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Guide to Standard Repayment Plan for Student Loans

Standard Repayment Plan for Student Loans
Melissa Brock
Melissa BrockUpdated July 31, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
If you’re not sure what people mean when they talk about a “standard repayment plan,” the answer is straightforward: It’s the basic repayment plan for federal student loans, specifically loans from the William D. Ford Federal Direct Loan (Direct Loan) Program and the Federal Family Education Loan (FFEL) Program.It's a good idea to understand the tenets of the standard repayment plan. In this article, you will learn more about standard repayment plans and how they work. We'll also take a look at the pros and cons of the standard repayment plan. Finally, we'll go over whether you can refinance your loans under the standard repayment plan. 

What Is a Standard Repayment Plan? 

Federal student loan holders under the standard repayment plan make fixed (equal) payments for up to 10 years for a total of 120 payments. The standard repayment plan has you paying off student loans in the least amount of time possible. It's important to weigh the benefits of having your loans paid off sooner and saving on interest compared to choosing a different repayment plan. Other repayment options include income-driven repayment plans, graduated repayment plans, and extended repayment plans. Let's take a look: 
  • Income-driven repayment plan: Income-driven repayment plans allow you to extend your repayment to a term of 20 or 25 years, depending on your income. After the term is over, your debt is forgiven, which means you no longer have to continue making payments.
  • Graduated repayment plan: The graduated repayment plan means that your federal student loan payments start out low, then increase every year for 10 years (10 to 30 years for Direct Consolidation Loans and FFEL Consolidation Loans).
  • Extended repayment: Extended repayment allows you to repay your federal student loans over an extended number of years, more specifically, up to 25 years.
Private and federal student loans differ. You cannot take advantage of the federal standard repayment plan with private student loans.

How Payments Under the Standard Repayment Plan Work 

You'll automatically enroll in the standard repayment plan. Under standard repayment, your federal student loans are divided into 120 equal payments. This ensures that you pay the exact same amount each month for 10 years, including the principal amount (the original amount you borrow) as well as interest. Interest refers to the fees you pay to your lender for the privilege of borrowing.Loan simulators can help you learn how much you'd pay under the standard repayment amount. They can help you get an idea of your payments but may not predict them with complete accuracy. Your loan servicer will have the most accurate payment amount available for you.

Pros of Standard Repayment Plan 

What are the benefits of taking advantage of the standard repayment plan? Let's take a look at the pros.

Predictable Payment Amounts

The standard repayment plan adds a level of predictability to your payments. You'll know exactly how much will come out of your bank account every month in this student repayment plan. It means no surprises, which can be beneficial for those on a budget or who like knowing what to expect. Learn more about how much student loan debt is too much.

Fewer Years of Repayment

Compared to certain other repayment plans, your payments will last just 10 years under the standard repayment plan. For example, compared to the extended repayment plan, it can take you up to 25 years. Note that you can always choose to pay off your federal student loans earlier — you don't have to wait 10 years to pay them off.

Costs Less Over Time

The standard repayment plan would cost you less over time because you'd pay less in interest over the Standard Repayment term. Whenever you have the option to shrink a loan term (this goes for other types of loans as well), your overall costs go down because you may save up to 15 years of interest payments.

Cons of Standard Repayment Plan 

What are the downsides of the standard repayment plan? It's worth considering the cons before you go this route—an alternative option to the standard repayment might make more sense for your situation. 

Higher Monthly Payments 

One of the biggest downsides to the standard repayment plan is that you'll have to make higher monthly payments compared to certain other types of loan repayment options. In other words, you can't stretch out the total amount you've borrowed to 20 or 25 years like you can with other repayment options and lower your monthly payments in the process. A 10-year term increases your monthly payments.

Not Based on Income or Other Circumstances 

The standard repayment plan isn't based on income or other financial circumstances you may have. In other words, if you have a few issues making your payments, you would have to switch to an income-driven repayment plan in order to be able to pay just a portion of your discretionary income. 

Can I Refinance a Standard Repayment Plan? 

Yes, you can refinance with the standard repayment plan. Refinancing means that you replace one or all of your existing federal student loans with private loans. You may want to refinance because it might allow you to lower your monthly payments, help you shorten your loan term (in order to pay off your loans sooner), save money on interest, or allow you to opt for a variable interest rate. A variable interest rate may be beneficial if you plan to pay your loan off quickly. However, it's important to note that when you refinance your federal student loans, you lose federal benefits such as access to federal student loan forgiveness programs. Plus, the average interest rate might be higher with private loans vs. federal loans.Note that refinancing differs from consolidation, which comes from the government and means that you put all your federal student loans together. You'll have fewer monthly payments to keep track of as soon as you consolidate your loans.Learn more about how to refinance student loans and whether you should refinance your student loans.

The Takeaway

Does the standard repayment plan for student loans fit your needs? The standard payment plan may be exactly right for your situation or you may decide that you want to tackle your student loans in a different way.Ready to refinance student loans? Lantern by SoFi lets you compare loan offers from multiple lenders at once.

Frequently Asked Questions

What is the standard repayment period for student loans?
What is the best repayment option for my student loans?
What are the disadvantages of using the standard repayment plan?
Photo credit: iStock/Prostock-Studio

About the Author

Melissa Brock

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Her work has appeared on Yahoo Finance, Entrepreneur, Investopedia, The Balance, FinanceBuzz, The Journal of College Admission, MarketBeat, College Finance, Rocket Mortgage, LeverageRx, Benzinga, Morty, Ally, and more.
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