Federal Student Loan Repayment Plans

According to a 2023 report from the Education Data Initiative, nearly 44 million borrowers in the United States have student loan debt, carrying a federal loan balance of $37,718 on average. Federal loan borrowers got much-needed relief from the pandemic-era payment pause, but regular monthly payments resumed in October 2023. 

If you recently started making monthly payments again, you may be unsure whether your current student loan repayment plan is the best option. Several options are available for federal student loans, and knowing them can help you choose the best plan for your situation. 

This guide can help you navigate the available federal student loan repayment options.

In this guide:

• When does federal student loan repayment start?
• How do I make my payment?
• What federal student loan repayment options do I have? 
• How to choose a repayment plan
• Should I use an income-driven repayment plan? 
• Can I consolidate my federal student loans? 
• Can I refinance my federal student loans? 
• Can my student loans be forgiven?

When does federal student loan repayment start?

The William D. Ford Federal Direct Loan Program is the U.S. Department of Education’s student loan program. Four types of loans are available, and certain loans come with a grace period after graduation that allows you to delay payments for a few months. 

Loan	Grace period
Direct Subsidized	6 months
Direct Unsubsidized	6 months
Direct PLUS	None
Direct Consolidation Loan	None

Can I delay repayment beyond the grace period? 

You can’t just call your loan servicer and ask for a longer grace period, but it’s possible to extend your grace period in rare cases. 

For instance, if you’re in the military and deployed for at least 30 days during your grace period, you can extend it for six months after your deployment. Those who enroll in school at least half-time during their grace period can also get an extension of up to six months after graduation.

How do I make my payment?

The process for making federal student loan payments varies depending on your loan servicer. Most servicers let you make monthly payments over the phone or by logging into an online dashboard. 

Who do I pay?

When you pay your federal student loans, you pay a loan servicer. This servicer manages the administrative aspects of your loan, including tracking and processing your payments, answering your loan questions, and implementing new repayment plans.  

Can I pay more than the required amount? 

If you want to pay down your federal student loans faster, you can pay more than the required monthly payment amount. Some loan servicers may let you do so over the phone or through an online portal. 

What happens if I struggle to make my payments? 

Borrowers struggling to make payments now that the payment pause is lifted have a few options. Multiple repayment plans are available with federal student loans, so you may want to modify your repayment plan to make your payments more manageable. Visit the Federal Student Aid website, or contact your student loan servicer to discuss possible options. 

Those who work in qualifying roles, such as public service positions, may be eligible for student loan forgiveness after meeting certain requirements. State-sponsored and nonprofit grant programs may also be available to help if you’re struggling to afford your payments. 

What happens if I miss a payment? 

Normally, if you miss a student loan payment, your loan servicer will report it to the three major credit bureaus, Equifax, Experian, and TransUnion. These delinquencies can hurt your credit score. 

But due to the Biden administration’s recent student loan legislation, missed payments won’t be reported to the major credit bureaus through September 30, 2024. If you miss a payment, it will be recorded as a forbearance and won’t damage your credit. Interest will still accrue, which could increase your outstanding loan payments and hurt your credit. 

What federal student loan repayment options do I have? 

Three basic repayment plans are available from the U.S. Department of Education for people who want a predictable, easy-to-prepare-for, and consistent plan.

	Standard repayment plan	Graduated repayment plan	Extended repayment plan
Monthly payment	Fixed payments	Lower payments to start that increase every 2 years	Fixed or graduated payments
Time frame	Up to 10 years (30 years for Consolidation Loans)	Up to 10 years (30 years for Consolidation Loans)	Up to 25 years
Direct Subsidized and Unsubsidized Loans eligible?	✅	✅	✅
Subsidized and Unsubsidized Federal Stafford Loans eligible?	✅	✅	✅
All PLUS loans (Direct and FFELP) eligible?	✅	✅	✅
All Consolidation Loans (Direct and FFELP) eligible?	✅	✅	✅
Pro	Pay less over time than other plans	Pay less per month initially	Lower monthly payments
Con	Higher monthly payment	Increasing loan payments	Pay more in interest

Standard repayment plan

The standard repayment plan of 10 years is the default plan for all federal student loans. Your payments are a percentage of your outstanding balance, and they’re fixed for the life of the loan.

With a standard plan, you could end up with higher monthly payments, but it’s the fastest way to repay your loans, and you’ll pay less in interest versus longer repayment plans.

Graduated repayment plan

With a graduated plan, your federal student loan payments start small and increase over a 10-year term. This plan can be good for someone who is just starting their career but expects to earn a higher salary further down the road. But you could run into problems if your higher loan payment is more than you can afford.

Extended repayment plan

For those who can’t afford high monthly payments, the extended plan offers a loan term of up to 25 years. Your payments are the lowest of all the basic plans, but you’ll pay more in interest over the long term.

How to choose a repayment plan

With multiple repayment plans available, it can be tough to determine which one works best for you. Before making any decisions, consider your financial situation and career path, and talk to your loan servicer. It’s about not only what you can afford now but your financial situation five or even 10 years down the road. 

Personal preference will play a role as well. Would you rather make small monthly payments for a longer time, or are you willing to put more toward your loans to pay them off faster and save on interest? These factors and more should be part of your decision-making process.

Should I use an income-driven repayment plan? 

Income-driven repayment (IDR) plans are worth considering if you have federal student loans. These repayment plans base your monthly loan payments on your family size and income instead of a set payment amount determined by your loan size and term. 

Opting for an IDR plan often results in a lower monthly payment than a standard repayment plan. 

	SAVE	PAYE	IBR	ICR	ISR
Monthly payment	10% of income	10% of income	10% – 15% of income	20% of income or fixed payment on 12-year repayment plan (whichever is less)	Amount based on annual income
Time frame	20 – 25 years	20 years	20 years	25 years	Up to 15 years
Direct Subsidized and Unsubsidized Loans eligible?	✅	✅	✅ (as well as Subsidized and Unsubsidized Federal Stafford Loans)	✅	❌ (only Subsidized and Unsubsidized Federal Stafford Loans are eligible)
Direct PLUS Loans eligible?	✅  (those made to students)	✅  (those made to students)	✅  (as well as FFEL PLUS Loans, both made to students)	✅  (those made to students)	❌  (only FFEL PLUS Loans are eligible)
Consolidation Loans eligible?	✅  (Direct Consolidation Loans that do not include PLUS loans made to parents)	✅  (Direct Consolidation Loans that do not include PLUS loans made to parents)	✅ (Direct or FFEL Consolidation Loans that do not include PLUS loans made to parents)	✅ (including those that repaid Parent PLUS loans)	✅ (only FFEL Consolidation Loans are eligible)
Outstanding balance forgiven?	✅	✅	✅	✅	❌
Pro	Outstanding balance forgiven after 20 or 25 years	Outstanding balance forgiven after 20 or 25 years	Outstanding balance forgiven after 20 years	Outstanding balance forgiven after 25 years	Payments change based on annual income
Con	Forgiven loan balance may be subject to income tax	Forgiven loan balance may be subject to income tax	Forgiven loan balance may be subject to income tax	Forgiven loan balance may be subject to income tax	Total payment over time may exceed that of the 10-year standard plan

Income-driven plans fluctuate with your income. Your payment amount will increase as you earn more. And if you experience a period of low wages, your payment will decrease during that time.

The five types of IDR plans have different terms, relevance of income, and interest rates.

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How can marital status affect an IDR plan? Our expert weighs in

Erin Kinkade

CFP®

In my experience, the income of both spouses affects the IDR plan. If the income is high for the other spouse—not the spouse in repayment—the payment could be greater, and vice versa. However, if you file your taxes separately—which is uncommon but is done with advice from a tax expert—only the borrower’s income is considered. I suggest weighing the pros and cons of this repayment plan. If the cons outweigh the pros, choose another more favorable repayment option.

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Saving on a Valuable Education (SAVE) Plan

With the Saving on a Valuable Education (SAVE) Plan, formerly the Revised Pay as You Earn Plan (REPAYE), your payments are limited to 10% of your discretionary income. This repayment plan is available on all Direct Loans except Parent PLUS loans. The term is 20 years for undergraduate loans and 25 years for graduate and professional loans, with any remaining balance forgiven after that time.

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Pay as You Earn (PAYE)

The Pay as You Earn Plan, or PAYE, is available on all federal Direct Loans besides Parent PLUS Loans. Non-Direct Loans may be eligible if consolidated through the Direct Consolidation Loan program. Your payment is 10% of your discretionary income—what’s left over after food, shelter, clothing, medical care, and other necessities. The term is 20 to 25 years, and any remaining balance after that time is forgiven.

>>Read more: PAYE vs. REPAYE

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Income-Based Repayment (IBR)

The Income-Based Repayment Plan, or IBR, is available with Direct Loans, federal Stafford loans, and Consolidation loans. The term is 20 years, and your outstanding balance is forgiven afterward. Payments are 10% to 15% of your discretionary income.

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Income-Contingent Repayment (ICR)

The Income-Contingent Repayment Plan, or ICR, is available for all Direct Loans, including Direct Consolidation Loans. Your payment is either 20% of your discretionary income or the amount you’d pay on a 12-year fixed repayment plan, adjusted for your actual income. The term is 25 years, and any remaining loan balance is forgiven afterward.

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Income-Sensitive Repayment (ISR)

The Income-Sensitive Repayment (ISR) plan bases your payment amount on your annual income, and its repayment term is 15 years. This plan is available for all federal Stafford loans, as well as FFEL PLUS and Consolidation loans.

Your payment amount changes yearly based on your salary, and your remaining loan balance isn’t forgiven after your 15-year term. With this plan, you’ll pay more interest than you would with the standard 10-year plan.

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CFP® Erin Kinkade cautions: 

Our expert cautions

Erin Kinkade

CFP®

Consider the following potential hurdles you could face with an income-driven repayment plan: The amount of joint or individual income, family size, and tax filing status. Does the payment ultimately provide you with an economic benefit? Certain financial professionals focus primarily on student loan repayments. I advise anyone seeking repayment who is in a complex circumstance to engage with one of these financial professionals.

Can I consolidate my federal student loans? 

Income-driven repayment plans are still an option when you get a Direct Consolidation Loan to consolidate your federal student loan debt. Direct Consolidation Loans are the only option the U.S. Department of Education offers for consolidating federal student loans.

During the consolidation process, you can choose from various repayment plans based on the types of loans you’re consolidating. Remember: Not all IDR plans are available for every type of federal loan, so you’ll need to understand the types of loans you have before consolidating.

Once your Direct Consolidation Loan is disbursed, all your loans are paid off, with only the consolidation loan still outstanding for repayment. Your single monthly payment is calculated based on the plan you choose during the consolidation process.

Can I refinance my federal student loans? 

You can consolidate federal student loans with a Direct Consolidation Loan, but the U.S. Department of Education doesn’t offer a refinancing option apart from that. 

You could refinance federal student loans with a private lender. But by doing so, you’ll sacrifice certain federal loan benefits, such as the option to convert to an IDR plan or potential student loan forgiveness. So it makes sense to consider alternatives before refinancing federal student loans with a private lender. 

Can my student loans be forgiven?

The Biden administration attempted to enact a federal student loan forgiveness plan for borrowers, but the U.S. Supreme Court shut it down in June 2023. Despite this, your student loans could be forgiven via other avenues. 
For instance, Public Service Loan Forgiveness (PSLF) is available to borrowers working in eligible public service roles. Under PSLF, your loans are forgiven once you’ve made 120 qualifying monthly payments and met other criteria. Other role-based student loan forgiveness programs are also available for eligible health care workers and teachers.