Guide to Student Loan Repayment Plans

There are several different types of repayment plans for federal student loans. These include Standard, Graduated, Extended, Pay-As-You Earn, Revised Pay As You Earn, Income Based Repayment, Income Contingent Repayment and Income Sensitive Repayment.

The payment plan you choose depends on many factors, including what you can afford to pay. Consider if it’s more important to you to pay off your student loans faster and pay less overall or have a lower monthly payment but end up paying more money in interest.

The student loan repayment plan you select will also depend on what your loans are eligible for and your income.

Read below for a guide to student loan repayment plans.

Standard

The standard plan is the default plan for federal student loans and has a 10-year term length. All federal loans are eligible for this plan, including unsubsidized and subsidized Direct, unsubsidized and subsidized Stafford, PLUS and Consolidation loans. 

Payments are highest under the standard plan because it has the shortest repayment window. In return, borrowers pay the least amount of interest. Their payments will remain the same for the entire term.

Anyone who can afford these monthly payments should stick with the standard plan because they’ll repay their loans faster and pay less interest overall.

To calculate the monthly loan payments and total payments under the standard repayment plan, use a loan calculator with a repayment term set to 10 years.

Graduated

As the name implies, payments on the graduated plan start small and increase over time, usually every two years. The repayment term is 10 years, but because the payments start out small, borrowers end up paying more interest than with the standard plan. 

Unsubsidized and subsidized Direct, unsubsidized and subsidized Stafford, PLUS and Consolidation loans qualify for this plan.

Borrowers with a low starting salary should consider this plan if they still want a 10-year repayment schedule, but can’t afford payments on the standard plan.

Extended

The extended repayment plan allows borrowers to stretch their loan term up to 25 years. Borrowers can choose from fixed or graduated payments based on what makes the most sense for them.

Direct, Stafford, PLUS and Consolidation (both Direct and FFEL) loans are eligible for this plan. However, those with Direct or FFEL loans must have more than $30,000 in total loans to qualify. Like other extended plans, the total interest paid will be higher than with the standard plan.

To calculate the monthly loan payments and total payments under an extended repayment plan, use a loan calculator with a repayment term set to 25 years.

Pay As You Earn (PAYE)

Monthly payments under PAYE are 10% of your discretionary income, which also takes family size into account. After 20 years, any remaining loan amount will be forgiven – but you’ll still have to pay taxes on that amount.

Only Direct, PLUS and Consolidation loans are eligible, but not Parent PLUS loans. Borrowers must have received their first loan disbursement on or after October 1, 2011 to qualify.

To calculate the monthly loan payments and total payments under the pay-as-you-earn repayment plan, use a pay-as-you-earn repayment calculator.

Revised Pay As You Earn (REPAYE)

Under the REPAYE plan, payments are limited to 10% of your discretionary income, which also considers family size.

Borrowers with undergraduate loans will have any leftover amount forgiven after 20 years. Those with graduate or professional school loans will have any leftover amount forgiven after 25 years. The forgiven amount is considered taxable income.

REPAYE is one of the best options for those working toward Public Service Loan Forgiveness (PSLF). Direct, PLUS and Consolidation loans qualify for this plan. Stafford, FFEL and Parent PLUS loans are not eligible.

Unlike with PAYE, married borrowers will have their partner’s income counted as part of their discretionary income, even if they file taxes separately. Borrowers with high-earning partners may be better off using PAYE or another repayment method.

To calculate the monthly loan payments and total payments under the revised pay-as-you-earn repayment plan, use a revised pay-as-you-earn repayment calculator.

Income-Based Repayment (IBR)

Income-Based Repayment calculates monthly payments as either 10 or 15% of your discretionary income, depending on your disbursement date. Borrowers have to provide information about their income, family size and state of residence every year. Payments may vary if that information changes.

Any remaining loan amount is forgiven after 20 or 25 years, depending on when your loans were initially given out. That amount will be taxable.

Borrowers with Direct, Stafford, PLUS and Consolidation loans are eligible, but not Parent PLUS loans.

To calculate the monthly loan payments and total payments under the income-based repayment plan, use an income-based repayment calculator.

Income-Contingent Repayment (ICR)

With the ICR option, monthly payments are either 20% of your discretionary income or the monthly amount due if you were on a 12-year fixed repayment plan, whichever is less.

After 25 years of payments on the ICR plan, the remaining amount will be forgiven. The forgiven amount will still count as taxable income.

Payments will be based on your state and family size. Borrowers must provide this information annually, so the monthly payment amount may change year to year.

Payments will never exceed what they would have been under the standard plan. Direct, PLUS and Consolidation loans are eligible, but not Parent PLUS or Parent Consolidation loans.

To calculate the monthly loan payments and total payments under the income-contingent repayment plan, use an income-contingent repayment calculator.

Income-Sensitive Repayment

The Income-Sensitive Repayment plan has a 15-year term and determines your monthly payments based on your income. The exact formula changes based on your loan servicer, but is generally between 4 to 25% of your gross monthly income.

Borrowers will pay more interest than with the standard plan, but it’s not clear how this amount compares to other repayment options. FFEL Consolidation, FFEL PLUS and Stafford loans qualify for this plan, but Direct loans are not eligible.

Repayment Plans for Private Student Loans

Private student loans don’t offer the variety of payment plans above. The above plans are just for federal student loans. 

Lower your payment: If you need to lower your monthly payment, call your lender directly to see if they offer an extended repayment plan. The pro to this is lowering your monthly payment if you’re unable to afford your current payment, but the con is that you will pay more on interest and carry the debt longer. 

Defer payments: Some private student loan lenders also offer an opportunity to defer student loans if you become unemployed. The time period isn’t as generous as it is for federal student loans, but it is available for a shorter duration for some private lenders. Call your lender directly to see what they offer. 

Consider if refinancing private loans is right for you: If your private student loans are a high interest, you could consider refinancing to potentially lower your interest rate. Keep in mind that if you refinance federal student loans, you will lose several irreplaceable benefits that come with only federal loans. If you refinance federal student loans, you lose the potential for student federal loan forgiveness, an option to make payments based on your income and family size, an option to pause payments during times of unemployment or economic hardship and any student loan cancellation proposed by Congress (like Joe Biden’s proposal to cancel some federal student loans). But it could make sense for private student loans – just consider the pros and cons of refinancing and take the time to understand if it’s right for you. Credible is a great tool for comparing various lenders at once if you decide refinancing private student loans is a good idea for you.

Splash Financial is a student loan refinance marketplace that matches you with a lender with a low interest rate.

The ChangEd app helps student loan borrowers pay down their debt faster. Link your credit and debit cards and with every purchase you make, the total is rounded up, and that “spare change” is added to your student loans. You can also earn points for potential free payments. Read our review to learn more.

At Savingforcollege.com, our goal is to help you make smart decisions about saving and paying for education. Some of the products featured in this article are from our partners, but this doesn’t influence our evaluations. Our opinions are our own.