Federal Student Loan Repayment Options
A federal student loan repayment plan depends on the type of loan (Stafford, PLUS or Perkins) and the borrower's financial needs. For most loans, the borrower is required to begin repaying the loan as soon as the grace period is over.
In addition to consulting with the loan servicer, there are a few options available for borrowers to find the best possible repayment plan.
Federal Stafford and Parent PLUS Repayment Plans
Federal Stafford Loans and Federal Parent PLUS loans offer very similar types of repayment plans. The plans are designed to help the borrower make regular monthly payments and avoid going into default. The repayment period ranges from 10 to 25 years. Unless otherwise specified, the following plans are available to Stafford and PLUS Loan borrowers:
This option requires the borrower to pay a fixed amount each month based on the principle and interest. The amount will be no less than $50 or the interest that has accrued. This plan is best for borrowers who can make higher monthly payments since it is the shortest term of all the plans. The shorter repayment term means you'll be paying less interest over the life of the loan.
This allows the borrower to make lower payments at the beginning of repayment. Over time, the payments begin to increase. Each of the payments must equal the interest accrued on the loan between the scheduled payments and initial payments. The loan term for Graduated Repayment is 25 years.
This provides eligible Federal Stafford, Federal PLUS and Alternative loan/Federal Consolidation loan borrowers with payment relief through a lengthened repayment term of up to 25 years.
Income-Based Repayment (not available to PLUS Loan borrowers)
Borrowers with financial hardship can use this repayment plan to alleviate financial responsibility during the repayment period. Monthly payments are based on the borrower's annual income, and it adjusts over the years if the individual's income increases or decreases.
Income-Contingent Repayment (not available to PLUS Loan borrowers).
Monthly payments are calculated based on the borrower's annual income, spouse's income, family size and the sum of the Direct Loans. Borrowers have up to 25 years to repay under this plan.
Federal Perkins Loan Repayment Plan
Federal Perkins Loan payments are made monthly to the school that serviced the loan. Borrowers have up to 10 years to repay the loan and must contact their school for more information on specific repayment options.
Federal Student Loan Consolidation
Federal student loan consolidation can stretch the repayment term from 10 years to a maximum of 30 years, making the monthly impact on your cash flow much lower. This is also a good choice for borrowers with multiple loans who want to make the repayment process simpler.
For borrowers of PLUS loans, consolidation has another benefit. PLUS loans are ineligible for the income sensitive plans mentioned above, however, they become eligible if consolidated into a Direct Consolidation Loan, providing a wider variety of repayment options.
Learn more about getting started on your loan consolidation.
For more information on both federal and alternative student loan repayment, check out our page on student loan repayment options and plans.