Navigating Student Loan Repayment: Choosing the Best Plan

Student loans can feel overwhelming, but understanding your repayment options is crucial. This article breaks down the various federal student loan repayment plans available, helping you determine the best fit for your financial situation and goals.

The Changing Landscape of Federal Student Loan Repayment

The federal student loan repayment system has undergone significant changes. In July 2025, President Trump signed into law a massive legislative package that restructures the federal student loan repayment system, which makes major changes to federal higher education policy.

Important Dates and Considerations:

Loans Before July 1, 2026: Borrowers with only loans taken out before July 1, 2026, will retain access to the current array of plans until July 1, 2028, with one caveat: the Education Department stopped allowing borrowers to enroll in the SAVE Plan in February 2025.
SAVE Plan Forbearance: Borrowers who had already enrolled in the SAVE Plan were placed in forbearance starting in 2024. The Education Department has not clarified what will happen if the plan is struck down by court order before July 1, 2028.
Loans On or After July 1, 2026: Borrowers with any loans taken out on or after July 1, 2026 will only have access to one non-income-based plan, the “new standard” plan.
Collections Resumed: Collections on defaulted federal student loans resumed on May 5, 2025.

Types of Federal Student Loans

Before diving into repayment plans, it's important to understand the different types of federal student loans:

Direct Subsidized Loans: Available to undergraduate students with demonstrated financial need.
Direct Unsubsidized Loans: Available to both undergraduate and graduate students. These loans are not based on financial need.
Direct PLUS Loans: Available to parents of dependent undergraduate students (Parent PLUS) and graduate or professional students (Grad PLUS). These loans are unsubsidized and require a credit check. Parents can borrow up to the cost of attendance (tuition, room and board and personal expenses) minus financial aid offered to the student.
Direct Consolidation Loans: Allows you to combine multiple federal student loans into one or two loans with one monthly payment. This can simplify repayment.

Overview of Federal Student Loan Repayment Plans

There are several federal student loan repayment plans available to borrowers. We suggest that each borrower review the options and decide which plan is right for them.

Traditional Repayment Plans

Under traditional plans, monthly payments are based on the loan balance, interest rates and a set payback period. These plans are not eligible for forgiveness and are best suited for people who can pay off their debt within a reasonable time, those not pursuing a federal forgiveness program, or those with high income who simply cannot afford an Income Driven Repayment plan. ALERT: If you take out new loans on or after July 1, 2026, you will be restricted to the Repayment Assistance Plan (RAP - IDR Plan) and the new Standard Fixed Plan (traditional plan).

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Standard Repayment Plan: Under this plan you will pay a fixed monthly amount for a loan term of up to 10 years. Depending on the amount of the loan, the loan term may be shorter than 10 years. There is a $50 minimum monthly payment.
Graduated Repayment Plan: Unlike the standard and extended repayment plans, this plan starts off with lower payments, which gradually increase every two years. The loan term is 12 to 30 years, depending on the total amount borrowed. The monthly payment can be no less than 50% and no more than 150% of the monthly payment under the standard repayment plan. The monthly payment must be at least the interest that accrues, and must also be at least $25.
Extended Repayment Plan: This plan is like standard repayment, but allows a loan term of 12 to 30 years, depending on the total amount borrowed. Stretching out the payments over a longer term reduces the size of each payment, but increases the total amount repaid over the lifetime of the loan. There is a variation on extended repayment in the FFEL program that provides a repayment term of up to 25 years, not 30 years, if you have more than $30,000 in loans with a single lender. This 25-year extended repayment plan does not require you to consolidate your loans.

Loan Term for Extended/Graduated Repayment

For extended and graduated repayment, the following chart shows how the maximum loan term depends on the amount borrowed.

Loan Balance	Maximum Loan Term
Less than $7,500	10 years
$7,500 to $9,999	12 years
$10,000 to $19,999	15 years
$20,000 to $39,999	20 years
$40,000 to $59,999	25 years
$60,000 or more	30 years

Standard Fixed Plan (New): Available Latest July 1, 2026. This plan is for Direct loan borrowers only. The only traditional plan available to borrowers with Direct loans who receive new loans on or after July 1, 2026. Monthly Payments are Fixed over life of loan (based on loan balance, interest rate, and repayment term). Repayment Term is 10-25 Years depending on loan balance. Best if your income is high enough to comfortably cover the payments. This is the only plan available to Parent Plus borrowers, who take new loans on or after July 1, 2026. No flexibility in repayment term.

Income-Driven Repayment (IDR) Plans

Under IDR Plans, payments are based on income, family size, and tax-filing status. They forgive remaining balances after making 10-30 years of payments with no employment requirement, or just 10 years under Public Service Loan Forgiveness. You must recertify these plans every year because they are based on your income. A settlement has been reached to eliminate the SAVE IDR plan, currently facing legal challenges. Once the court approves the settlement, The Department of Education will notify borrowers in the SAVE forbearance of the timeline for transitioning to a different repayment plan.

Income-Contingent Repayment: Payments under the income contingent repayment plan are based on the borrower’s income and the total amount of debt. Monthly payments are adjusted each year as the borrower’s income changes. The loan term is up to 25 years. At the end of 25 years, any remaining balance on the loan will be discharged. The write-off of the remaining balance at the end of 25 years is taxable under current law. There is a $5 minimum monthly payment. Income Contingent Repayment is available only for Direct Loan borrowers. Income Contingent Repayment (ICR) - Phased out by July 1, 2028. All Direct Loans (except Parent Plus which must be consolidated before July 1, 2026, to become eligible). No loans issued on or after July 1, 2026. Monthly Payments are the lesser of 20% of borrower’s discretionary income or the loan balance amortized over 12-years and adjusted for income.
Income-Sensitive Repayment: As an alternative to income contingent repayment, FFELP lenders offer borrowers income-sensitive repayment, which pegs the monthly payments to a percentage of gross monthly income. The loan term is 10 years.
Income-Based Repayment: Similar to income contingent repayment, Income-Based Repayment caps the monthly payments at a lower percentage of a narrower definition of discretionary income. Income Based Repayment (IBR) For New Borrowers Loans first disbursed on or after July 1, 2014. No loans disbursed on or after July 1, 2026. Direct Loans (excluding Parent PLUS, unless consolidated before July 1, 2026). FFEL Loans (excluding Parent PLUS and FFEL Consolidation loans that include Parent PLUS). Monthly Payments are 10% of borrower’s discretionary income.
Pay As You Earn (PAYE): Pay As You Earn (PAYE) - Phased out by July 1, 2028 Loans issued before July 1, 2014. No loans issued on or after July 1, 2026. Direct Loans (excluding Parent PLUS, unless consolidated). FFEL Loans (excluding Parent PLUS and FFEL Consolidation loans with Parent PLUS). Must be income-eligible. No outstanding Direct or FFEL loans issued before Oct 1, 2007. Must have a Direct Loan issued on or after Oct 1, 2011. No loans issued on or after July 1, 2026. Monthly Payments are 10% of borrower’s discretionary income.
Repayment Assistance Plan (RAP): All Direct Loans(except Parent Plus or Consolidation loans containing Parent Plus). The only Income-Driven Repayment (IDR) plan available to student borrowers taking loans on or after July 1, 2026. Monthly Payments are 1%-10% of Adjusted Gross Income. $50 reduction for each dependent claimed on tax return. $10 minimum. Repayment Term is 30 Years. Interest and principal subsidies will ensure balance is reduced by at least $50 monthly (must make required payment to benefit). Eligible for PSLF. No adjustment for inflation. Longer path to forgiveness. Forgiven loan balance may be subject to income tax starting in 2026.

The SAVE Plan

Formerly known as Revised Pay As You Earn (REPAYE), the new SAVE Plan was released under President Biden's administration. For undergrad borrowers, the maximum repayment period for SAVE is 20 years versus 25 years for those with graduate loans. SAVE also subsidizes 100% of all the interest your required payment doesn’t cover for the life of the loan. Additionally, the SAVE Plan excludes spousal income if you're married and file taxes separately. Finally, SAVE counts for PSLF.

Upcoming Repayment Plan Changes Starting July 1, 2026

Starting July 1, 2026, Trump’s budget bill changes student loan repayment options in these ways:

The new Repayment Assistance Plan (RAP) replaces all current IDR plans.
Graduated and extended repayment plans end for new borrowers.
The standard plan gets new, potentially longer terms.

If you borrow any new federal loan after July 1, 2026 - even if you have older loans - all your loans must follow the new rules. That’s because all of your loans must be repaid under the same plan.

Key deadlines for student loan repayment plan changes

Before July 1, 2026 Only borrowers who took out loans before this date can qualify for the following plans until they pay off their loans: the current standard plan; Income-Based Repayment (IBR), which is a type of IDR plan; or graduated or extended repayment plans.They may also qualify for the new RAP plan.
July 1, 2026 New repayment plan rules from the Trump administration’s budget bill start to take effect.Deadline to consolidate parent PLUS loans to stay in the income-driven repayment system. (After consolidating your parent PLUS loans, you still need to enroll in an income-driven repayment plan.)
July 1, 2028 Deadline to switch into the Income-Based Repayment (IBR) plan if you want to avoid being moved into the new RAP plan.If you have parent PLUS loans, you must switch into the Income-Contingent Repayment (ICR) plan.

Comparing Repayment Plans

The following table compares each of the major repayment plans with standard ten year repayment. As the table illustrates, increasing the loan term reduces the size of the monthly payment but at a cost of substantially increasing the interest paid over the lifetime of the loan. For example, increasing the loan term to 20 years may cut about a third from the monthly payment, but it does so at a cost of more than doubling the interest paid over the lifetime of the loan. This table is based on the unsubsidized Stafford Loan interest rate of 6.8%.

Repayment Planand Loan Term	Reduction inMonthly Payment	Increase inTotal Interest Paid
Extended Repayment - 12 years	12%	22%
Extended Repayment - 15 years	23%	57%
Extended Repayment - 20 years	34%	118%
Extended Repayment - 25 years	40%	184%
Extended Repayment - 30 years	43%	254%
Graduated Repayment (50% initial payment)	38% average reduction	89%
Income Contingent Repayment (Salary = initial debt, 4% annual raise)	41% declining to 33% (37% average reduction)	178%

Key Considerations When Choosing a Repayment Plan

Income and Expenses: Evaluate your current income and expenses to determine how much you can realistically afford to pay each month.
Loan Balance: A higher loan balance may necessitate a longer repayment term and potentially an income-driven plan.
Career Goals: If you plan to work in public service, consider Public Service Loan Forgiveness (PSLF) and choose a qualifying repayment plan.
Future Income: If you expect your income to increase significantly, a graduated repayment plan might be suitable.

Strategies for Managing Student Loan Debt

No Prepayment Penalty: All Federal education loans allow prepayment without penalty. For loans that are not in default, any excess payment is applied first to interest and then to principal. However, if the additional payment is greater than one monthly installment, you must include a note with the payment telling the processor whether you want your prepayment to be treated as a reduction in the principal. Otherwise, the government will treat it as though you paid your next payment(s) early, and will delay your next payment due date as appropriate. (It is best to tell them to treat it as a reduction to principal, since this will reduce the amount of interest you will pay over the lifetime of the loan.)Due to the way the income contingent repayment plan treats interest, it is not advisable to prepay a loan in the income contingent repayment plan.
Switching Repayment Plans: If you want to switch from one plan to another, you can do so once per year, so long as the maximum loan term for the new plan is longer than the amount of time your loans have already been in repayment.
Consolidation: Consolidation is not a type of refinancing to get a lower interest rate. A Direct Consolidation Loan has a fixed interest rate based on the average of the interest rates on the loans being consolidated.
Loan Rehabilitation: Consider loan rehabilitation if you have loans in default. When your loan is rehabilitated, the default status will be removed from your loan, and collection of payments through wage garnishment or Treasury offset will stop.

Avoiding Delinquency and Default

To avoid delinquency (being late on a payment) and default, you should make on-time monthly payments on your federal student loans. There are many consequences of missing monthly payments, including negatively impacting your credit score.

Enroll in Auto Pay: This is your best option to never miss a payment and save 0.25% on your interest rate.

Resources and Tools

StudentAid.gov/repay: A wealth of information about loan repayment, including details about when repayment begins, what happens if a student goes into repayment but then returns to school, what the latest interest rates are, and more.
StudentAid.gov Dashboard: Provides information about which loan servicer is handling your loans.
StudentAid.gov/loan-simulator: An online tool helping borrowers calculate federal student loan payments and choose a loan repayment option that best meets their needs and goals. Visit StudentAid.gov/loan-simulator to make sure you are on the best repayment plan for your current circumstances, especially if your financial situation has changed. The Loan Simulator tool may recommend an income-driven repayment (IDR) plan, which bases your monthly payment amount on your income and family size.

Private Student Loans

Private student loans are offered by banks, credit unions, and other private lenders. These loans often require a credit check and may have variable interest rates and less flexible repayment options compared to federal loans. They should be your last resort since they are frequently the most expensive, depending on the borrower’s credit. Private loans can be used when federal loans, grants, and scholarships don’t cover all educational costs.

Protections: Fewer borrower protections like deferment and forgiveness options and extremely difficult to release a cosigner.

Important Reminders

Federal loan servicers will help you for free. You never have to pay for assistance with your federal student loans.
Beware of Scams: Unfortunately, too many borrowers wait until they're in default and find that their tax refund has been taken as payment before seeking help. If you're working with someone whose loans are in default, reassure them that there are ways to resolve loan default, including repayment, rehabilitation, or consolidation.

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