Navigating the Best Student Loan Debt Repayment Options

When you think about the most common forms of debt, what comes to mind, and how far do you have to go before you get to student loan debt? As one of the most common forms of debt, student loans have impacted the lives of many people, with an estimated 43.5 million Americans in possession of some amount of debt. Fortunately, you don’t have to feel like you’ve been left out to dry. Some more affordable and effective student loan debt repayment options can help you navigate your short and long-term finances more effectively. We’ll outline them to help you get back to enjoying a debt-free life.

Standard Repayment Plan

Looking to pay your loans off in the simplest way possible while avoiding as much interest as you can? The standard repayment plan provides this option. Borrowers will make fixed payments for 10 years (with options for 10 and 30 years for Consolidation Loans), and all borrowers are eligible for this plan. This includes owners of both direct subsidized and unsubsidized loans, as well as the following:

  • Subsidized and Unsubsidized Federal Stafford Loans
  • All PLUS loans (Direct/FFEL)
  • All Consolidation Loans (Direct/FFEL)

Graduated Repayment Plan

All borrowers are also eligible for the graduated repayment plan, which is designed around the same timeframe as the standard plan but adjusts the monthly payments you make each year. This plan starts with a lower monthly payment, providing a bit of flexibility post-college, before then rising to an appropriate amount to have your loans paid off in those 10 years. Increases in payments usually occur every two years. 

Extended Repayment Plan

Extended repayment plans are available for all borrowers, with the caveat that direct loan and FEEL program loans borrowers must owe at LEAST $30,000 in debt. This plan aims to ease the burden of a borrowed amount that’s fairly high by spreading out the payments over a longer term. Of course, you would have to pay much more in interest, but the extended repayment plan does have its advantages. Payments will be made over 25 years instead of the standard 10 and can be either fixed or graduated.

Income-Driven Repayment (IDR) Plans

Income-driven repayment plans are a type of student loan repayment plan that adjusts your monthly payment amount based on your income and family size. These plans are designed to make your monthly payments more affordable, especially if you have a low income or high student loan debt. There are four main types of income-driven repayment plans: 

  • Income-Based Repayment (IBR)
  • Saving on a Valuable Education Plan (SAVE)
  • Pay As You Earn (PAYE)
  • Income-Contingent Repayment (ICR)

Each plan has different eligibility requirements and payment calculations, so it’s important to research which one is right for you.

Income-Based Repayment (IBR)

Income-based repayment is precisely how it sounds. You’ll pay off your loans at a fixed amount based on your earnings. This plan is available for borrowers with every loan option EXCEPT for parents with PLUS loans. Monthly payments will be either 10% or 15% of your income, but monthly payments won’t go above the amount you’d pay on a standard loan. 

Pay As You Earn Repayment Plan (PAYE)

The Pay As You Earn (PAYE) Repayment Plan was introduced in 2012 to help borrowers with high student loan debt and low income by capping their monthly payments at 10% of their discretionary income. To qualify for PAYE, you must have taken out your first federal student loan after October 1, 2007, and must have received a disbursement of a Direct Loan on or after October 1, 2011. You must also demonstrate a partial financial hardship, which is determined by comparing your annual income to your total federal student loan debt.

Saving on a Valuable Education Plan (SAVE — formerly the REPAYE Plan)

The Saving on a Valuable Education (SAVE) plan is a newer plan introduced to borrowers that can provide more affordable monthly payments and potential loan forgiveness after 20–25 years of qualifying payments. With the SAVE plan, your payments are capped at 10% of discretionary income, and you may qualify for a $0 monthly payment if your income is low enough. Additional benefits include a lack of accrued interest that’s contingent on you paying the set amount each month.

Income-Contingent Repayment (ICR)

With ICR, your monthly payment is calculated each year and is the lesser of 20% of discretionary income or what you would pay on a fixed repayment plan over 12 years, adjusted according to your income. ICR can be a good option if you want to base your payments on your income and are aiming for loan forgiveness down the road.

What About My Private Loans?

Many private student loans do not offer the same flexible repayment options as federal loans. With private loans, you typically have to stick with the standard 10-year fixed or variable repayment schedule outlined in your loan agreement. However, some private lenders may allow you to extend your repayment term to 15 or 20 years, which can lower your monthly payment but increase the total interest paid over the life of the loan.

A few private lenders offer income-driven repayment options similar to federal plans, but eligibility requirements are much stricter. You may be able to qualify for forbearance or deferment if you run into financial hardship, but these are temporary solutions.

Consolidating and refinancing private loans can also potentially lower your interest rate and monthly payment, but this also comes with drawbacks like loss of borrower protections. If you struggle to pay private student loans, your best option is to contact your lender directly to discuss arrangements or refinance for better terms.

Should I Refinance or Consolidate My Loans?

Refinancing and consolidating student loans can offer some major benefits if done strategically. By refinancing, you can potentially qualify for a lower interest rate, saving you money on interest charges over the life of the loan. Consolidating multiple loans into one new loan allows you to simplify repayment with just a single monthly payment.

Consolidating also gives you the flexibility to extend your repayment term, which lowers your monthly minimum. Just keep in mind this means paying more interest over time. Evaluate your options to see if these strategies are right for your needs.

Pave Your Way to Financial Freedom

Navigating student loan repayment can be confusing with all the different options available. Whatever you decide, be sure to estimate your costs and run the numbers for each plan. Consult with a financial advisor if you need guidance weighing the pros and cons of each option.

The financial experts at Quality Credit Repair offer customized debt management support that can help you make a plan to tackle your student loan debt effectively. Gain insight into repayment, credit repair options, and many other ways to take back your life from the burden of student loans. Take action today!