Federal Student Loans Repayment Programs
If you have Federal Student Loans, there are a number of repayment plans to consider when it’s time to pay them back. Standard, Graduated, and Extended repayment are based on your loan amount, length of repayment, and interest rate. Income-Driven Repayment is based on your income and household size.
- Standard Repayment Plan – fixed payments over 10 years
- Graduated Repayment Plan – payments start at a lower amount and increase every two years at a rate to pay off the loan over 10 years
- Extended Repayment Plan – fixed payments over 25 years
- Income-Driven Repayment (IDR) Plans – payments are calculated as a percentage of discretionary income. IDR plans are a requirement for Public Service Loan Forgiveness (PSLF).
Table of Contents:
- How to enroll in a federal repayment plan
- Federal student loan repayment calculator
- Picking a repayment plan
- Income-driven repayment plans for federal loans
How to Enroll in a Federal Repayment Plan
Your loan servicer will send you a notification to enroll in a repayment plan when you graduate. If you don’t select a plan, they will put you in the standard 10-year plan. To enroll in the standard, graduated, or extended repayment plan, you can call your loan servicer and request that plan. If you’d like to enter an IDR plan, you’ll need to fill out an Income-Driven Repayment Application form. Most borrowers should be in an IDR plan, such as REPAYE or PAYE. Old IBR and ICR are more legacy programs which are rarely recommended, unless you have FFEL loans.
Federal Student Loan Repayment Calculator
Input your loan amount, interest rate, income, and household size to generate your monthly payment across the federal repayment plans. Here’s the link to our calculator page.
Picking a Repayment Plan
Standard, graduated, and extended repayment plans each have their pros and cons. Graduated and extended provide you with a lower monthly payment than standard, but you end up paying more interest over the life of the loan. Graduated and standard are completed in 10 years while extended is over 25 years. From an emotional standpoint, being out of debt in 10 years can be a lot more stomachable than 25 years. The 10-year standard repayment plan also counts toward public service loan forgiveness (PSLF). However, if you make fixed monthly payments over 10 years, you’ll have nothing left to forgive since your loans will be paid off.
We almost never recommend you stay on those three plans because you’ll end up paying more on your loans than if you decided to pursue PSLF, taxable loan forgiveness, or private refinancing.
The question you need to ask yourself is:
Is there a remote possibility that I’ll go for loan forgiveness?
If the answer is yes, you should enroll in an IDR plan. If there’s 0% chance you will, you’re probably better off privately refinancing your student loans.
If you’d like to learn more about loan forgiveness programs or private refinancing, see our additional resources:
Income-Driven Repayment Plans for Federal Loans
There are five IDR plans, each with different rules based on the payment calculation, forgiveness term, and eligibility.
Pay As You Earn (PAYE)
Who is eligible? A borrower with direct federal student loans who has a partial financial hardship, did not borrow prior to October 1, 2007, and has a loan disbursed after September 30, 2011.
Payment Calculation? 10% of joint/separate discretionary income with monthly payments capped at the standard 10-year payment amount. Ability to exclude spousal income through married filing separately.
Forgiveness Track? 20 years to taxable forgiveness or 10 years to PSLF.
Interest Limitations? Capitalization is limited to 10% of the amount borrowed if you switch to another federal repayment plan.
Who should pick it? Married borrowers, dual-earning households, borrowers certain they will do loan forgiveness, borrowers who plan to do long-term forgiveness.
Revised Pay As You Earn (REPAYE)
Who is eligible? A borrower with direct federal student loans.
Payment Calculation? 10% of household discretionary income.
Forgiveness Track? 20 years to taxable forgiveness for undergraduate borrowing only, 25 years to taxable forgiveness if you borrow for graduate or professional degrees and 10 years to PSLF.
Interest Limitations? Only 50% of interest accrues during periods of negative amortization.
Who should pick it? Single borrowers, sole earner in household, borrowers who would like to take advantage of the interest subsidy, borrowers considering PSLF.
“Old” Income Based Repayment (IBR)
Who is eligible? Any borrower with direct or FFEL loans.
Payment Calculation? 15% of joint/separate discretionary income with monthly payments capped at the standard 10-year payment amount. Ability to exclude spousal income through married filing separately.
Forgiveness Track? 25 years to taxable forgiveness or 10 years to PSLF.
Interest Limitations? Capitalization has no limit when interest capitalizes.
Who should pick it? Dual-earning households who are certain they will do loan forgiveness and don’t qualify for PAYE.
“New” Income Based Repayment (New IBR)
Who is eligible? A borrower with direct loans who has a partial financial hardship, did not borrow prior to July 1, 2014.
Payment Calculation? 10% of joint/separate discretionary income with monthly payments capped at the standard 10-year payment amount. Ability to exclude spousal income through married filing separately.
Forgiveness Track? 20 years to taxable forgiveness or 10 years to PSLF.
Interest Limitations? Capitalization has no limit when interest capitalizes.
Who should pick it? No borrower. Always pick PAYE instead of this plan. It is superior to new IBR.
Income Contingent Repayment (ICR)
Who is eligible? A borrower with direct federal student loans.
Payment Calculation? 20% of joint/separate discretionary income with monthly payments capped at the 12-year payment amount adjusted according to your income. Ability to exclude spousal income through married filing separately.
Forgiveness Track? 25 years to taxable forgiveness or 10 years to PSLF.
Interest Limitations? Capitalization has no limit when interest capitalizes. Any unpaid interest will be capitalized to loan balance each year.
Who should pick it? Parent borrowers pursuing loan forgiveness.
IDR Repayment Plan Selection
Selecting your IDR plan can depend on your loan size, marital status, income, state of residence, profession, etc. If you’re in legacy IDR plans, such as ICR or IBR, you should usually consider switching into REPAYE or PAYE. Each repayment plan has different rules which you need to become an expert in if you have federal student loans. Or you can hire a pro to do it for you.
If you’re a single borrower, you should most likely be in the REPAYE plan. If you’re married with a spouse who also makes money or has student loans, this is where it begins to become tricky. Some situations merit the couple switching repayment plans, filing taxes separately, or even private refinancing your loans. Don’t go it alone if you’re a couple with student loans. Sit down with an expert to get a clear path forward on tackling your student loans.
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