Note that the situation for student loans has changed due to the impact of the coronavirus pandemic and relief efforts from the government, student loan lenders and others. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.

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Paying off student loans is stressful, but there is a silver lining: Federal student loans have a lot of flexibility when it comes to paying them back. In fact, the Federal Student Aid office offers eight different repayment plan options. With all these choices, how can you select your best student loan repayment plan?

Here are four steps you can take to figure out which student loan repayment plan is best for you.

1. Learn about the different student loan repayment plans
2. Determine how much you can pay each month
3. Use a student loan calculator to estimate interest costs
4. Change your plan or refinance if your circumstances change
● Plus: Final thoughts on finding your best student loan repayment plan
● Plus: FAQs: Student loan repayment

1. Learn about the different student loan repayment plans

Your first step in choosing your best repayment plan for your student loans is learning about your options.

Federal student loans come with eight different plans. Not every loan type qualifies for every plan, but you can follow the links to learn about each plan and its eligibility requirements in full detail.

  • Standard repayment: This plan spans 10 years. You’ll have the same fixed payments every month.
  • Graduated repayment: This plan also gives you 10 years to pay off your debt, but with one key difference: Your monthly payments will start out small and increase regularly, generally every two years.
  • Extended repayment: This plan lowers your monthly payments and extends your repayment term to up to 25 years. You can choose fixed payments, which stay the same every month, or graduated payments, which increase over time.
  • Income-driven repayment (IDR): IDR plans cap your monthly payments at 10% to 20% of your discretionary income. They include:

Most of the income-driven plans end in loan forgiveness if you haven’t paid off your balance after 20 or 25 years.

If you don’t request an alternative plan, you’ll make payments on your federal loans under the standard 10-year repayment plan. But for some borrowers, the standard plan is too burdensome. For others, though, this approach is not aggressive enough for paying off debt.

Private student loans don’t qualify for these plans

Note that private student loans are different. They probably won’t come with flexible student loan repayment options, and they don’t qualify for federal plans such as IDR. Each lender sets its requirements, with most letting you choose a term between five and 20 years when you initially borrow, so you’ll want to shop around for private student loans before borrowing.

But if you already borrowed and are struggling to keep up with payments, you’ll need to speak with your lender to see if you can choose a new term or postpone payments through forbearance.

Refinancing student loans could be another option if you’re looking to restructure your debt. Since private lenders determine their student loan repayment options, you’ll need to call your lender or servicer to learn what’s available to you.

2. Determine how much you can pay each month

After learning about the different student loan repayment plans, it’s time to take a close look at your budget. Use a spreadsheet or download an expense-tracking app to get a clear picture of your monthly cash flow.

Based on your income and expenses, figure out how much you can afford to pay toward your student loans each month. Then, use a tool like the Federal Student Aid Loan Simulator to calculate your payments on different plans.

If you need to lower your payments…

If your student loan payments under the standard repayment plan are dragging down your budget, apply for a different plan. Each has its own eligibility requirements, so factors such as your income, loan type, date of loan disbursement and total debt might narrow down your options.

When considering changing your repayment plan, ask yourself these questions:

  • Do I expect my income to rise over time? If so, you might opt for the graduated repayment plan. With this option, your payments will start low and gradually rise, but you’ll still pay off your debt in 10 years.
  • Do I need long-term relief? If so, opt for the extended repayment plan or an IDR plan, both of which lengthen your repayment term to 20 or 25 years. IDR plans are usually a better option, since they could end in loan forgiveness.
  • Am I working toward Public Service Loan Forgiveness (PSLF)? If you’re working toward PSLF, you’ll need to put your loans on an IDR plan to qualify.
  • Do I have parent PLUS loans? If you’re a parent borrower, your only available IDR plan is Income-Contingent Repayment, and you’ll have to consolidate your loan first.
  • Do I need to pause my student loan payments altogether as a result of losing my job or returning to school? If this is the case, consider student loan deferment or forbearance to avoid default.

The right plan will match your circumstances and make your monthly payments more manageable. But keep in mind that if you lower your monthly payments, you’ll likely pay more in interest in the long run.

Again, if you have private student loans and need relief, you’ll need to speak with your loan servicer. It might offer temporary forbearance in the case of economic hardship.

If you can pay more each month…

After taking a close look at your budget, you might reach the opposite conclusion: You can pay more each month and get out of debt even faster. If that’s the case, you can set up extra payments without penalty.

You can set up recurring or one-time extra payments to pay off your debt faster. However, you might need to instruct your loan servicer to apply your extra payments to your balance rather than save them for future bills.

3. Use a student loan calculator to estimate interest costs

Once you’ve compared your budget with the various student loan repayment plans, do the math to see what each plan would look like for you. Not sure where to start? Student loan calculators can take the guesswork out of the process.

For example, let’s say you owe $30,000 in loans with a 5.70% rate. On the 10-year standard plan, you can expect to pay $329 a month for 10 years. Over the life of your loans, you’ll pay about $9,427 in interest.

But if you can pay just $50 more a month, you’ll save about $1,700 in overall interest and get out of debt a year and eight months ahead of schedule. If you can ramp up your payments to $500 a month, you’ll save over $4,000 in interest and get out of debt about four years early.

By revealing your total savings, these calculators can motivate you to pay off your loans faster.

Student loan prepayment calculators

Calculators can also show you what happens if you lower your monthly payments. This IBR calculator, for example, gives a bird’s-eye view of your loans. It even takes annual salary raises into account.

INCOME BASED REPAYMENT (IBR) CALCULATOR

Your monthly payment on IBR would be , a difference of from what you are currently paying. If your income increases over time, your payments may increase. Assuming annual income growth of 3.5%, your final monthly payment would be . After making payments for — years, you will have paid a total of and would receive in forgiveness, compared to your current plan where you will pay over the next — years.

Student loan refinancing rates as low as % APR. Check your rate in 2 minutes.

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Student loan calculators reveal the relationship between your monthly payments and the interest you pay over the long run. By crunching the numbers, you can see how your actions now will affect your finances in the future.

4. Change your plan or refinance if your circumstances change

There’s no one-size-fits-all approach when it comes to repaying student loans. The plan you choose might be different from someone else’s. Plus, your approach as a new grad might look different than it does in your 30s or 40s.

If your bills are overwhelming, an IDR plan could be exactly what you need to lower your monthly payments and avoid default. But if you start making more money with a high-paying job or a side hustle, you could ramp up your student loan payments to get out of debt faster.

Once your finances are in good shape, you could even refinance your loans under new terms. When you refinance, you turn over one or more of your student loans to a new, private lender. You could refinance one loan or combine multiple ones. Ideally, you’ll get a lower interest rate when you do so.

Plus, you could choose new terms, perhaps lowering your monthly payments or accelerating your payoff date. If you go from a 10-year plan to a five-year one, for instance, you’ll be out of debt much faster. Just make sure to do the math so you understand exactly what your new terms will mean for your budget.

For example, let’s say you refinanced a 10-year, $30,000 loan at 5.70% interest. Your new plan has a five-year term at 4.50% interest. In this case, your monthly payments would increase by $230, but you’d get out of debt five years early and save $5,870 on interest.

Typically, the best candidates for student loan refinancing have a steady income and strong credit score. Keep in mind, though, that if you refinance your federal student loans, you’ll lose out on federal student loan repayment options, such as IDR plans and forgiveness programs.

Final thoughts on choosing your best student loan repayment plan

If you’re confused about the different student loan repayment plans available, you’re not alone. There are a lot of options, and each has its pros and cons.

Careful research and a bit of patience can pay off, whether you land big savings from a new repayment plan or free up more of your money each month. Explore your student loan repayment options if you need some financial relief or want to pay off your debt faster.

FAQs: Student loan repayment

If you’re confused about the different student loan repayment plans available, you’re not alone. There are a lot of options, and each has its pros and cons.

These frequently asked questions about student loan repayment may help clear up any confusion:

What are my student loan repayment options for federal loans?

Federal student loans are eligible for a variety of repayment plans, including:

  • Standard 10-year repayment
  • Extended repayment
  • Graduated repayment
  • Income-driven repayment plans

Unless you opt for an alternative plan, your loans will automatically go on the standard 10-year plan with fixed monthly payments.

You can defer payments while you’re enrolled at least half-time in school and for six months after you graduate.

If you want to save money on interest, you can choose to make in-school payments or extra payments at any time without penalty.

What are my student loan repayment options for private loans?

Private student loans are not eligible for the federal repayment plans listed above. In most cases, you’ll choose your repayment term when you borrow, typically between 5 and 20 years.

Since you might not have the option to change your repayment plan later, make sure you carefully consider your terms before choosing. Use a student loan calculator to crunch the numbers and find a repayment plan you can afford.

Similar to federal loans, many (but not all) private student loans come with a grace period, meaning you don’t have to pay until after you leave school. But you can make in-school payments or extra payments to cut down on interest costs.

Can I pause payments on my student loans?

If you’re struggling to make payments on your student loans, you may be able to pause payments temporarily. While the U.S. government granted an automatic freeze on student loan repayment during the COVID-19 pandemic, federal student loans have always carried eligibility for deferment and forbearance. These options allow you to postpone payments for a period of time.

While private loans don’t qualify for these federal programs, some private lenders do offer deferment or forbearance options to borrowers if you meet certain criteria. If you’re having trouble repaying your loan, reach out to your loan servicer to find out about your options.

While pausing payments can give you financial relief, it can also come with a downside: In most cases, your loans will continue to accrue interest, causing your balance to grow even bigger.

Interested in refinancing student loans?

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