Choose the federal student loan repayment plan that’s best for you.

Student Loan Plans 

Standard Repayment Plan

This is the payment that you are typically put into by default. It’s simply amortized over 10 years. The payment is usually larger, which is not good for many people. But it pays off the fastest and will save you the most interest, which is very good. All borrowers are eligible for this repayment plan no matter what kind of loans they have. Because this isn’t an income-driven plan, you can’t qualify for the Public Services Loan Forgiveness program. Consolidated loan payment terms can be extended depending on the payment amount: less than $7,500 is 10 years, from $7,500 - $9,999 is 12 years, from $10,000 - $19,999 is 15 years, from $20,000 - $39,999 is 20 years, from $40,000 to $59,999 is 25 years, and over $60,000 is 30 years. All Direct and Stafford Loans qualify for this payment plan, as well as Parent Plus and consolidated loans (Direct or FFEL).

Graduated Repayment Plan

Payments are lower at first and then increase, usually every two years. If you are expecting your income to increase this is a good loan repayment program that will pay off in 10 years like the Standard Repayment Plan. However, because your payments are lower at first, you end up paying more interest in the long run. All borrowers are eligible for this repayment plan no matter what kind of loans they have. Because this isn’t an income-determined plan, you can’t qualify for the Public Services Loan Forgiveness program. Consolidated loan payment terms can be extended depending on the payment amount: less than $7,500 is 10 years, from $7,500 - $9,999 is 12 years, from $10,000 - $19,999 is 15 years, from $20,000 - $39,999 is 20 years, from $40,000 to $59,999 is 25 years, and over $60,000 is 30 years. All Direct and Stafford Loans qualify for this payment plan, as well as Parent Plus and consolidated loans (Direct or FFEL).

Extended Repayment Plan

Payments may be fixed for the entire loan term or graduated (increasing) over the 25-year loan period. You can do this program whether you have FFEL or Direct loans, but if they are Direct Loans the balance must be at least $30,000. Although this allows you to pay off your loan in a much longer time period, you pay much more in interest. Because this isn’t an income-driven plan, you can’t qualify for the Public Services Loan Forgiveness program. All Direct and Stafford Loans qualify for this payment plan, as well as Parent Plus and consolidated loans (Direct or FFEL).

Pay As You Earn Repayment Plan (PAYE)

This is the first income-determined repayment plan. To be eligible for this program, you must have received a Direct Loan after October 1, 2011. Under this plan, you pay 10% of your discretionary income, recalculated annually and based on your updated income and family size. Your payment can never be more than it would have been in a Standard Repayment Plan. Loan balances remaining after 20 years are forgiven. To qualify, the payment PAYE plan payment must be less than what you would pay under the Standard Repayment Plan with a 10-year repayment period. While you are in the program, if your income ever increases to the point that your payment would be higher than the Standard Plan payment, you’ll remain in the plan, but your payment will no longer be based upon income but instead would be the amount you would pay in a ten year Standard Payment Plan payment. Borrowers must qualify initially for partial financial hardship to enroll. A partial financial hardship exists when the annual amount due on a borrower's eligible loans, as calculated under a 10-year repayment plan, exceeds 15% of discretionary income. This is a good program for lower-income individuals who need a low payment. Because this is an income-determined plan, you can qualify for the Public Services Loan Forgiveness program. Your spouse’s income is only
considered if the two of you file a joint tax return. So again, Direct Loans made after October 1, 2011 qualify for this program, as well as Direct Plus Loans made to students, and Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL) made to parents. FFEL Loans are also eligible if consolidated. Any amounts forgiven after 20 years may be taxable.

Revised Pay As You Earn Repayment Plan (REPAYE)

This income-determined repayment plan covers any borrower of a Direct Loan, no matter the date. Like PAYE, it requires that you pay 10% of your discretionary income, recalculated annually and based on updated income and family size. However, there is no cap, so you can actually pay more than what it would have been under a Standard Repayment Plan. It is also forgiven after 20 years if all the loans were for undergraduate study or 25 years if any portion was for graduate or professional study. Because this is an income-determined plan, you can qualify for the Public Services Loan Forgiveness program. Under REPAYE, married couples cannot file taxes separately in order to exclude spousal income. Parent Plus loans are not eligible. Any Direct Loans are eligible, as well as Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL) made to parents. FFEL Loans are also eligible if consolidated. Any amounts forgiven after 20 years may be taxable.

Income-Based Repayment Plan (IBR)

Borrowers with Direct student loans qualify for this program, either subsidized or unsubsidized, as well as holders of Stafford Loans and consolidation loans. Your monthly payment is 10% of your of discretionary income if you took out the loan on or after July 1, 2014, with unpaid loans forgiven after 20 years. To qualify, the payment your IBR plan payment must be less than what you would pay under the Standard Repayment Plan with a 10-year repayment period. For loans before that date, your monthly payment is 15% of discretionary income, and 25 years of payments need to be made before loan forgiveness. Spousal income is only considered if you file a joint tax return. As with PAYE, the monthly payment cannot be more than the Standard Repayment Plan payments. While you are in the program, if your income ever increases to the point that your payment would be higher than the Standard Plan payment, you’ll remain in the plan, but your payment will no longer be based upon income but instead would be the amount you would pay in a ten year Standard Payment Plan payment. Borrowers must qualify initially for partial financial hardship to enroll. A partial financial hardship exists when the annual amount due on a borrower's eligible loans, as calculated under a 10-year repayment plan, exceeds 15% of discretionary income. Parent Plus Loans are not eligible. All Direct and Stafford Loans are eligible for this program, as well as Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL) made to parents. Any amounts forgiven after 20 years may be taxable.

Income-Contingent Repayment Plan (ICR

Any Direct Loan borrower can do this income-determined plan. You would pay the lesser of either 20% of discretionary income or the payment amount of a fixed plan over 12 years, adjusted according to income. Recalculated annually and based on updated income, family size, and the total amount of direct loans. Spousal income is only considered if the couple files a joint tax return. Outstanding balances are forgiven after 25 years. FFEL Loans are also eligible if consolidated. A Parent PLUS loan consolidated into a direct consolidation loan qualifies for ICR. This is the only income-driven plan for Parent Plus Loans. Any amounts forgiven after 25 years are taxable.

Income-Sensitive Repayment Plan (ISR)

Despite its name, the Income-Sensitive Repayment Plan isn't considered an income-driven repayment plan. ISR is for low-income borrowers who have loans that existed prior to the federal direct loan program. In other words, it can be used for FFEL loans and Stafford Loans. Monthly payments are based on annual income and amortized

to be completely paid off in 15 years. Borrowers under ISR won't be considered for Public Service Loan Forgiveness.

Student Loan Payment Information

** The U.S. Department of Education counts discretionary income as the difference between a borrower's adjusted annual income and 150% of the federal poverty guideline amount based on family size and state of residence. Alaska and Hawaii have separate guidelines compared with the other U.S. states and the District of Columbia. For example, a single person living in Virginia or one of the 48 contiguous states with an adjusted gross income of $30,000 and federal student loan debt of $60,000 would have $12,880 subtracted from their gross income, leaving $17,120 in annual discretionary income. When you figure 10% of that number ($1,712 paid per year) needs to be paid, the monthly payment would be a little under $143 per month under IBR. Under IBR, a spouse's income is considered only if the couple files a joint tax return.)

** If you’re making payments under an income-driven repayment plan and also working toward loan forgiveness under the Public Service Loan Forgiveness (PSLF) Program, you may qualify for forgiveness of any remaining loan balance after you've made 10 years of qualifying payments, instead of 20 or 25 years. Qualifying payments for the PSLF Program include payments made under any of the income-driven repayment plans.

** Defaulted loans are not eligible for repayment under any of the income-driven repayment plans. There are three ways to get a loan out of default: (1) Pay it in full; (2) Rehabilitate the loan, which takes almost a year to complete; or (3) Loan consolidation. To rehabilitate a loan, speak directly with your loan servicer, but it generally involves making on-time payments over 9 out of 10 months in an amount your loan servicer thinks is reasonable. You can rehabilitate a defaulted loan only once.

** To consolidate a defaulted federal student loan into a new Direct Consolidation Loan, you must either agree to repay the new Direct Consolidation Loan under an income-driven repayment plan, or make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it. To reconsolidate a defaulted Direct Consolidation Loan, you must also include at least one other eligible loan in the consolidation in addition to meeting one of the two requirements described above. If you have no other eligible loans that can be included in the consolidation, you cannot get out of default by consolidating a defaulted Direct Consolidation Loan. Your options are repayment in full or loan rehabilitation. You may reconsolidate a defaulted FFEL Consolidation Loan without including any additional loans in the consolidation, but only if you agree to repay the new Direct Consolidation Loan under an income-driven repayment plan.

** If you go the rehabilitation route, the default will come off your credit report, however, the late payments will not. If you consolidate a defaulted loan, both the default and late payments will stay on your credit. Negative things such as late payments will typically stay on your credit report for seven years from when they were first reported.

** In addition, if you want to consolidate a defaulted loan that is being collected through garnishment of your wages, or that is being collected in accordance with a court order after a judgment was obtained against you, you cannot consolidate the loan unless the wage garnishment order has been lifted or the judgment has been vacated.

** After your defaulted loan has been consolidated, your Direct Consolidation Loan will be eligible for benefits such as deferment, forbearance, and loan forgiveness. You’ll also be eligible to receive additional federal student aid, but unlike loan rehabilitation, consolidation of a defaulted loan does not remove the record of the default from your credit history.

** Public Service Loan Forgiveness Program: a federal program that forgives remaining balances after you’ve made payments for 10 years if you work for certain types of employers. You must: (1) work for a U.S. federal, state, local, or tribal government or not-for-profit organization, including the U.S. military; (2) work full-time for them; (3) have Direct Loans (or consolidate other federal student loans into a Direct Loan); (4) make your payments in one of the approved an income-driven repayment plan; and (5) pay for 10 years.

** Things are more complicated if your wages are being garnished, which is why that is one of the questions we ask you. If you are being garnished, you are typically having 15% of your paycheck taken and sent to pay your student loans. If you are being garnished you have 6 options: (1) settlement of the debt with the servicer; (2) consolidation, but this must typically be done before a garnishment actually starts, after the garnishment starts, most defaulted student loans are ineligible for consolidation; (3) rehabilitate the loan, but that means you'll need to make 5 monthly payments on top of the wage garnishment before the garnishment stops; (4) file bankruptcy; (5) work out voluntary payments with the servicer; or (6) a hardship hearing.

Types of Student Loans

The William D. Ford Federal Direct Loan (Direct Loan) Program

The William D. Ford Federal Direct Loan (Direct Loan) Program— Under this program, loans are made by the U.S. Department of Education (ED). Direct subsidized loans are loans with typically better interest rates, and the government covers the interest for periods of time, including when you are attending school at least half time. Direct Unsubsidized loans are responsible for interest from the time the loans are made, but they are available to graduate students and not based on financial need. Direct PLUS loans are made to both undergraduate and graduate students, and also parents of students (Parent PLUS loans). These can be made if you’ve maxed out other Direct loans.

The Federal Perkins Loan Program

The Federal Perkins Loan Program — Under this program, loans were made by schools.

The Federal Family Education Loan (FFEL) Program

The Federal Family Education Loan (FFEL) Program — Under this program, loans were made by banks.

Consolidation loans

Consolidation loans allow you to combine other federal student loans. The interest rate is a weighted average of what you already have. They make it so you only have a single payment to one servicer. However, if you are under an income-driven plan already you’ll lose credit for the time you’ve already made payments.

History of Student Loans

1840: The first student loans are offered to students attending Harvard University in 1840.

1867: The United States Department of Education is formed to help make schools more successful, but it does not yet have a student loan program.

1944: The GI Bill passes, helping World War II veterans get money to go to college for free or for very cheap. In subsequent years, veterans would account for nearly half of those attending college.

1958: Federal student loans are first offered under the National Defense Education Act to help the United States compete with other countries—namely the Soviet Union. High school students who showed promise in mathematics, science, engineering, or foreign language, or those who wanted to become teachers, were offered grants, scholarships, and student loans.

1965: The Higher Education Act is established to provide “Educational Opportunity Grants” to colleges recruiting students with considerable financial need. The Higher Education Act also establishes the Guaranteed Student Loan Program, also known as the Federal Family Education Loan Program or FFELP, which allows banks and private institutions to provide government-subsidized and guaranteed loans to students.

1966: The National Association of Financial Aid Administrators is created to monitor financial aid throughout the nation.

1972: The Basic Educational Opportunity Grant, which would come to be called the Pell Grant, is created to help in-need students attend college. Senator Claiborne Pell was instrumental in its creation.

1992: The Higher Education Amendments of 1992 create the FAFSA, the Direct Lending program, and unsubsidized Stafford loans, which meant that now students had to cover interest costs while in school rather than the federal government. Up until this point, the federal government was subsidizing student loans. We are beginning to see the modern-day student loan system.

1993: The Student Loan Reform Act officially implements the Direct Lending program. Under this program, the government can now directly lend to student loan borrowers, instead of through a private institution, which had been the only system since 1965 (FFELP).

2005: The Higher Education Reconciliation Act reduces loan fees from 4% to 1% and allows graduate students to take out PLUS Loans. Outstanding student loan debt is now at $391 billion.

2008: Credit market problems stemming from the Great Recession forces many private lenders to back out of FFELP as they no longer have the financial ability to provide loans to college students. Outstanding student loan debt is now at $639 billion.

2010: Legislation proposed under the Obama administration eliminates FFELP and now requires all new federal student loans to be Direct Loans as part of the Direct Lending Program, which was launched back in 1993. At this time, private lenders begin offering private student loans to students independently from the government. Outstanding student loan debt is now at $811 billion.

2012: Total amount of student loan debt passes $1 trillion.

2021: Outstanding student loan debt now sits at $1.7 trillion. In March 2020, the coronavirus pandemic pushes the federal government to put all federal student loans in pandemic forbearance, which means no payments are required and interest won’t accrue. In January 2021, the newly formed Biden Administration extends pandemic forbearance until October 2021.