Repayment Options for Federal Student Loans

Various repayment plans are available to help you manage your student loan debt. If you are interested in switching repayment plans to any of those listed below, please contact our customer service department.

Standard Repayment allows you to make equal monthly payments during the entire term of the loan and results in the least amount of interest cost to the borrower.

Here's an example of a $30,000 loan on a standard repayment plan:

Loan Principal: $30,000
Interest Rate: 6.8% Fixed
Term: 10 years, or 120 months
Monthly Payment*: $345.24
Total Interest Paid: $11,428.92

Graduated Repayment lowers your monthly payment amount as you enter the job market after college.  This plan allows for primarily interest-only payments for the first two years with payments increasing by approximately 20% every two years as you are better able to manage your money and get settled in a job.

Here's an example of that same $30,000 loan on a graduated repayment plan:

Loan Principal: $30,000
Interest Rate: 6.8% Fixed
Term: 10 years, or 120 months
Initial Monthly Payment*: $245.75
Final Monthly Payment*: $509.58
Total Interest Paid: $13,380.41

Extended Repayment is available for borrowers if their first loan disbursement occurred on or after October 7, 1998, who accumulate federal student loan debt greater than $30,000.  The repayment term may be extended up to 25 years.

Here's an example of a $30,000 loan on an extended repayment plan:

Loan Principal: $30,000
Interest Rate: 6.8% Fixed
Term: 25 years, or 300 months
Monthly Payment*: $208.22
Total Interest Paid: $32,462.41

Notice the total amount of interest paid on the extended repayment plan is significantly more than the total interest paid on the standard repayment plan.  The more time you take to pay off your loans, the more interest you will pay over the life of the loan.

Income-Based Repayment (IBR) is a repayment option that caps your monthly payment at 15% of your discretionary income. Discretionary income is the difference between adjusted gross income (AGI) and 150% of the federal poverty line that corresponds to your family size and state of residence. The monthly payment amount, or Partial Financial Hardship (PFH) payment amount, is adjusted annually based on any changes in annual income, state of residence, and family size. IBR is available for Stafford, GradPLUS, and consolidation loans (consolidation loans must not include any Parent PLUS loans). Any balance outstanding at the end of 25 years will be forgiven with 25 years of eligible payments. Under current legislation, the amount of debt discharged is treated as taxable income, so if you qualify for loan forgiveness at the end of 25 years, you would have to pay income taxes on the amount discharged that year.

Here's an example of a $30,000 loan on an income-based repayment plan:

Loan Principal: $30,000
Interest Rate: 6.8% Fixed
AGI: $26,000
Family Size: 1
Term: 11.3 years, or 136 months
Monthly PFH Payment*: $120.81 (PFH eligibility is evaluated annually to recalculate monthly payment amount. This example assumes 12 months at the PFH payment amount and the remaining term at the maximum monthly payment amount.)
Maximum Monthly Payment*: $345.24
Total Interest Paid: $14,094.19

Notice the total amount of interest paid on the IBR plan is significantly more than the total interest paid on the standard repayment plan.  Also, the balance would be paid in full in just over 11 years, so there would be no loan forgiveness.

If you are interested in IBR, please visit our IBR information page or try our IBR calculator to learn more about this program.

Income Sensitive Repayment lowers your monthly payment amount by basing your payments on a percentage of your gross monthly income (from 4% to 25%), allowing you to extend your repayment period up to 15 years.  Individual repayment schedules will vary based on the borrower's income and loan balance.  You may use our Income Sensitive Repayment worksheet (pdf) to see if you qualify.

 

Side-by-Side Comparison

*All examples are approximate and payment amounts may vary for individual borrowers.  Some borrowers may have older loans with variable interest rates as well as loans with fixed interest rates, depending upon disbursement date.  Visit our Interest Rates page for more information.

**The Additional Interest Paid number reflects the amount of interest paid above that which would be paid on a standard repayment plan. 

You can use your own loan information in our Repayment Calculator to get a better idea of how much your payments and interest cost will be. If you are interested in switching repayment plans or if you have questions, please contact our customer service department.

If you are temporarily unable to make payments, then a deferment or forbearance might be the right choice for you.

A deferment allows you to temporarily delay repayment of your student loans for a specified period of time.  There are many different situations that would make a person eligible to defer their payments.  Some of the most commonly used deferments cover unemployment, enrollment in school, or economic hardship. A forbearance is an option available to people who do not qualify for a deferment.

The big difference between deferment and forbearance is that borrowers with subsidized student loans on deferment have the accrued interest paid for them by the federal government.  The borrower is responsible for the interest that accrues on unsubsidized loans on deferment and for the interest that accrues on both subsidized and unsubsidized loans on forbearance.  If the interest is not paid, it will be capitalized (added to the principal balance) at the end of the deferment or forbearance period. Capitalization of interest increases the total cost of your loans which may consequently increase your monthly payment amount. Please keep in mind that there are limits on the amount of deferment and forbearance time available to you.

You can use our Form Selector to determine whether a deferment or a forbearance best meets your needs.