Student Loan Repayment Options: Find the Best Plan For You

Borrowers can choose from four types of federal student loan repayment plans. But the best one for you will likely be the standard repayment plan or an income-driven repayment plan, depending on your goals.

• Standard repayment lasts 10 years and is the best one to stick with to pay less in interest over time.

• Income-driven repayment (IDR) options tie the amount you pay to a portion of your income and extend the length of time you're in repayment to 20 or 25 years. When the term is over, you can get income-driven loan forgiveness for your remaining debt. IDR is best if you're having difficulty meeting your monthly payment and need something more manageable. There are four types of IDR plans.

• Graduated repayment lowers your monthly payments and then increases the amount you pay every two years for a total of 10 years.

• Extended repayment starts payment amounts low and then increases every two years for a total of 25 years. Or you can choose a fixed version which splits payment amounts evenly over 25 years.

Before changing student loan repayment plans, plug your information into the Education Department's Loan Simulator to see what you’ll owe on each plan. Any option that decreases your monthly payments will likely result in you paying more interest overall.

» MORE: Income-driven repayment applications suspended

Here's how to decide which payment plan is right for you:

Best repayment option: standard repayment.

On the standard student loan repayment plan, you make equal monthly payments for 10 years. If you can afford the standard plan, you’ll pay less in interest and pay off your loans faster than you would on other federal repayment plans.

How to enroll in this plan: You’re automatically placed in the standard plan when you enter repayment.

Best repayment option: income-driven repayment.

The government offers four IDR plans: income-based repayment, income-contingent repayment, Pay As You Earn (PAYE) and Saving on a Valuable Education (SAVE). These options are best if your income is too low to afford the standard repayment.

Income-driven plans set monthly payments between 10% and 20% of your discretionary income. Payments can be as small as $0 if you're unemployed or underemployed and can change annually. Income-driven plans extend your loan term to 20 or 25 years, depending on the type of debt you have. At the end of that term, you get IDR student loan forgiveness on your remaining debt — but you may pay taxes on the forgiven amount.

The Education Department has announced another new IDR plan option that would cut payments by at least half and forgive some borrowers' debt after 10 years, instead of 20 or 25. It's not yet finalized or available to borrowers; rollout will begin at the end of 2023.

How to enroll in these plans: You can apply for income-driven repayment with your federal student loan servicer or at studentaid.gov. When you apply, you can choose which plan you want or opt for the lowest payment. Taking the lowest payment is best in most cases, though you may want to examine your options if your tax filing status is married filing jointly.

» MORE: Which income-driven repayment plan is right for you?

Best repayment option: graduated student loan repayment plan.

If your income is high, but you want lower payments, a graduated plan may make sense for you.

Graduated repayment decreases your payments at first — potentially to as little as the interest accruing on your loan — then increases them every two years to finish repayment in 10 years.

If your income is high compared with your debt, you may initially pay less under graduated repayment than an income-driven plan. This could free up money in the short term for a different goal, like a down payment on a home, without costing you as much interest as an income-driven plan. You would still pay more interest than under standard repayment.

Initial payments on the graduated plan can eventually triple in size. You need to be confident you’ll be able to make the larger payments if you choose this plan. Generally speaking, it’s best to stick with the standard plan if you can afford it.

How to enroll in these plans: Your federal student loan servicer can change your repayment plan to graduated repayment.

Best repayment option: extended student loan repayment plan.

The extended plan lowers payments by stretching your repayment period to as long as 25 years. You must owe more than $30,000 in federal student loans to qualify for extended repayment.

You can choose to pay the same amount each month over that new loan term — like under the standard repayment plan — or you can opt for graduated payments. Whether you choose equal or graduated extended payments, you’ll have a good idea of what you’ll pay each month in the future.

Extended repayment does not offer loan forgiveness like income-driven repayment plans do; you will pay off the loan completely by the end of the repayment term.

How to enroll in these plans: Your federal student loan servicer can change your repayment plan to extended repayment.

To get rid of your debt sooner than your monthly payments allow, you can prepay loans. This will save you interest with any repayment plan, but the impact will be greatest under standard repayment. Just be sure to tell your student loan servicer to apply the extra payment to your principal balance instead of toward your next monthly payment.

» MORE: How to pay off student loans fast

You may be able to temporarily postpone repayment altogether with deferment or forbearance. Some loans accrue interest during deferment, and all accrue interest during normal forbearance periods. This increases the amount you owe.

If your financial struggles are pay-related, income-driven repayment is a better option. Income-driven repayment plans can reduce payments to $0 — and those payments count toward forgiveness.

Best repayment option: income-driven repayment.

Public Service Loan Forgiveness is a federal program available to government, public school teachers and certain nonprofit employees. If you’re eligible, your remaining loan balance could be forgiven tax-free after you make 120 qualifying loan payments.

Only payments made under the standard repayment plan or an income-driven repayment plan qualify for PSLF. To benefit, you need to make most of the 120 payments on an income-driven plan. On the standard plan, you would pay off the loan before it’s eligible for forgiveness.

How to enroll in these plans: You can apply for income-driven repayment with your servicer or at studentaid.gov.

Private student loans don’t qualify for income-driven repayment, though some lenders offer student loan repayment options that temporarily reduce payments. If you’re struggling to repay private student loans, call your lender and ask about your options.

If you have a credit score in at least the high-600s — or a cosigner who does — there’s little downside to refinancing private student loans at a lower interest rate. Dozens of lenders offer student loan refinancing; compare your options before you apply to get the lowest possible rate.

How much could refinancing save you?