Choosing a Student Loan Repayment Plan

The federal government offers many different student loan repayment plans. These are designed specifically to help borrowers who meet certain criteria pay off their loans faster. 

This can be hugely helpful for individuals who need a little bit of extra help to pay their student loans. With such a wide array of options, most people with federal loans will be able to find a repayment plan that works for them. The challenge is choosing a student loan repayment plan. 

Choosing a Student Loan Repayment Plan

How should borrowers go about choosing a student loan repayment plan? Your current situation and your relationship with your loans are the most important elements. There are many specific rules and regulations that qualify or disqualify individuals from being able to utilize various repayment plans. 

These are a few of the most common student loan repayment plans:

  • Standard repayment plan – Before getting into anything too fancy, it makes sense to start with the basics. The standard 10-year Stafford Loan repayment plan is open to all borrowers. Your payments are at a fixed interest rate, and the loan will be paid in ten years unless you consolidate to a different payoff term. 
  • Income-driven repayment plans – There are a few different ways you can qualify for income-driven repayment plans. The idea behind these is that the amount of money you make relative to your debt level determines if you can have some amount of your loan discharged. This works by fixing your loan payment to your income. After 20-25 years, depending on the plan, the rest will be forgiven no matter your remaining principal balance. 
  • Public service loan forgiveness plans – Those who work for certain organizations can utilize this plan to have their loans forgiven after making a certain number of payments. 
  • Graduated repayment plans – Despite the name, this has nothing to do with whether you actually received your diploma. Instead, the “graduated” term refers to how payments increase over time. This can be a good plan for those who might plan to go to a graduate school program where they might not make much money, but will make significantly more later. It’s important to note that you’ll pay more over time with a gradated plan than a standard plan. 

There are a few varieties of these plans, so it makes sense to speak with a representative at the Education Department or your loan servicer to determine what makes the most sense for you. But what if you don’t qualify for any particularly enticing federal repayment plans? Or what if you have other loans that didn’t come from the government?

What If You Don’t Qualify for a Federal Plan?

Those who don’t fit neatly into any of the federal repayment plans will have to find another path forward if they want to change their loan repayment terms. For many, a student loan refinance will be the right move. 

Refinancing is a standard financial move that’s done with loans of all kinds. So, what is refinancing a student loan? The process is quite simple, really. You take out a new loan that replaces your previous debt. When you do this, it can get you a better interest rate or change the repayment term of the loan. These are generally going to be the most important features when it comes to the affordability of a loan. 

For the most part, only those with private loans or high-interest federal loans who don’t qualify for more advantageous repayment plans will want to refinance their loans. Since all refinancing happens through a private lender, you can lose potential loan forgiveness benefits. 

There are currently over 43 million people in the U.S. with student loans. No matter your situation, getting the best student loan repayment plan will lead to positive impacts on your life. 


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Written by Virily Editor

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