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The right way to pay your student loans

One payment plan doesn’t fit all

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Federal student loans come with a variety of payment options that may help if you can’t meet a standard repayment plan. If you’re having trouble with your loans, evaluate your options as soon as possible so that you don’t risk missing payments.

Key Takeaways:

  • If you have federal student loans, there are a variety of payment plans available that could better fit your needs than the standard repayment plan.
  • Several payment options, such as plans that tie what you pay to your income, are available to all borrowers.
  • Others, such as forgiveness, cancellation or discharge, are only available in certain specific situations.
  • Unlike some federal loans, interest on private loans starts to accrue even while you are still in college, so you need to choose a payment approach sooner.
  • If you don’t make payments on your private loans while you’re in college or you only make partial interest payments, the remaining interest will be added to your balance.
  • Consolidation may be an option for all loan types. However, be careful if you’re considering consolidating federal loans and then refinancing them privately, because you will lose certain protections if you do.

Breaking down federal student loan repayment plans

Standard: 

Pay off your loans in fixed monthly payments over ten years.

Graduated: 

Payments start lower and increase gradually over ten years.

Income-based:

Match payments to your income and family size.

Income-contingent:

Similar to an income-based plan but with more aggressive payments.

Pay-as-you-earn:

Similar to an income-based plan but with more lenient payments.

Deferment:

A temporary break from payments due to hardship during which interest does not accrue.

Forbearance:

Similar to deferment, but interest continues to accrue during the break.

Loan forgiveness or cancellation:

If you work for the government or for a qualifying non-profit organization your loans may be forgiven or canceled after a certain period of time.

Loan discharge:

In certain specific situations, potentially including bankruptcy or a school’s closure, your loans may be discharged.

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