Loan Repayment Plans
When it comes time to start repaying your student loan(s), you can select a repayment plan that is right for your financial situation. Generally, you'll have from 10 to 25 years to repay your loan, depending on which repayment plan you choose.
When Do Payments Begin?
- Direct Unsubsidized Loans have a six-month grace period.
- PLUS Loans do not have a grace period, but law students are in an automatic deferment period that extends for six months after graduating.
The US Department of Education’s COVID-19 relief for student loans is ending this year. Student loan interest will resume starting on Sept. 1, 2023, and payments will be due starting in October. The Department of Education and Loan Servicers will communicate with borrowers on repayment due dates and plan registration.
- Standard Repayment
With the standard plan, you'll pay a fixed amount each month until your loans are paid in full. Your monthly payments will be at least $50, and you'll have up to 10 years to repay your loans.
Your monthly payment under the standard plan may be higher than it would be under the other plans because your loans will be repaid in the shortest time. For that reason, having a 10-year limit on repayment means you may pay the least interest.
- Extended Repayment
Under the extended plan, you'll pay a fixed annual or graduated repayment amount over a period not to exceed 25 years. If you're a FFEL borrower, you must have more than $30,000 in outstanding FFEL Program loans. If you're a Direct Loan borrower, you must have more than $30,000 in outstanding Direct Loans. For example, if you have $35,000 in outstanding FFEL Program loans and $10,000 in outstanding Direct Loans, you can choose the extended repayment plan for your FFEL Program loans, but not for your Direct Loans. Your fixed monthly payment is lower than it would be under the Standard Plan, but you'll ultimately pay more for your loan because of the interest that accumulates during the longer repayment period.
This is a good plan if you will need to make smaller monthly payments. Because the repayment period will be 25 years, your monthly payments will be less than with the standard plan. However, you may pay more in interest because you're taking longer to repay the loans. Remember that the longer your loans are in repayment, the more interest you will pay.
- Graduated Repayment
With this plan, your payments start out low and increase every two years. The length of your repayment period will be up to ten years. If you expect your income to increase steadily over time, this plan may be right for you. Your monthly payment will never be less than the amount of interest that accrues between payments. Although your monthly payment will gradually increase, no single payment under this plan will be more than three times greater than any other payment.
- Pay As You Earn
To qualify for Pay As You Earn, you must have a partial financial hardship. You have a partial financial hardship if the monthly amount you would be required to pay on your eligible federal student loans under a 10-year Standard Repayment Plan is higher than the monthly amount you would be required to repay under Pay As You Earn. For this purpose, your eligible student loans include all of your William D. Ford Federal Direct Loan (Direct Loan) Program loans that are eligible for Pay As You Earn, as well as certain types of Federal Family Education Loan (FFEL) Program loans. Although your FFEL Program loans cannot be repaid under Pay As You Earn, the following types of FFEL Program loans are counted in determining whether you have a partial financial hardship:
- Federal Subsidized and Unsubsidized Federal Stafford Loans
- Federal PLUS Loans made to graduate or professional students
- Federal Consolidation Loans that did not repay any PLUS loans for parents
Additionally, you must be a new borrower as of Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. You are a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program loan as of Oct. 1, 2007, or had no outstanding balance on a Direct Loan or FFEL Program loan when you received a new loan on or after Oct. 1, 2007.
Your payment amount may increase or decrease each year based on your income and family size. Once you’ve initially qualified for Pay As You Earn, you may continue to make payments under the plan even if you no longer have a partial financial hardship. Find out whether you’re eligible for Pay As You Earn.
- SAVE Plan
The SAVE repayment plan (replacing REPAYE) can significantly decrease your monthly payment amount compared to all other income-driven repayment plans.
Your monthly payment amount is based on your discretionary income—defined as the difference between your adjusted gross income (AGI) and 225% of the US Department of Health and Human Services Poverty Guideline amount for your family size.
If you apply for an IDR plan now and select the REPAYE Plan, you will automatically be put on the SAVE Plan once it becomes available. You can also select the option for your loan servicer to place you on the lowest monthly payment plan (this will usually be REPAYE).
The application for the new SAVE Plan will be available later this summer. You can also sign up by contacting your loan servicer directly.
- Income-Based Repayment (IBR) Effective July 1, 2009
Income Based Repayment is a repayment plan for the major types of federal loans made to students. Under IBR, the required monthly payment is capped at an amount that is intended to be affordable based on income and family size. You are eligible for IBR if the monthly repayment amount under IBR will be less than the monthly amount calculated under a 10-year standard repayment plan. If you repay under the IBR plan for 25 years and meet other requirements you may have any remaining balance of your loan(s) cancelled. Additionally, if you work in public service and have reduced loan payments through IBR, the remaining balance after ten years in a public service job could be canceled. For more information about IBR, go to IBR Plan Information.
Find out if you qualify. To calculate your estimated loan payment amount under IBR, go to the IBR calculator.
- Income Contingent Repayment (ICR - Direct Loans Only)
This plan gives you the flexibility to meet your Direct Loans obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse's income if you're married), family size, and the total amount of your Direct Loans. Under the ICR plan, you will pay each month the lesser of the:
- The amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or 20 percent of your monthly discretionary income.
- If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized (added to the loan principal).
The maximum repayment period is 25 years. If you haven't fully repaid your loans after 25 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged. You may, however, have to pay taxes on the amount that is discharged.
As of July 1, 2009, graduate and professional student Direct PLUS Loan borrowers are eligible to use the ICR plan. Parent Direct PLUS Loan borrowers are also eligible for the ICR repayment plan.
- Public Service Loan Forgiveness
On January 31, 2012, the U.S. Department of Education (ED) released an Employment Certification Package to help borrowers track their progress toward qualifying for PSLF. The following information is reprinted straight from the government website.
What is the Public Service Loan Forgiveness Program?
The PSLF Program is intended to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance of their Direct Loans after they have made 120 qualifying payments on those loans while employed full time by certain public service employers.
What must I do to have any remaining balances on my Direct Loans forgiven under the PSLF Program?
You must make 120 on-time, full, scheduled, monthly payments on your Direct Loans. Only payments made after October 1, 2007 qualify. You must make those payments under a qualifying repayment plan. When you make each of those payments, you must be working full-time at a qualifying public service organization.
What loans are eligible for forgiveness?
Only loans you received under the William D. Ford Federal Direct Loan (Direct Loan) Program are eligible for PSLF. Loans you received under the Federal Family Education Loan (FFEL) Program, the Federal Perkins Loan (Perkins Loan) Program, or any other student loan program are not eligible for PSLF.
If you have FFEL Program or Perkins Loan Program loans, you may consolidate them into a Direct Consolidation Loan to take advantage of PSLF. However, only payments you make on the new Direct Consolidation Loan will count toward the required 120 qualifying payments for PSLF. Payments made on your FFEL Program or Perkins Loan Program loans before you consolidated them, even if they were made under a qualifying repayment plan, do not count as qualifying PSLF payments. In addition, if you made qualifying payments on a Direct Loan and then consolidate it into a Direct Consolidation Loan, you must make 120 qualifying payments on the Direct Consolidation Loan.
Find out more about consolidating your FFEL Program or Perkins Loan Program loans into a Direct Consolidation Loan. If you don't know what type of federal student loans you have, log in to My Federal Student Aid to get that information.
What are on-time, full, scheduled, monthly payments?
On-time payments are those that are received by your federal loan servicer no later than 15 days after the scheduled payment due date.
Full payments are payments on your Direct Loan in an amount that equals or exceeds the amount you are required to pay each month under your repayment schedule. If you make a payment for a month that is less than what you are required to pay for that month, that month's payment will not count as one of the required 120 qualifying payments. If you make multiple, partial payments in a month and the total of those partial payments equals or exceeds the required full monthly payment amount, those payments will count as only one qualifying payment.
Scheduled payments are those that are made under a qualifying repayment plan after your federal loan servicer has billed you for the month's payment. They do not include payments made while your loans are in an in-school or grace status or in a deferment or forbearance period.
You must make separate monthly payments. Lump sum payments or payments you make as advance payments for future months are not qualifying payments. There are special rules on lump sum payments for borrowers whose public service employment is with AmeriCorps or the Peace Corps.
What is a qualifying repayment plan?
To maximize forgiveness under the PSLF Program, you should repay your loans on one of the income-driven repayment plans (Income-Based Repayment (IBR) Plan, Pay As You Earn Repayment Plan, or the Income-Contingent Repayment (ICR) Plan), which qualify for PSLF.
Other PSLF-qualifying repayment plans are the 10-Year Standard Repayment Plan or any other repayment plan where your monthly payment amount equals or exceeds what you would pay under a 10-Year Standard Repayment Plan.
Before selecting a repayment plan, it is important to understand the implications and costs of that decision. The longer you make PSLF-qualifying payments under a 10-Year Standard Repayment Plan, the lower the remaining balance on your loans will be when you meet all of the PSLF Program's eligibility requirements. In fact, if you make all of the required 120 qualifying payments under the 10-Year Standard Repayment Plan, there will be no remaining balance on your loans to be forgiven.
Under the IBR, Pay As You Earn, and ICR plans, your monthly payment amount will likely be lower than under any of the other PSLF-qualifying repayment plans and your repayment period will likely be longer. Because of the longer repayment period, additional interest that will accrue on your loan, and the smaller monthly payment amount, you will be left with a higher loan balance that could be forgiven. However, if you ultimately do not meet the eligibility requirements for PSLF, you will be responsible for repaying the entire balance of your loan, including all accrued interest, unless you qualify for forgiveness under the terms of the IBR, Pay As You Earn, or ICR plan.
What kinds of employment qualify?
Qualifying employment is any employment with a federal, state, or local government agency, entity, or organization or a not-for-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC). The type or nature of employment with the organization does not matter for PSLF purposes. Additionally, the type of services that these public service organizations provide does not matter for PSLF purposes.
A private not-for-profit employer that is not a tax-exempt organization under Section 501(c)(3) of the IRC may be a qualifying public service organization if it provides certain specified public services. These services include emergency management, military service, public safety, or law enforcement services; public health services; public education or public library services; school library and other school-based services; public interest law services; early childhood education; public service for individuals with disabilities and the elderly. The organization must not be a labor union or a partisan political organization.
What is full-time employment?
You must meet your employer's definition of full-time. However, for PSLF purposes, that definition must be at least an annual average of 30 hours per week. For purposes of the full-time requirement, your qualifying employment at a not-for-profit organization does not include time spent participating in religious instruction, worship services, or any form of proselytizing.
If you are a teacher, or other employee of a public service organization, under contract for at least eight out of 12 months, you meet the full-time standard if you work an average of at least 30 hours per week during the contractual period and receive credit by your employer for a full year's worth of employment.
If you are employed in more than one qualifying part-time job simultaneously, you may meet the full-time employment requirement if you work a combined average of at least 30 hours per week with your employers.
What does it mean that my 120 qualifying payments must be made while I am working full-time at certain public service organizations?
For a payment to count as one of the required 120 qualifying payments, you must be a full-time employee at a qualifying public service organization on the date that your federal loan servicer receives your monthly Direct Loan payment.
In addition, you must be a full-time employee at a qualifying public service organization at the time you apply for PSLF Program loan forgiveness and at the time forgiveness is granted.
How can I keep track of my eligibility?
Because it will take at least 10 years for you to make the 120 qualifying payments necessary to receive PSLF, we have created an Employment Certification for Public Service Loan Forgiveness form (Employee Certification form) that you should submit to us and a process that you should follow so that we can assist you in tracking your periods of qualifying employment and your qualifying payments.
The form allows you to get your employer's certification of employment while you are still employed at that organization or shortly after leaving. The process allows you to receive confirmation of qualifying employment and your Direct Loan payment eligibility. You may also submit the form less frequently than annually to cover more than one year's employment or for more than one employer.
While use of this form and process is not required, if you want us to track your progress toward meeting the PSLF eligibility requirements, you should follow the steps below. If you do not periodically submit the form, you will still be required to submit a form for each employer that you want considered for PSLF at the time that you apply for forgiveness.
- Complete, with your employer's certification, the Employment Certification form annually or whenever you change jobs.
- Submit the completed form to FedLoan Servicing (PHEAA), the PSLF servicer, following the instructions on the form.
- FedLoan Servicing (PHEAA) will review your Employment Certification form, ensure that it is complete, and, based on the information provided by your employer, determine whether your employment is qualifying employment for the PSLF Program.
- If the form you submit is incomplete or your employment does not qualify, FedLoan Servicing (PHEAA) will notify you and you will have an opportunity to provide additional information.
- If FedLoan Servicing (PHEAA) cannot determine whether your employment qualifies, you may be asked to provide additional information or documentation to help establish whether you were employed by a qualifying public service organization. This documentation may include an IRS Form W-2, pay stubs, or other documents from your employer that substantiate your employment at the organization or documentation supporting your employer's eligibility as a public service organization.
- If your employment qualifies and some or all of your federally held loans are not serviced by FedLoan Servicing (PHEAA), those loans will be transferred to FedLoan Servicing (PHEAA) so you will have a single federal loan servicer for all of your federally held loans. After your loans are transferred, earlier payments made to other federal loan servicers will be evaluated to see whether they are qualifying PSLF payments.
- FedLoan Servicing (PHEAA) will notify you whether your employment qualifies, and, if so, how many payments during the certification period were qualifying payments, the total number of qualifying payments you have made, and how many payments you must still make before you can qualify for PSLF.
What should I do after I become eligible for PSLF?
After you make your 120th qualifying payment, you will need to submit the PSLF application to receive loan forgiveness. The application is under development and will be available prior to the date when the first borrowers will be eligible for PSLF Program forgiveness, in October 2017. You must be working for a qualified public service organization at the time you submit the application for forgiveness and at the time the remaining balance on your loan is forgiven.
We look forward to working with you while you learn more about PSLF and work toward your goal of making 120 qualifying payments. If you have any more questions, look at the Public Service Loan Forgiveness FAQ page or contact your federal loan servicer. If you don't know the federal loan servicer for your federal student loans, visit My Federal Student Aid.