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How to Decide on a Federal Student Loan Repayment Option

student loan repayment options

If you’re someone who’s struggling with student loan debt, you’re definitely not alone. One of the most important things to know when looking to tackling your student loans is what kind of loans you have.

With federal student loans, you will have a number of different repayment options to pursue, many of which are designed to make your monthly payment affordable for you. Familiarizing yourself with the different repayment options available to you will allow you to decide what’s best for you.

Federal Student Loan Repayment Options
Standard Repayment

The first and most common federal student loan repayment option is the standard repayment plan. If you do not designate otherwise, this is the plan that you will be provided with. The plan’s fixed payments ensure that your loans are paid off within 10 years. As a result, you typically pay less over time than with other programs.

Graduated Repayment

Another plan is the graduated repayment plan where the payments start out low and increase every two years. The amount is made so that it is guaranteed to pay off the loan within 10 years. However, you will likely end up paying more over time than you would with the standard plan because interest will be accruing in the beginning stages when your payments are lower. This is a good choice for you if your income is low now but you expect it to keep increasing over time.

Extended Repayment

The extended repayment plan involves fixed or graduated payments that are guaranteed to be paid off in 25 years. Monthly payments are relatively low, but you will pay more over time than the other options. To qualify for this payment option, you have to have more than $30,000 in loans.


Another option is the Revised Pay as You Earn (REPAYE) repayment plan. With this plan, monthly payments are 10 percent of your income. The government recalculates your payments each year based on income and family size. If you’re married, your spouse’s income will also be taken into account. The benefit is that any debt you have left on the loan after 20-25 years will be forgiven. However, the amount that is forgiven may be taxed.


The Pay as You Earn (PAYE) repayment plan is very similar to the REPAYE, but this plan is best for people who have a high debt-to-income ratio. The income-based repayment plan requires monthly payments that are 10-15% of your discretionary income. The government will reevaluate your income and family situation each year to determine your payment. Your loans will be forgiven after up to 25 years.


The Income-Contingent repayment plan involves a monthly payment of 20% of income or the fixed amount that you would have to pay off your loan in 12 years. Parent borrowers are able to access this plan by consolidating their Parent PLUS Loans into a direct consolidation loan.


Finally, the Income-Sensitive repayment plan has a monthly payment based on your annual income. The plan guarantees that you will pay off your loans in 15 years. This option is only available for FFEL Program loans, which are not eligible for Public Student Loan Forgiveness.

Should You Change Repayment Options?

If you notice that you can’t keep up with the repayment plan that you have or you suspect that another plan would be better for you, you are allowed to change your repayment plan at any time for free. The best place to start is contacting your loan servicer to discuss alternative options that may be better for you. You may change repayment plans to lower monthly payments as often as you need, but you should be aware that doing so will likely increase the amount you pay over time due to interest. Changing plans may also increase the amount you owe by capitalizing unpaid interest, which is unpaid interest that is added to your loan repayment. However, high interest may be worth it if a new repayment plan will help you avoid the consequences of student loan default, such as damaged credit, garnished wages, and tax refund garnishment.

How to Change Repayment Options

To start the process of changing plans, decide on a new plan that is right for you. You can enter your loan information into the Federal Student Aid’s Repayment Estimator to get a sense of which plan you may want to switch to. Next, you have to contact your loan servicer and they will take care of switching plans for you. You will have to complete any necessary paperwork that your loan servicer will provide you with. Your loan servicer may take a few months to process the plan switch. Therefore, it would be beneficial to check payment due dates so that you don’t fall behind. Finally, adjust your autopay schedule as needed.

While making payments can certainly be stressful, federal student loans offer a number of repayment options that can help make the burden more manageable. Knowing your options – and knowing that have the ability to change options – can help you avoid the consequences of getting into student loan trouble.

For more tips on managing student loans, contact Leslie Tayne and the student loan experts at the Tayne Law Group.

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