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12.3. Loan Repayment Options

Repaying loans doesn’t have to be a one-size-fits-all slog. Federal loans offer flexibility; private loans less so.

• Federal Repayment Plans: 

  • Standard: Fixed payments over 10 years—highest monthly cost, lowest total interest.

  • Graduated: Payments start low and rise every two years—good if your income will grow.

  • Extended: Lower payments over 25 years—requires $30,000+ in loans.

  • Income-Driven Plans: 

    • Income-Based Repayment (IBR): Caps payments at 10%–15% of discretionary income, forgiven after 20–25 years.

    • Pay As You Earn (PAYE): 10% of income, 20-year forgiveness—stricter eligibility.

    • Revised Pay As You Earn (REPAYE): 10% of income, 20–25 years, open to all borrowers.

    • Income-Contingent Repayment (ICR): 20% of income or standard payment (whichever’s less), 25 years.

  • Grace Period: Six months post-graduation before payments start (interest accrues on unsubsidized loans).

• Private Loan Repayment: 

  • Varies by lender—often 5–15 years with fixed or variable payments.

  • Some offer deferment (pausing payments) or forbearance (temporary relief), but terms are stricter and interest keeps piling up.

• Strategies: 

  • Pay extra when you can—it cuts interest and shortens the term.

  • Refinance private loans for lower rates if your credit improves (but you’ll lose federal benefits).

Tip: Use the repayment estimator at studentaid.gov to test federal plans—pick one that fits your budget now and adjusts later.