Finding the right student loan repayment plan

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finding the right student loan repayment plan

There are a ton of student loan repayment plans out there. How do you know which one is best for you? Well, that ultimately depends on your goals and your student loans. If you are dealing with federal student loans then you are likely to choose between standard repayment plans and income-driven repayment plans. If you’re looking for… 

  • Lower Payments: Income-Driven Repayment Plans
  • Student Loan Forgiveness: Income-Driven Repayment Plans
  • Less Interest: Standard Repayment

Let’s break these down further.

Lower Payments

Lower payment options are best if your income is simply too low to make standard payments. The best repayment plan option for lower payments are income-driven repayment plans. Luckily, the government offers four different income-driven repayment plans that you can choose from:

  1. Income-Based Repayment
  2. Income-Contingent Repayment
  3. PAYE – Pay As You Earn
  4. REPAYE – Revised Pay As You Earn

However, making low monthly payments means you will probably end up paying more over a long period of time. Monthly payments are usually set between 10% and 20% of your income, and they may change annually. Additionally, these lower payment plans can extend your loan term to 25 years

If you are interested in applying for an income-driven repayment plan, check-in with your student loan servicer or You choose which plan you want when you apply. 

Student Loan Forgiveness

Once again, income-driven repayment plans are best if you are seeking student loan forgiveness. Federal programs available to government and nonprofit employees offer a Public Service Loan Forgiveness. After making 120 qualifying payments, your remaining loan balance can be forgiven (tax-free!) — as long as you are eligible. 

Keep in mind that federal student loan forgiveness can only be applied towards income-driven repayment plans or standard repayment plans. Not private loans.

Less Interest

If you are seeking a lower interest rate, standard repayment is your best bet. With a standard repayment plan, you will pay less in interest while simultaneously paying off your student loans faster than any other federal repayment plans. Therefore, if you can afford to make equal monthly payments for 10 years, this may be an option for you!

If you want to be sure that you are choosing the right plan, plug your information into the Student Loan Comparison Calculator to determine how much you will owe with each plan. Keep in mind, options that decrease your monthly payments are likely to result in more accruing interest. This means, paying more overall.

What If You Have Private Student Loans?

Unfortunately, private student loans do not qualify for income-driven repayment plans. However, if you are struggling to pay off those loans, contact your loan servicer and see if they offer any options that temporarily reduce monthly payments. You may also want to consider refinancing your student loans.  

Thinking about refinancing your student loans?

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Pay off debt faster. See the world.

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Gain access to the guide on how to refinance your student loans:



Tallie Beaconsfield is a young blogger and professional with a passion for finance. She graduated from Stanford University. She is an avid rock climber and you can always find her adventuring on the weekends.

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