically do not offer as many repayment options as federal loans. However, you can still explore the following options to manage your debt effectively:

1. Refinancing: Refinancing allows you to consolidate your existing loans into a new loan with a lower interest rate and better terms. This can potentially save you money in the long run and simplify your repayment process.

2. Extended Repayment: Some private lenders offer extended repayment plans that allow you to spread out your payments over a longer period, reducing the monthly amount you owe.

3. Deferment or Forbearance: If you are experiencing financial hardship, you may be eligible for deferment or forbearance, which allows you to temporarily pause or reduce your loan payments. However, interest may continue to accrue during this time.

Choosing the Best Repayment Plan

When deciding on the best repayment plan for your student loans, consider the following factors:

1. Your Financial Situation: Take into account your current income, expenses, and other financial obligations. Choose a plan that aligns with your budget and allows you to make timely payments.

2. Loan Terms: Understand the terms and conditions of each repayment plan, including interest rates, monthly payments, and the total amount you will repay over time.

3. Long-Term Goals: Consider your long-term financial goals, such as buying a home, starting a family, or saving for retirement. Choose a plan that helps you achieve these objectives while managing your student debt effectively.

4. Eligibility for Loan Forgiveness: If you are eligible for loan forgiveness programs such as PSLF, factor this into your decision-making process. Loan forgiveness can provide significant relief from your student debt burden.

Conclusion

Navigating the student loan repayment process can be challenging, but with the right information and guidance, you can find a plan that works for you. Whether you have federal or private student loans, there are options available to help you manage your debt and achieve financial stability. By understanding your loan terms, exploring different repayment plans, and considering your long-term goals, you can make informed decisions that set you on the path to financial success. Remember, you are not alone in this journey – seek support from financial advisors, loan servicers, and other resources to guide you through the repayment process. With determination and financial literacy, you can conquer your student debt and pave the way for a bright future ahead.

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