App version: 0.1.0

Your Guide to Choosing a Student Loan Repayment Plan

Choosing a Student Loan Repayment Plan
Sulaiman Abdur-Rahman
Sulaiman Abdur-RahmanUpdated March 26, 2025
Share this article:
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.
March 2025: The Saving on a Valuable Education (SAVE) Plan for federal student loan repayment is on hold due to a court injunction. As of late March, these loan repayment plans are available: Income-Based Repayment, Pay As You Earn, and Income-Contingent Repayment. Federal student loan consolidation applications are also live. To monitor the latest decisions on federal student loan plans, check the Federal Student Aid site.
Federal student loan borrowers can choose a federal student loan repayment plan. The U.S. Department of Education offers a variety of student loan repayment options, and you can choose the best option for you.

Different Student Loan Repayment Plans

Below, we highlight some of the federal student loan repayment plans offered by the U.S. Department of Education:

Standard Repayment

The Standard Repayment Plan is the basic loan repayment plan. It’s available to anyone who’s borrowed a federal student loan under the Direct Loan or Federal Family Education Loan (FFEL) programs. Your fixed monthly payment under this plan would be at least $50. The repayment period is generally up to 10 years but between 10 and 30 years for borrowers with federal consolidation loans.

Graduated Repayment

Federal student loan borrowers may be eligible for the Graduated Repayment Plan. Monthly payments under this plan start out low and increase every two years. The repayment period is generally up to 10 years but between 10 and 30 years for borrowers with federal consolidation loans.

Extended Repayment

Borrowers with federal student loans may be eligible for the Extended Repayment Plan. This plan allows you to repay your federal student loans over an extended period up to 25 years. Monthly payments under this plan could be a fixed or graduated amount.

Income-Driven Repayment

The U.S. Department of Education offers the following four income-driven repayment (IDR) plans to help borrowers pay down their federal student loan debt:Private student loans are not eligible for any federal repayment options, including IDR plans. Depending on your income and family size, all four IDR plans may offer a lower monthly payment compared with the Standard Repayment Plan.All IDR plans can end with a borrower’s outstanding balance being forgiven at the end of the repayment period. Forgiveness may come after 20 or 25 years under any of the IDR plans, but forgiveness may come earlier for some SAVE Plan enrollees.Borrowers with original principal balances of $12,000 or less may be eligible for forgiveness of any remaining balance after making 10 years of payments under the SAVE Plan, according to the Federal Student Aid Office.

Choosing a Student Loan Repayment Plan

You can take the following steps when choosing a student loan repayment plan:

1. Reviewing Your Finances

The first step you can take when choosing a student loan repayment plan is reviewing your finances. This may include reviewing your income, cost-of-living expenses, debt obligations, and personal savings. You can assess your personal financial outlook to determine how much you can afford to pay toward student loan balances each month. Your annual income may determine whether an IDR plan is right for you. Monthly payments under the SAVE Plan will be 5% of discretionary income for undergraduate loans, 10% for graduate loans, and a weighted average for borrowers who have both.You can minimize your interest charges by paying off your student loans sooner rather than later. Choosing a longer repayment term may expose you to more interest charges over the life of your loan.

2. Creating a Budget

After reviewing your finances, you can work toward creating a budget that works best for you. Once you determine how much you can afford to pay each month on student loans, you can implement a budget plan for paying down student debt.As mentioned above, you can minimize your interest charges by paying off your student loans sooner rather than later. Borrowers can make more than the minimum payment when paying off student loans.What you’re willing to budget toward student debt payments can reflect what’s best for you. Making extra payments may not work for you if it means sacrificing your quality of life.

3. Choosing the Best Option for You

After reviewing your finances and creating a budget, you can choose the student loan repayment plan that works best for you. The federal government has a loan simulator that can help you choose a repayment option that best meets your needs and goals.Student loan repayment plans offered by the U.S. Department of Education may include specific eligibility criteria. You may qualify for several repayment plans, but your individual circumstances would determine which plan can provide you with the lowest monthly payment.The 10-year Standard Repayment Plan may not be right for you if you’re eligible for Public Service Loan Forgiveness (PSLF). The PSLF program can forgive the remaining balance on your federal student loans after you have made 120 qualifying monthly repayments as a public employee.Recommended: How Long Does It Take To Pay Off Student Loans?

Changing Your Repayment Plan by Refinancing Your Student Loans

You may refinance federal and private student loans with a private lender. Student loan refinancing is paying off existing student loans with a private education loan. Refinancing student loans may lower your interest rate. (Refinancing for a longer term may increase your total interest costs.)You’ll forfeit federal benefits if you refinance federal student loans with a private lender. Refinancing federal student loans will remove your access to IDR plans and PSLF.When weighing the pros and cons of student loan refinancing, here are some additional points to consider:The difference between private vs. federal student loans is the U.S. Department of Education provides or guarantees federal student loans, whereas banks, credit unions, online lenders, and state-based organizations may offer private education loans not guaranteed by the government.Recommended: How Does Student Loan Refinancing Work?

The Takeaway

Income-driven repayment plans can help people make payments on their federal student loans. If you want to refinance student loans, Lantern by SoFi can help. Just remember that the amount you refinance is not eligible for federal student loan forgiveness.Explore student loan refinance rates.

Frequently Asked Questions

What is the best repayment option for student loans?
How do I choose a loan repayment plan for myself?
What are the most common student loan repayment plans?
Photo credit: iStock/Vanessa Nunes
LNTSLR-Q125-009

About the Author

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman writes about personal loans, auto loans, student loans, and other personal finance topics for Lantern. He’s the recipient of more than 10 journalism awards and served as a New Jersey Society of Professional Journalists board member. An alumnus of the Philadelphia-based Temple University, Abdur-Rahman is a strong advocate of the First Amendment and freedom of speech.
Share this article: