Student Loan Repayment: What Are My Options?

4 min read
January 12, 2016

Student Loan Repayment Options

When it comes to improving your finances and establishing your career path, graduating college is often only the first step in the journey. With at least two-thirds of all graduates leaving America’s colleges and universities carrying some type of student loan debt, it’s safe to say that student loan repayment is a burden many recent college graduates and working professionals are dealing with.

After you graduate, it’s important to understand your student loan repayment options and know you’re not alone when it comes to having debt. You can certainly pay your loans off in a timely manner -- and looking into some of these Federal student loan repayment plans may help you find a solution for your specific situation.

Student Loan Repayment Plans

Generally, when you graduate there is a 6-month grace period in which you don’t have to make any payments on your student loans. But if you have any extra room in your budget, try to contribute something to your loan balance to keep interest to a minimum since it will be calculated each day.

Toward the end of your grace period, you’ll be prompted to pick a repayment plan based on your needs and preferences. There are five main types of repayment plans:

Standard: This plan is eligible for Direct and Stafford subsidized and unsubsidized loans along with all PLUS loans. Monthly payments are set at a minimum of $50 per month and your repayment term can last up to 10 years. With this particular plan, monthly payments are fixed and you’ll pay less interest over time as a result.

Graduated: This plan is also eligible for Direct and Stafford subsidized and unsubsidized loans and PLUS Loans. It allows you to start the repayment process by making lower payments. Your minimum payment amount increases usually every two years.

The idea behind this plan is starting off with a lower, more manageable payment while you are trying to advance your career. But know that, over time, you’ll pay more interest over the life of your loan.

Extended: This plan is almost like a combination of the standard and graduated plans, only borrowers can take up to 25 years to repay their loans. As a result, monthly payments would be lower than the 10-year plans. This may be an option if you are dealing with a massive amount of student loans.

Income-Based: This plan allows your maximum monthly payment to be 15 percent of your discretionary income which is the difference between your adjusted gross income and 150 percent of the poverty guideline for your family size.

Pay As You Earn: With this plan, you can take up to 20 years to pay back your loans. The maximum monthly payments will be 10 percent of your discretionary income.

Student Loan Forgiveness

There is a way to have your student loan balance forgiven after a certain period of time if you have Federal loans. Most student loan forgiveness programs are geared toward low-paid educators, public defenders, and other government workers.

Contrary to popular belief, student loan forgiveness is not a quick fix solution by any means and it can take up to 10 years to have your loans completely forgiven. If you work in a qualifying field or work for any government-funded community service organizations (like Peace Corps), there is a Public Service Program that allows you to have your student loans forgiven after making 120 qualified payments while working for a qualified employer.

Qualified payments include an income-based repayment plan and/or a 10-year standard repayment plan. Note that you must make every single one of those 120 payments to qualify! If you miss even one, you will not be eligible for loan forgiveness.

Should You Consolidate Your Student Loans?

Consolidating your loans allows you to combine several student loans into one total balance with one low interest rate. This can help simplify your debt and allow you pay off your student loans faster if you receive a lower interest rate.

A few caveats to be aware of if you’re considering consolidation: when you consolidate Federal loans, you essentially get a new lender which will make you ineligible for certain government relief programs like deferment or forbearance. And if you have both Federal and private loans, you can’t consolidate them together due to the differences in terms.

As you can see, there is a wide variety of options made available in order to help you manage the monthly payments and pay off your loans. If you ever feel like you can’t make payments on your loans, contact your lender or a financial expert who can help you determine which repayment option or solution might be best for you.


Chonce MaddoxAbout the Author: Chonce is a freelance writer who's passionate about helping others get out of debt and work toward financial stability. You can connect with her on her blog,