Federal Loan Repayment Options
The Federal Direct Loan Program offers various repayment plans. Although you may select or be assigned a repayment plan when you first begin repaying your student loan(s), you can change repayment plans at any time. For assistance selecting a repayment option, visit studentaid.gov. Contact your loan servicer if you would like to discuss repayment plan options or change your repayment plan. Please note that repayment options for private loans will vary according to the lender.
Types of Federal Student Loan Repayment Plans:
- Standard Repayment Plan: A Standard Repayment Plan with a fixed annual repayment amount paid over a fixed period of time not to exceed 10 years.
- Graduated Repayment Plan: Paid over a fixed period of time not to exceed 10 years. With this plan, your payments start with a relatively low amount and then increase, generally every two years.
- Extended Repayment Plan: With a fixed annual or graduated repayment amount to be paid over a period not to exceed 25 years. If you’re a FFEL borrower, you must have more than $30,000 in outstanding FFEL Program loans to be eligible for this plan. If you’re a Direct Loan borrower, you must have more than $30,000 in outstanding Direct Loans This means, for example, that if you have $35,000 in outstanding FFEL Program loans and $10,000 in outstanding Direct Loans, you can choose the extended repayment plan for your FFEL Program loans but not for your Direct Loans. Your monthly payment will be lower than it would be under the Standard Plan, but you’ll ultimately pay more for your loan because of the interest that accumulates during the longer repayment period.
- Income-Driven Repayment Plans:
- Saving on a Valuable Education (SAVE) Plan - formerly the REPAYE plan: The SAVE plan, by law, will go into effect on July 1, 2024. This plan enables more Direct Loan borrowers to cap their monthly student loan payment amount at 10% of monthly discretionary income. Payments are recalculated each year and are based on your updated income and family size. If you're married, both you and your spouse’s income or loan debt will be considered, whether taxes are filed jointly or separately (with limited exceptions). Your monthly payment can be more than the 10-year Standard Plan amount. Any borrower with eligible federal student loans can make payments under this plan. The SAVE Plan improves upon the current Pay As You Earn Plan while extending its protections to all student borrowers with Direct Loans. The SAVE Plan also will provide a new interest subsidy benefit to prevent ballooning loan balances for those whose income-driven payments cannot keep up with accruing interest. In addition to the monthly payment cap, SAVE will forgive the remaining debt after 20 years for those who borrowed only for undergraduate study and 25 years for those who borrowed for graduate study. You may have to pay income tax on any amount that is forgiven.
- Income-Based Repayment (IBR) Plan: Income-Based Repayment Plan became available July 1, 2009. To qualify for the IBR Plan, you must have a partial financial hardship. Under this plan, during any period when you have a partial financial hardship, your required monthly payment amount will not exceed 15 percent of the difference between your adjusted gross income and 150 percent of the Federal Poverty Guideline amount for your family size and state. You are considered to have a partial financial hardship if the amount you would be required to repay on your eligible student loans under a Standard Repayment Plan with a 10-year repayment period is more than the amount you would be required to repay under the IBR Plan. If you repay under this plan and meet certain other requirements over a 25-year period, any remaining balance on your loans may be canceled. Contact the Direct Loan Servicing Center (for Direct Loans) or your FFEL lender (for FFEL Program loans) for more information about the IBR Plan.
- Pay As You Earn (PAYE) Repayment Plan: Monthly payments are 10% of discretionary income, the difference between your adjusted gross income and 150% of the poverty guideline for your family size and state of residence (other conditions may apply). You must also prove partial financial hardship. Additionally, you must be a new borrower on or after October 1, 2007, and must have received a Direct Loan disbursement on or after October 1, 2011.
- Income Contingent Repayment (ICR) Plan: To qualify for the ICR plan, your Adjusted Gross Income (AGI), family size, and total federal student loan debt is assessed. Monthly payments are set at the lesser of (1) what you would pay on a repayment plan with a fixed monthly payment over 12 years, adjusted based on your income or (2) 20% of your discretionary income, divided by 12. Your income and family size must be updated every year, even if it hasn't changed, as this allows your loan servicer to recalculate your monthly payment amounts. If you're married, your spouse's income or loan debt will be considered only if you file a joint tax return or you choose to repay your Direct Loans jointly with your spouse. Any outstanding balance will be forgiven if you haven't repaid your loan in full after 25 years but you may have to pay income tax on the amount that is forgiven.