Best Student Loan Repayment Plans in 2022

There are many federal student loan repayment plans out there, and sometimes people don’t know where to start! The best plan for you depends on your financial situation, goals, and career. Below, we will go into more detail about the different types of student loan repayment plans, terms and conditions, eligibility, and a few more details about who each repayment plan is ideal for, including private student loan repayments.

Types of Student Loan Repayment Plans

Standard Repayment

Eligible Loans: Direct PLUS Loans, Direct Federal Stafford, All Consolidation Loans

Terms: All borrowers are eligible for Standard Repayment and payments are set for 10-year repayment.

For whom is standard payment best suited? Students who want to pay off their loan as quickly as possible (and who may be willing to pay a higher monthly amount).

Graduated repayment plan

Eligible Loans: Direct PLUS Loans, Direct Federal Stafford, All Consolidation Loans

Terms: All borrowers are eligible for Graduated Repayment and payments are lower but increase approximately every two years. Borrowers can repay these loans in 10 years.

Who is Graduated Repayment suitable for? Students who want lower payments in the short term but are willing to pay more later (which can be a good decision if you have a higher income)

Extended Repayment Plan

Eligible Loans: Direct PLUS Loans, Direct Federal Stafford, All Consolidation Loans

Terms: Borrowers must have a certain level of debt to be eligible and will repay their loans over a long period (25-30 years).

Who is Extended Repayment for? This repayment makes more sense if you owe a lot of student loans and want to reduce your monthly payment. The drawback is that you might end up paying more interest because the loan is for a longer period.

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Revised Pay-as-you-earn Repayment Plan

Eligible Loans: Direct PLUS Loans, Direct Federal Stafford, All Consolidation Loans

Terms: The Revised Pay-as-you-earn Repayment Plan is available to all direct loan borrowers and limits monthly payments to 10 percent of your income. If you have not repaid your loan in 20 years, the outstanding balance will be forgiven (this increases to 25 years if the loans are for higher education).

Who is plan best for? This repayment plan works well for people who want to match their loan amount to their income (it can help with budgeting). As with other extended repayment plans, the drawback is that students may end up paying more interest.

Pay-as-you-earn Repayment Plan

Eligible Loans: Direct PLUS Loans, Direct Consolidation Loans, and Direct Federal Stafford

Terms: You must be a new student loan borrower by October 1, 2007 and have received a direct loan disbursement by October 1, 2011. If you are married, you can file your taxes separately and your spouse’s income does not count (Revised Pay-as-you-earn). The other major difference between REPAYE and PAYE is that under PAYE, outstanding balances are canceled after 20 years (including graduate loans).

Who is Pay-As-You-Earn Repayment Plan for? This can be a good solution for people with high debt who want to tie their student loans to their income. Please note that some PAYE borrowers may pay more due to loan term.

Income-Based Repayment Plan

Eligible Loans: Direct PLUS Loans, Direct Federal Stafford, All Consolidation Loans

Terms: Monthly payments of 10 or 15 percent of your income and debt forgiveness after 20 or 25 years.

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Who is this repayment plan ideal for? The Income-based repayment plan can be a good solution for people with large debts who want to tie their student loans to their income. Some Income-Based Repayment borrowers end up paying more because the loan is extended.

Income-Contingent Repayment Plan

Eligible Loans: Direct PLUS Student Loans, Direct Consolidation Loans, and Direct Federal Stafford

Terms: Monthly payment of 20 percent of income or the amount you would pay if you had a 12-year fixed payment plan. All loans are forgiven after 25 years

Who is the Income- Contingent Repayment Plan suitable for? This plan is open to all direct loan borrowers (while some of the other income-based plans have different requirements). You could end up paying more money than if you had a fixed plan.

Income- Sensitive Repayment Plan

Eligible Loans: FFEL Consolidation Loans, Direct PLUS Loans, Federal Family Education Loan (FFEL), Direct Federal Stafford

Terms: Monthly repayments are based on income, but the loan will be fully repaid over 15 years

Who is the Income-Sensitive Repayment Plan suitable for? This plan is ideal for students who have taken out Federal Family Education Loans and is not an option if you have direct loans.

Repaying a Private Student Loan

Private student loans are processed by private lenders and do not qualify for any of the repayment plans above (which only apply to government student loans). If you’re having trouble making payments on your private student loan repayments, we recommend contacting the lender to discuss your options.

Beyond that, you may be eligible to refinance your private student loans at a lower interest rate. A loan refinance marketplace allows you to see what types of private student loan refinance rates you might be eligible for.

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Need More Help With your Repayment Plan?

If you are not sure where to start, we recommend using the Department of Education’s loan simulator tool as well. This free tool lets you compare your student loan repayment options based on your personal financial information. This gives you the most accurate estimate of what your monthly payments and total loan payments will be.

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