Federal Student Loan Repayment Plan Options

 

You will begin repaying your federal student loans six months after you leave school or drop below half-time enrollment. You have a variety of repayment plan options and have the opportunity to change your repayment plan at least annually. It is the responsibility of the borrower to contact the loan holder if repayment plan changes are needed.

 

Basic Repayment Plans

  • Standard Repayment: Repaying the loan in equal monthly payments of at least $50 for the life of the loan up to 120 months (10 years).
  • Graduated Repayment: Repayment begins with a lower monthly payment and increases so that the loan is paid-off in 120 months (10 years).
  • Extended Repayment: Available to the first-time federal student loan borrower after October 7, 1998. Students MUST HAVE at least $30,000 in Direct Loans OR at least $30,000 in FFELP loans.

 

Income-driven Repayment Plans

Income-driven repayment (IDR) plans take into consideration your income and family size when calculating your monthly payment. These plans can help make your student loan debt more manageable by reducing your monthly payment. An IDR repayment plan may forgive any remaining debt on your loans if there is still a balance after a required number of payments have been made over 240 to 300 months (amount of time varies upon what repayment plan is selected).

  • Income Based Repayment (IBR): Available to help FFELP and certain Direct Loan borrowers, this program uses your income, family size, and total student loan debt to cap your monthly payments at 15 percent of your discretionary monthly income.
  • Pay As You Earn: Available to qualifying Direct Loan borrowers, this program uses your income, family size, and total student loan debt to cap your monthly payments at 10 percent of your discretionary monthly income and uses the Standard plan amount as a cap to the payment. If a balance remains after 20 years of qualifying payments, Pay As You Earn forgives any remaining debt.
  • Revised Pay As Your Earn (REPAYE): Available to any borrower with Direct Loans, this program also calculates your monthly payment at 10 percent of your discretionary monthly income, but there is no cap on the payment amount. This program offers more of an interest subsidy than the other repayment plans. REPAYE forgives any remaining debt after 20 years of qualifying payments for undergraduate loans and after 25 years of qualifying payments for Grad PLUS loans.
  • Income-Contingent Repayment: Available for Federal Direct Student Loans only, this plan adjusts the monthly payment annually based on the most recent tax year’s adjusted gross income (AGI), family size, and total amount borrowed. If a balance remains after 25 years of qualifying payments, ICR forgives any remaining debt.
  • Income-Sensitive Repayment: Available for Federal Family Education Loan Program loans only, this plan provides for annual adjustments to the required monthly payment based on total income. The loan term is 120 months (10 years). Because the full balance is still paid in 10 years, this plan is often used only as short-term relief.

 

Income-Based Repayment (IBR), Pay As You Earn, and Revised Pay As Your Earn are very similar plans; which plan you qualify for will depend on when your federal loans were taken out and whether you have a “partial financial hardship.”

 

The Pay As You Earn Plan is only offered on Direct Loans. However, to be eligible, you must:

  • Have taken out a Direct Loan on or after October 1, 2011.
  • Not have had an outstanding balance on a Direct or FFELP Loan as of October 1, 2007, unless this balance was paid off before you received a new federal loan after October 1, 2007.

 

The Revised Pay As You Earn Plan is only offered on Direct Loans. However, all Direct Loans, no matter what date they were taken out, are eligible. You can still apply for the Revised Pay As You Earn plan even if you do not qualify for a lower payment than you would on the Standard Repayment Plan. Therefore, you do not need a Partial Financial Hardship to qualify for the Revised Pay As You Earn Plan.

 

Income-Based Repayment is offered on FFELP Loans and Direct Loans not eligible for Pay As You Earn. Parent Plus Loans, Federal Consolidated Loans with underlying Parent Plus Loans, and private loans are not eligible for Pay As You Earn, Revised Pay as You Earn, or Income-Based Repayment.

 

While the differences between these plans can be confusing, the good news is that a single application form covers four of these repayment plans (IBR, Pay As You Earn, Revised Pay As You Earn, and Income-Contingent). If you are unsure which to apply for, you may request for your servicer to automatically put you on the payment plan with the lowest monthly payment amount.

 

Payment Estimate Calculator 

To get an estimate of what payment plans may look like, please see this Repayment Estimate Calculator. (Please note that some repayment options are only available under the Direct Loan Program. Learn more about on how to consolidate your loans to the Direct Loan Program on the Department of Education’s website.)

 

More information on “income related” plans