Graduates can manage student loans if they understand their repayment optionsInformation to help you pay off your student loans.

Student Loans in the U.S.

In the last two decades, student loans have become increasingly common. Today, 70% of those who graduate do so with debt, amounting to 44.2 million borrowers in the U.S. With a combined debt of over $1.4 trillion owed and a concerning amount of borrowers falling behind on repayments, student loans have been a source of stress for the economy and debtors alike.

The majority of students graduate with $30,000 in loans or more and will likely spend the next 10-25 years repaying the debt. If you are wondering how you can better manage your student loans, follow along as we provide detailed answers to the most frequently asked questions.

Student Aid Options: Federal, Private, and Parent Loans

Out of those that pursue a higher education some will have their schooling paid for by family, many will receive full or partial scholarships, and the majority remaining (70%) will need to apply for and accept student loans in order to cover the cost.

As the need for student loans has grown, hundreds of lenders have emerged to offer solutions. While some options are more enticing than others, it’s important to know what you are getting into before signing on the dotted line. Read on to better understand which type of lender might be right for you.

Federal Student Loans

The most trusted place to start is with federal student loans. As their name indicates, these loans are regulated and funded by the federal government through the U.S. Department of Education. They are acquired by completing a Free Application for Federal Student Aid (FAFSA) and can be put towards schooling at a 4-year university or college, community college, or a career college. FAFSA will take into consideration all your financial information including income, family size, dependency, etc. and determine your need for assistance. If you qualify for aid, this will be offered in two forms usually through your institution’s financial aid package.

Federal Direct Subsidized Loan

The more favorable of the two loan types, federal direct subsidized loans (also referred to as Stafford Loans), are awarded to undergraduates based on need. Knowing the costs, your school will partner with the government to ensure that you are not borrowing more than what you will need. This may seem restrictive. However, the benefits of this type of loan will ensure the amount of debt you accumulate will be manageable and much easier to repay. A direct subsidized loan accomplishes this by reducing the instances in which interest will be paid on your loan. You will not be accountable for interest while you are enrolled in school part-time, for the six months after you stop attending school, and once you have entered deferment (a period when loan payments are postponed).

Federal Direct Unsubsidized Loan

Federal Direct Unsubsidized loans are easier to qualify for and are available to undergraduates and graduates alike. Your school will still help determine what amount is reasonable for your borrowing needs and according to your other sources of aid. While this type of federal loan is considered better than a private loan, you will not receive the same break on interest that you would with a direct subsidized loan. Instead, interest will accumulate during the three periods mentioned and also be capitalized on once you have graduated.

Despite some drawbacks, students are fortunate to receive federal student loans because this allows them more forgiving repayments options. This means you can adjust your repayment plan to accommodate your changing needs, including in the case of hardship, military service, etc. Federal loans also typically offer a lower interest rate making repayment shorter and more affordable.

As helpful as federal loans try to be you will find they have established limits for time spent in school and amounts borrowed. You can find more details on that at the official Federal Student Aid site.

Federal Stafford Loans

Federal Stafford Loans are loans that are federally back in order to guarantee fair borrowing rates. They have become less prevalent since July 1, 2010, when the name of these subsidized and unsubsidized loans changed to Federal Direct Loans and became strictly funded by the U.S. Department of Education.

Direct PLUS Loans

If your needs extend beyond the limitations of the subsidized and unsubsidized loans, a direct PLUS loan may be the answer to your borrowing needs. These loans are offered to individuals looking to pay for graduate school as well as to parents who are borrowing on behalf of an undergraduate student. To be eligible, students must be looking to enroll in part-time schooling.

Direct PLUS loans can help graduates and parent borrowers alike.You can apply for a Direct PLUS loan using the previously mentioned FAFSA form. Additionally, your school may ask that you submit a request through

Be aware that Direct PLUS loans require a healthy credit history to be considered. They do carry a fixed interest rate of 7% which is higher than other federal loans. You can also expect to pay a loan fee at the time of disbursement as well as count on interest accruing during times when payments are not being made.

Repayment for these loans begins six months after the student falls below part-time enrollment. For parent borrowers, it may begin as early as when the loan is disbursed. However, a deferment can be requested to postpone payments till the student’s finished school.

Repayment plans for direct PLUS loans differ slightly from those offered for other federal loans and will be discussed later on in this guide.

Federal Perkins Loans

While Federal Perkins Loans are another borrowing option for undergraduates, graduates, and professional students, they are, unlike other federal loans, provided by your school and are not as widely available.

These loans come at a 5% interest rate and are limited by the amount of money your school is able to lend.

To be eligible for a Federal Perkins Loan, you must be in financial need as well as plan to enroll in at least part-time schooling.

Federal Perkins Loans have two appealing benefits: there is no disbursement fee and they allow nine months before repayment begins after leaving school.

Private Student Loans

Private student loans are not supplied by the federal government. You may find them available through a bank, credit union, school, or through state loan programs. If you have borrowed beyond federal loan limits or your family’s income has made you ineligible for a federal loan, you may need to rely on a private loan as a last resort.

You should know that these loans typically require a stronger credit history or co-signer to meet eligibility requirements. Interest rates on these loans can be double what they are on federal loans. This interest rate often varies over the life of the loan and offers no tax deduction during repayment.

Understand that plans available to repay your private loans will likely be less lenient and forgiving than with federal loans. This could mean financial disaster should you lose your job or are unable to make timely payments for any other reason.

Should you choose to pay off your private loan early, you could be facing a fee for doing so.

If you are in need of money for school, private student loans may be the only source to provide it. However, proceed with caution and a full understanding of the terms and repayment expectations.

Student Loan Repayment Plans

Managing your student loan can ensure successful repaymentFederal Student Loans offer a variety of repayment options that strive to meet any circumstance. Less common loans such as the PLUS or Perkins have a limited number of repayment plans available. There is no penalty for paying off early any federally backed student loan. Repayment on private loans is dictated by the lender and may include only one or two methods.

Standard Repayment Plan

A standard repayment plan is the most widely used method because borrowers are automatically enrolled if they do not choose another option before their first payment is due.

Using a fixed monthly payment, a borrower will be able to repay their loans in 10 years or under. This method ensures that the borrower pays the least in interest and returns the loan in its entirety in the quickest amount of time.

The Standard Repayment Plan is ideal and should be sought unless, for reasons of hardship, you are unable to afford the monthly payment required.

Eligible Loans: Federal Direct Subsidized and Federal Direct Unsubsidized loans, Subsidized and Unsubsidized Federal Stafford loans, Federal PLUS loans, and Direct or FFEL Consolidation Loans.

Graduated Repayment Plan

The Graduated Repayment Plan is often selected by individuals who anticipate increasing their income year over year following graduation. Knowing they may have a tighter budget early on, they accept a lower monthly payment in the beginning. This payment increases periodically eventually growing larger than the fixed payment on the Standard Repayment Plan in order to pay the debt off in 10 years. While this plan may allow you to better manage your monthly payment, it will also cost you a small amount more to do so.

Eligible Loans: Federal Direct Subsidized and Federal Direct Unsubsidized loans, Subsidized and Unsubsidized Federal Stafford loans, Federal PLUS loans, and Direct or FFEL Consolidation Loans.

Extended Repayment Plan

The Extended Repayment Plan, as implied, is completed over an extended period of time. Instead of paying off your loan in 10 years, the repayment is stretched over 25 years. The borrower can choose whether payments are fixed or graduated. For some, this will make monthly payments more affordable. However, the total amount paid will be greater due to growing interest over the additional years.

Eligible Loans: Federal Direct Subsidized and Federal Direct Unsubsidized loans (must have a $30,000 balance), Subsidized and Unsubsidized Federal Stafford loans, Federal PLUS loans, and Direct or FFEL Consolidation Loans.

Pay As You Earn Repayment Plan (PAYE)

The Pay As You Earn Repayment Plan sets your monthly payment at 10% of the difference between your yearly income (including a spouse’s income if you file taxes jointly) and 150% of the poverty guideline as it relates to your household. This payment amount is reevaluated annually but will never be more than the monthly payment on the Standard Repayment Plan.

Federal student loan repayment plans can be adjusted to your income when in need.Any portion of your debt not paid after 20 years will be forgiven. When this occurs, you may be required to pay income tax on the balance forgiven.

Because this repayment method is drawn out over a 20 year time period, the total amount repaid may be more than on a Standard Repayment Plan even taking into account any amount forgiven.

Eligible Loans: Federal Direct Subsidized and Federal Direct Unsubsidized loans, Federal PLUS loans (student borrowers only), and Direct Consolidation Loans (student borrowers only).

Additionally, borrowers will only qualify if they have a concerning debt-to-income ratio and if their borrowing and disbursement fall within established time periods.

Revised Pay As You Earn Repayment Plan (REPAYE)

The Revised Pay As You Earn Repayment plan mirrors the original Pay As You Earn Repayment plan. However, when calculating your monthly payments, a spouse’s income will always be considered no matter how you choose to file your taxes. The calculated payment can exceed the amount you would pay monthly on a Standard Repayment Plan. Lastly, an outstanding balance may not be forgiven until 25 years of payments have been made.

Eligible Loans: Federal Direct Subsidized and Federal Direct Unsubsidized loans, Federal PLUS loans (student borrowers only), and Direct Consolidation Loans (student borrowers only).

Income-Based Repayment Plan (IBR)

An Income-Based Repayment Plan will work the same as a Pay As You Earn Repayment Plan with just a few differences. Monthly payments on an IBR can be up to 15% of the difference between your (and if applicable, your spouse’s) income and 150% of the poverty guideline. Loans on an IBR plan are eligible for loan forgiveness. However, this may not come until 25 years of payments have been made. You should also note that borrowers with Stafford loans qualify for this form of repayment.

Eligible Loans: Federal Direct Subsidized and Federal Direct Unsubsidized loans, Subsidized and Unsubsidized Federal Stafford loans, Federal PLUS loans (student borrowers only), and Direct Consolidation Loans (student borrowers only).

Income-Contingent Repayment Plan (ICR)

On an Income-Contingent Repayment Plan, there are two ways monthly payments are calculated. It could be 20% of the difference between your (and if applicable, your spouse’s) income and 100% of the poverty guideline. If it offers you a lower monthly payment, the amount may be decided by determining a 12 year fixed monthly payment taking into account your ability to pay given your income.

Similar to the PAYE and IBR plans, the payment amount is reassessed yearly and loans may be forgiven after 25 years of repayment.
Borrowers should be warned this monthly payment may be more than on a Standard Repayment.

Eligible Loans: Must be a Direct Loan including Federal Direct Subsidized and Federal Direct Unsubsidized loans, Federal Direct PLUS loans, and Direct Consolidation Loans.

If a parent borrower chooses to convert their PLUS loan into a Direct Consolidation loan, they may also select this form of repayment.

Income-Sensitive Repayment Plan (ISR)

On an Income-Sensitive Repayment Plan, the lender determines your monthly payment based on your yearly income. Because FFEL loans are lent by governmental and non-governmental agencies alike, every lender’s process is unique. However, on most plans you can expect to pay over a 10-15 year period and that the total amount you pay over time will be more than on a Standard Repayment Plan. Let it also be clear that unlike PAYE, REPAYE, IBR, and ICR Repayment plans, an ISR is not at any point eligible for loan forgiveness.

Eligible Loans: Subsidized and Unsubsidized Federal Stafford loans, FFEL PLUS loans, and FFEL Consolidation Loans.

Individual lenders such as schools determine the terms of repayment for federal Perkins loans.Federal Perkins Loan Repayment Plans

Repayment plans for Federal Perkins Loans vary by lender or school. Available options usually include a version of the Standard Repayment, Graduated Repayment, and Extended Repayment plans and are designed to be completed within 10 years. Because Perkins Loans are federally regulated, you can expect your school to enforce a mandated minimum monthly payment in order to ensure a timely replenishment of funds. Specific details can only be obtained through your school.

Private Loan Repayment

The best way to know the options available to repay your private student loan is to reach out to your specific lender. Besides a basic repayment plan, your lender may be able to offer a grace period, deferment or forbearance, reduced payment, or income-based repayment plans.


When a borrower faces a hardship, returns to school, becomes active in military service, or enters unpaid professional training they may be able to request a deferment. If approved, the borrower will not be obligated to make payments or be accountable for interest accrued during the deferment period. Deferments can last anywhere from a couple months up to three years contingent on the circumstance.

Eligible Loans: Federal Direct Subsidized loans (including Stafford loans), Federal Perkins loans, any subsidized part of a Direct Consolidation loan or FFEL Consolidation loan. Private loans may also offer a variation of this payment option.


In the case of Forbearance, borrowers will be allowed to pause their monthly payments for a set period of time if they are managing medical expenses, struggling financially, or transitioning jobs. However, they will still be responsible for accruing interest. If this interest goes unpaid, it will be added to the principal balance causing the total amount repaid to be higher. Forbearance usually takes place in 12 month time periods but can be extended two times not to exceed 3 years.

Eligible Loans: Federal Direct Unsubsidized loans (including Stafford loans), Federal PLUS loans (including Direct and FFEL), any unsubsidized part of a Direct Consolidation loan or FFEL Consolidation loan. Private loans may also offer a variation of this payment option.

If borrowers are deemed ineligible for a deferment, they may be able to obtain a general or mandatory forbearance.

Student Loan Forgiveness

In some cases, borrowers may qualify for and can obtain student loan forgiveness. It is less likely to have any portion of private student loans forgiven. Understanding the qualifications and steps of this process is vital to ensuring your approval.


As mentioned above, one way to pursue student loan forgiveness is by enrolling in an income-driven repayment plan. These include the federal REPAYE, PAYE, IBR, and ICR plans. The standard repayment plan also qualifies. When borrowers successfully enroll in one of these, they can expect their loan to be forgiven after a maximum of 20-25 years of timely payments.

Public Service Loan and Teacher Loan Forgiveness

Federal Direct Loan borrowers may also attempt to receive loan forgiveness if they work in a qualified profession, such as for a nonprofit, governmental agency, or as a teacher. In order for this to be granted, a borrower must submit an Employment Certification form immediately after securing qualified full-time (30 plus hours) employment and complete 120 timely payments. It is advised that borrowers speak with their loan servicer regularly to ensure they are on track for the anticipated forgiveness.

If you have a Federal Perkins Loan or Federal Family Education Loan, you may need to consolidate your loan before any loan forgiveness options are available.

Student Loan Cancellation and Discharge

Student loan cancellations and discharges similarly erase an amount of debt that a borrower must repay. Aside from a difference in name, they function just the same. Typically they are issued to those who are working in a qualified profession, dealing with extreme financial or medical hardship, or who have been the victim of identity theft or lenders who have violated loan regulations.

Student Loan Refinancing and Consolidation

As soon as a borrower has obtained a loan, they are free to consider refinancing or consolidating their debts. Through these methods, borrowers can obtain lower interest rates, shorten or length their repayment time and adjust their monthly payments, or simply organize various loans into one.

Graduates must know the pros and cons before pursuing loan refinancing or consolidationThe benefits can save borrowers stress and money but also come with a price.

As mentioned, federal student loans come with a wide variety of repayment options even addressing cases of hardship or allowing loan forgiveness. Often times, these advantages are lost when a loan is consolidated.

Additionally, because refinancing and consolidation at times involve a loan, borrowers may struggle to qualify for either option on their own. If they are able to qualify, there’s no guarantee that offered interest rates or repayment schedule will be better than what the borrower presently has. The lender also may not be able to extend a loan that covers the total of your debt which may only complicate your situation.

Review these points carefully when considering consolidating or refinancing with a new lender. Before proceeding, be sure these options are the right ones for you.

How to Pay Off Student Loans Faster

It may come as an obvious answer, but the fastest way to pay off student loans is to pay more toward them monthly. With federal student loans, you can at any time select a repayment plan with a higher monthly payment and shorter pay off time.

If you are still in school, you also have the opportunity to make payments before your required repayment begins. With some federal loans, this will reduce the principal amount borrowed and therefore lessen the amount of interest paid. In the end, you will spend less time paying off the total.

Student loan servicers suggest that if you intend to send additional monthly payments, to include a letter specifying the amount goes directly toward the principal and not the interest. If you are aiming to pay your balance off faster, you can choose to send any extra amount you are able to or you can pay half of your monthly payment every other week. With the latter, you’ll trick yourself into making a couple extra payments a year without much extra effort.

Paying even an extra $100 a month has been proven to reduced the amount repaid by thousands of dollars and shortened the time of repayment by years.

How We Can Help

Student loans are complicated and understanding their terms and repayment options can be difficult. Our certified credit counselors are trained in student loan policies and are ready to help you identify which options make the most sense for your circumstance.

With their assistance, you’ll be able to obtain an affordable monthly payment and get on track to a satisfactory repayment.

If you are suffering a hardship or are interested in loan forgiveness, we can assist you in determining your eligibility and guide you toward the right repayment option to meet your needs and goals.

Along with student loan services, we offer free counseling on budgeting, building credit, paying off other debts, and saving money to ensure a bright financial future.

Since student loans, and especially repayment options can fluctuate, please contact us if you find any information that is out of date or incorrect. While we strive to bring you the most accurate information at all times, it is possible information may be incorrect. Be sure to check multiple sources and if you need immediate answers or solutions call us at 866-688-3328.


IFAP’s Federal Student Aid Handbook
Official Website for Federal Student Aid