Student Loan Debt PUBLISHED MAY 17, 2019

Understanding Federal Repayment Options


The Story

Back when you were a teenager, you signed on the dotted line. Now you might owe thousands in student loans. That’s fun. If those loans were from Uncle Sam, you’ve got a bunch of different ways to pay that money back.

Go on.

There are a total of eight different federal repayment plans. You have to pick one. But you can change your mind anytime. Pros: Options are great. Cons: Lots of options can also be overwhelming. Especially when they all sound kinda the same. But unless you know exactly what you want upfront, it’s a good idea to read the whole menu before picking an entrée. Here’s what you need to know.

Standard Repayment Plan: Open to everyone. Your payments are fixed and calculated to make sure you’ll be loan-free within 10 years. This is the quickest path to paying off your loans, so your payments will be on the higher end. But you’ll pay less in interest. Unless you picked a different plan, you were probably defaulted into this one.

Graduated Repayment Plan: Another option for anyone who wants to be done with federal loans in 10 years. Payments start low, but go up every two years. You might pick this option if your income’s low now, but you think it’ll steadily increase in the future.

Extended Repayment Plan: Available for people with certain Direct Loans or Federal Family Education Loans (FFEL) with at least $30,000 left to pay. (FYI, Direct Loans = the most common type of loan, funded by the Department of Education.) You can opt for fixed or graduated payments over 25 years. Stretching out the timeline can lower your monthly payment. But it’ll cost you more in interest over time.

Aren’t there options that let you pay based on your income?

Yep. And the three most popular ones come with a nice perk. After 20-25 years, any debt you haven’t paid off is forgiven. If you’re eligible for Public Service Loan Forgiveness, you have to sign up for one of these plans. Or else. Oh, and one more small catch. You may owe income tax on any money that’s forgiven.

Whenever you see the words “discretionary income,” take a drink. And keep in mind that the gov defines that as the difference between your adjusted gross income and 150% of the poverty line for your family size in your state. (Adjusted gross income = the number you put on your tax returns. It’s your annual income minus any deductions.) This calculator can do that math for you. You’re welcome.

Revised Pay As You Earn Repayment Plan (REPAYE): For certain borrowers with FFEL and Direct Loans. Payments are generally 10% of your discretionary income and recalculated each year based on any updates to your paycheck and family size. If you’re married, both your and your partner’s income will be counted.

Pay As You Earn Repayment Plan (PAYE): For people with eligible Direct Loans who borrowed money after Oct 1, 2007, and received a disbursement (aka loan payout) after Oct 1, 2011. Stay with us. Payments are capped at 10% of your discretionary income. You only qualify if that means your monthly bill is lower than it would be normally through the Standard Repayment Plan.

Income-Based Repayment Plan (IBR): Good if you’ve got a lot of debt compared to what you earn. You’llpay 10-15% of your discretionary income, depending on when you first borrowed the money.

That’s a lot of info. What if I’m still not sure what my best option is?

Think about it like this: The right plan for you should either save you money in the long run or save you money today. If your goal is to pay the least amount of interest possible, the Standard or Graduated plans may be for you. If you’d rather have the money in your wallet now, look at income-driven options instead.

And if you’re still not sure, check out this repayment calculator for more guidance.


Your student loan servicer will opt you into a repayment plan. TBD if that’s the best option for you. If it’s not, understanding all the options on the table can help you pick something better. If your needs evolve over time, you can always change your plan again.

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