5 Must DOs Before Repaying Your Student Loans

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Almost time to start paying back your student loans?  Contrary to popular belief, your student loan payments don’t have to stop you from living your life. You just have to weigh your options and find a strategy that works within your budget. Here are some steps to get you started.

1. Compare monthly payment amounts

The amount you pay each month toward your student loans will depend on the repayment plan you choose. If you take no action, you will be automatically enrolled in the 10-year Standard Repayment Plan. If you don’t think you can afford that amount or you want a lower monthly payment, consider switching to an income-driven repayment plan, where your monthly payment could be as low as $0 per month. Just know that when you make payments based on your income your monthly payment amount may be lower, but you will likely pay more in total over a longer period of time.

Use our repayment calculator to compare the different repayment options.

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8 Student Loan Tips for Recent College Grads

8 Student Loan Tips

Nothing says, “Welcome to adulthood” quite like getting your first student loan bill in the mail. If student loans are your reality, here are some tips that may help you (from someone who is going through this too).

1. Don’t ignore your student loans!

Affordable payment options

I think everyone can agree that student loans are no fun to pay back, but ignoring them can have serious consequences (and it won’t make them go away.) If you’re worried about your student loans or don’t think you can afford your payments, contact us for help. No matter what your financial situation is, we can help you find an affordable repayment option. For many, that could mean payments as low as $0 per month.

2. Set a budget.

Budgeting tips

Life after graduation gets real, real fast. To make a plan to tackle your student loans, you need to understand what money you have coming in, and what expenses you have going out. If you haven’t already, it’s important that you create a budget. This will help determine your repayment strategy. Here are some budgeting tips to help you get started.

3. Choose an affordable payment amount.

Repayment calculator | Apply for an income-driven repayment plan

There is no one-size-fits-all approach to paying back student loans. The key question you need to answer is: Do you want to get rid of your loans quickly or do you want to pay the lowest amount possible per month?

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No, You Won’t Be Arrested For Falling Behind On Your Student Loans


Today, more than ever before, a college diploma or job-training credential is one of the best investments you can make in your future. By some estimates, a bachelor’s degree is worth an average of a million dollars over the course of your lifetime.

But college also has never been more expensive, and far too many Americans are struggling to pay off their student loan debt.

Maybe you haven’t quite landed that dream job in your field of study yet. Or you decided to go into public service instead of taking the highest-paying offer. Your reward for investing your time and money in the skills and knowledge needed to secure your future shouldn’t be a sky-high monthly payment.

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Learn the Secret to Expanding Your Student Loan Repayment Benefits

If you borrowed before July of 2010, you may need to consolidate your loans in order to qualify for certain student loan repayment benefits, such as Public Service Loan Forgiveness and some income-driven repayment plans.

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Why does it matter which type(s) of loans I have?

If you’re interested in the best student loan repayment benefits, you’ll want to have Direct Loans. If you borrowed any federal student loans before July 2010, there’s a good chance that some or all of your federal student loans are not Direct Loans. But that doesn’t mean you can’t qualify for the best repayment benefits—you can. All you’ll need to do is consolidate. If you consolidate, as a student borrower, here are some of the repayment benefits you could access:

What are Direct Loans?

Direct Loans are those that are made to you, though your school, directly by the Department of Education. Since July 2010, almost all federal student loans are made under this program—in full, called the William D. Ford Federal Direct Loan Program.

Though the Direct Loan Program existed long before 2010, there was another bigger federal student loan program that most students relied on to finance their education: the Federal Family Education Loan (FFEL) Program.

Under the FFEL Program, loans were made by banks and ultimately guaranteed by the taxpayer in case you didn’t make your payments. In 2010, this program ended.

Loans from both of these programs are FEDERAL student loans.  The main way the programs differ is in who made you the loan in the first place. Most of the benefits in the Direct Loan Program are available in the FFEL Program. However, FFEL Program loans are not eligible for Public Service Loan Forgiveness or the best income-driven repayment plans. This is where loan consolidation can help. It will effectively convert your FFEL Program loans into Direct Loans.

How do I find out which type(s) of federal student loans I have?

  1. Go to StudentAid.gov/login
  2. Log in using your FSA ID (You can’t use your Federal Student Aid PIN anymore!)
  3. Scroll to the loan summary section. Go through each of the loans that are listed. Use the list below to see if you need to consolidate any of your loans to qualify for the best repayment options.

Which loans to consolidate

What should I consider before consolidating?

First, evaluate whether you want any of the benefits that are available only in the Direct Loan Program. Consolidating your loans can increase the amount of interest that accrues on your loans, so if you’re not interested in these programs, you may not want to consolidate. Also, understand that, by consolidating your loans, you will start your forgiveness clock over. For example, if you were already on an income-driven repayment plan and consolidate your loans, then you will lose the any credit you had already earned toward forgiveness.

Lastly, understand that some of the loans that we called out for consolidation are those from another federal student loan program called the Federal Perkins Loan Program. Those loans have their own cancellation benefits that are based on your job. If you consolidate these types of loans, you will lose access to those cancellation benefits. Learn more about Perkins Loan cancellation here.

Now I know what type(s) of loans I have. What can I do?

  • I have some loans that I need to consolidate, and some that I don’t. Okay, you’re a little trickier to advise. You’ll definitely have some loans that you’ll want to consolidate, but the real question is, should you consolidate all of your loans? Only consolidate what you need to? You can do either. It will be easier to keep track of your loans if you only have one, but as you can see in the above section, sometimes you’re better off not consolidating if you don’t have to. After you’ve figured this out, you can consolidate your loans and apply for the best income-driven repayment plans. After you’re set up on the plan you want and if you want to apply for Public Service Loan Forgiveness Program, get your employment certified for Public Service Loan Forgiveness.

If you’re confused, need help, or have questions, you can contact the Loan Consolidation Information Call Center at 1-800-557-7392 to get free advice.

Ian Foss is a Program Specialist and Nicole Callahan is a Digital Engagement Strategist at the U.S. Department of Education’s office of Federal Student Aid.

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Which Income-Driven Repayment Plan is Right for You?

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You may have heard about income-driven repayment plans. These days, there are a lot of them to choose from.

It might seem difficult to choose an income-driven repayment plan when so many of the basic features of the plans look the same. After reading this post, you’ll be armed with the knowledge you need to choose the best repayment plan for your situation.

Here are the basics:

Let’s start by looking at the basics. All of these plans set your payments based on a percentage of your income, and all of these plans forgive any remaining balance on your loans after a period of time. There are some obvious differences between the plans, sure, but the chart is so general that you don’t have enough information in the chart to make a smart choice.

If you’re interested in an income-driven plan, you probably want to pay as little as possible over the shortest period of time and have accepted that more interest may accrue on your loans as a result. Additionally, you should understand that you have to keep in touch with your loan servicer about your income each year in order to stay on these plans. So, Pay As You Earn would seem to be a natural choice. But there are very specific requirements you must meet to qualify for Pay As You Earn plan. The details matter.

Let’s dive in to the details.

What type of federal student loans do you have?

If you’re interested in an income-driven repayment plan, you will first want to determine whether your federal student loans are Direct Loans. If you borrowed any federal student loans before July 2010, there’s a good chance that some or all of your federal student loans are not Direct Loans.

If your loans aren’t Direct Loans, that doesn’t mean you can’t qualify for the best income-driven repayment plans—almost everyone can. You just need to consolidate first. If you don’t consolidate, the only income-driven repayment plan you might qualify for is the income-based repayment plan, and, as you saw, it wouldn’t give you the lowest payment.

After you have figured out whether you needed to consolidate, and done so, you’re ready to choose a plan.

Let the Department of Education choose the best plan for you

Don’t do difficult work that you don’t have to do. The details matter for these plans. And there are a lot of details. Instead of sorting all of this out yourself, make us, or, more accurately, your loan servicer, do the difficult work. Just go to StudentLoans.gov and start an “Income-Driven Repayment Plan Request”. (That’s the online income-driven repayment application.)

When you get to the “Repayment Plan Selection” section of the application (toward the end), you should not choose an income-driven repayment plan by name. Instead, choose this option:

Choose the Repayment plan you would like to be placed on. "I request that my loan holder (servicer) place me on the plan with the lowest monthly payment amount.

If you do, your loan servicer will evaluate whether you are eligible for all of the income-driven repayment plans and put you on the best plan for you.

If you want to choose a plan on your own, you probably want to choose the Revised Pay As You Earn Repayment Plan.

For most borrowers, the Revised Pay You Earn Plan is the best choice because:

  • all Direct Loan student borrowers are eligible for the plan,
  • there are no date restrictions,
  • there are no income restrictions,
  • it offers the lowest payment of all the income-driven repayment plans,
  • it offers the shortest repayment period for many, and
  • it offers a generous interest benefit to keep your interest balance from growing

However, there are some borrowers who can’t or shouldn’t choose the Revised Pay As You Earn Plan.

Answer the questions below to see if you’re one of those borrowers.

Are you married? How do you file your taxes?

If you are married, you can choose to file a joint or separate income tax return. How you choose to file your taxes can have a large impact on income-driven repayment. There are two factors at play here—whether your spouse’s income will be used to calculate your payment and whether your spouse’s loan debt will be used to adjust your payment downward.

There are two things you need to consider

First, income.

If you file jointly, for all plans, your income + your spouse’s income = income used to calculate payment.

If you file separately, then how your spouse’s income is treated depends on the plan:

For the Income-Contingent, Income-Based, and Pay As You Earn plans, only your income = income used to calculate payment.

For the Revised Pay As You Earn Plan, however, your income + your spouse’s income = income used to calculate payment.

Second, loan debt.

If it seems like using a joint income is going to disadvantage you, this isn’t the end of the story. If your spouse also has federal student loans, then we will figure out what percentage of the total debt is yours and multiply the payment based on a joint income by that percentage. This acknowledges that there are multiple federal student loan debts being repaid with the joint income. If your spouse has no federal student loan debt, however, then 100% of the debt is yours, and so there’s no adjustment to your payment.

What does this all mean? Though the Revised Pay As You Earn Plan is better for most, if you are married, file a separate return from your spouse, and your spouse doesn’t have federal student loan debt, then you will definitely be able to get a better deal under the Pay As You Earn Plan (if you are eligible for it), and, depending on your spouse’s income, you might even get a better deal under the Income-Based or Income-Contingent Repayment Plan. But, to get this better deal, you have to file separately from your spouse, and that might cost you more in taxes.

Did you borrow a federal student loan for graduate school?

Let’s talk about borrowing for graduate school. If you did, then the Revised Pay As You Earn Plan might not be for you.

Under the Revised Pay As You Earn Plan, the forgiveness clock runs for 20 years if you only borrowed for undergraduate study, and for 25 years if you borrowed even one loan for graduate study.

By contrast, the Pay As You Earn Plan has a 20-year forgiveness clock for all borrowers, undergraduate and graduate alike. So, if you qualify for Pay As You Earn and are a graduate borrower, it’s probably a better option for you. If you don’t qualify for Pay As You Earn, however, the Revised Pay As You Earn Plan is still better for you than the Income-Based or Income-Contingent Repayment Plans.

How recently did you start borrowing?

The Pay As You Earn Plan has many, but not all of the benefits as Revised Pay As You Earn, and, for some borrowers, it’s a better option. However, it’s also the plan that is available to the fewest number of borrowers. Specifically, to qualify for Pay As You Earn, you need to be a “new borrower” on or after October 1, 2007 who received a loan on or after October 1, 2011. That excludes a lot of people who have loans today.

Are you are a parent borrower?

Parent borrowers who want to repay their Parent PLUS Loans under an income-driven repayment plan can’t use the Revised Pay As You Earn Plan or any other income-driven repayment plan except for the Income-Contingent Repayment Plan.

The Income-Contingent Repayment Plan is the only plan that a borrower with this loan type can opt for. However, eligibility is not automatic. To become eligible, parent borrowers must consolidate their outstanding Parent PLUS Loans into a Direct Consolidation Loan. If you’re a parent borrower, you can do that by visiting StudentLoans.gov.

Let’s sum up.

The Revised Pay As You Earn is the best plan for most borrowers. However, if it’s not good for you for one of the reasons I mentioned above, then you should consider Pay As You Earn. If that doesn’t work for you, consider the Income-Based Repayment Plan. Finally, consider the Income-Contingent Repayment Plan.

Ian Foss has worked at the Department of Education since 2010. He just saved 33% on his student loan payments by switching from the Income-Based Repayment Plan to the Revised Pay As You Earn Repayment Plan.

Image by Getty Images

Your Federal Student Loans Just Got Easier to REPAYE

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Beginning today, Federal Direct Loan borrowers can take advantage of a new repayment plan: REPAYE (the Revised Pay As You Earn Plan).

Some of you may be familiar with the Pay As You Earn (PAYE) Repayment Plan, which caps payments at 10% of a borrower’s monthly income and forgives any remaining balance on your student loans after 20 years of qualifying repayment. But this plan is only for recent borrowers.

REPAYE solves this problem. Like the name implies, REPAYE has some similarities to PAYE. First and foremost, REPAYE, like PAYE, sets payments at no more than 10% of income. However, REPAYE—unlike PAYE— is available to Direct Loan borrowers regardless of when they took out their loans.

Should I switch to REPAYE?

If you can’t afford your monthly payment under your current repayment plan, you should consider REPAYE or one of the other income-driven repayment plans. These plans can offer needed relief by ensuring that you will never pay more than a certain percentage of your income. If you can afford to pay more on your loan, you should, since this will save you more on interest costs over the life of your loan.

If you’re pursuing Public Service Loan Forgiveness, you should consider REPAYE. REPAYE is an eligible repayment plan for the Public Service Loan Forgiveness (PSLF) Program. If you’re working toward PSLF and considering consolidating your loans in order to qualify for REPAYE, you should read this first.

If you’re currently on Income-Based Repayment (IBR) because you weren’t eligible for PAYE, you should consider whether REPAYE might be a better option for you. REPAYE could lower your payments by one-third, from 15% to 10% of income.

Before making your decision, use our repayment estimator to compare what your monthly payment would be under REPAYE and all of our other plans.

Under any income-driven repayment plan, you’ll need to “recertify” your income and family size each year.

How is REPAYE different from the other income-driven repayment plans?

So, you already know that your payment under an income-driven plan is a percentage of your income. But REPAYE is different from the other plans. Here are a few differences:

There’s no income requirement to enter the plan: Unlike with the PAYE and IBR plans, borrowers don’t have to show that that their income is low compared to their federal student loan debt in order to enter REPAYE. In simple terms, that means that the amount of your debt and your income level won’t keep you from qualifying.

Borrowers with only undergraduate loans will have a different repayment period than those with graduate loans: Income-driven repayment plans forgive any remaining loan balance after a specific number of years of qualifying repayment—either 20 or 25 years, depending on the plan. REPAYE is a little different than the other income-driven repayment plans. With REPAYE, if you’re only repaying loans you received as an undergraduate student, you’ll repay your loans for up to 20 years. However, if you’re repaying even one loan that you received as a graduate or professional student, you’ll repay your loans (including any loans you received as an undergraduate) for up to 25 years. Of course, this difference doesn’t matter if you later qualify for Public Service Loan Forgiveness, since your loans would be forgiven after 10 years of qualifying payments.

Married borrowers’ payments are calculated differently: The other income-driven repayment plans use the combined income of you and your spouse to set your payment amount only if you file a joint federal income tax return. If you and your spouse file separate tax returns, your payment amount is based on only your income. REPAYE (with limited exceptions) uses the combined income of you and your spouse to set your monthly payment amount, regardless of whether you file a joint tax return or separate returns. This could increase your monthly payment amount. For more information, read our Q&A.

REPAYE payments are not capped at the 10-year standard payment amount: Generally, your payment amount under an income-driven repayment plan is a percentage of your discretionary income. However, this isn’t always the case with the PAYE and IBR plans. Under PAYE and IBR, your payment will never be higher than what it would have been under the 10-year Standard Repayment Plan, no matter how much your income increases. With REPAYE, there’s no cap on your monthly payment amount. Your payment will always be 10% of your discretionary income, no matter how high your income grows. This means that if your income increases significantly, your REPAYE payment could be higher than what you would have to pay under the 10-year Standard Repayment Plan.

REPAYE provides a more generous interest benefit: If your payment doesn’t cover all of your interest, REPAYE pays more of the remaining interest than PAYE or IBR. This can help prevent your loan balance from ballooning and limit the total cost of your loans.

What else should I consider before applying?

Determine whether you have Direct Loans before attempting to switch to REPAYE. If you’re not sure which type of loans you have, you can log in to StudentAid.gov to find out. Loans labeled “Direct” qualify for REPAYE, loans without the “Direct” label don’t qualify for REPAYE unless you consolidate them. You can apply for a Direct Consolidation Loan on StudentLoans.gov.

Special considerations for borrowers who are currently on IBR:

  • If you don’t have Direct Loans, but you’ve been repaying your other loans under IBR for a while and you’re thinking of consolidating to take advantage of REPAYE, it’s important to understand that you’ll lose any credit toward IBR loan forgiveness that you received before consolidating—you’ll have to start over with a new 20- or 25-year repayment period on the Direct Consolidation Loan. So, carefully consider whether having a lower monthly payment amount matters more than the additional time you may spend repaying your loans.
  • Any outstanding interest will be capitalized (added to your loan principal balance) when you leave IBR.

How do I apply for REPAYE?

You can apply for REPAYE—or any other income-driven repayment plan—on StudentLoans.gov. We’ve made some improvements to the way the electronic application works, so give it a spin.

Looking for the lowest monthly payment? With four income-driven repayment plans, it’s easy to overlook a plan or confuse a feature of one plan with another. Let us do the hard part for you. If you’re looking for the lowest monthly payment, there’s a box you can check on the application to request that your loan servicer evaluate you for all income-driven repayment plans, and put you on the plan with the lowest initial payment.

Where can I get more information?

There’s more to know about REPAYE than what you see in this blog post.

Have a question that our resources can’t answer? Contact your servicer. They’re the best option for individualized advice.

3 Options to Consider if You Can’t Afford Your Student Loan Payment

Frustrated man - 3 Things You Should Do If You Can't Afford Your Student LoansThe U.S. Department of Education offers a number of affordable repayment options for borrowers who are struggling to pay back their student loans. The important thing to remember about all the options below is that it’s completely free to apply! Also, if you ever have questions or need FREE advice about your student loans, you can always contact your Department of Education loan servicer.

1. Switch Your Repayment Plan

You may be able to lower your monthly student loan payment by switching to a different repayment plan. Use this calculator to compare what your monthly payment amount could be if you switched your plan.

If you don’t pick a different plan when entering repayment, you are automatically enrolled in the 10-year Standard Repayment Plan. However, many borrowers don’t realize that you can switch your plan at any time by contacting your loan servicer.

One of the most popular options for borrowers who are looking to lower their payments is the income-driven repayment plans.

We offer three income-driven repayment plans:

  1. Pay As You Earn
  2. Income-Based
  3. Income-Contingent


  • Your monthly payment will be a percentage of your income. Depending on the plan, that may be 10% or 15% of your discretionary income, or something else. What you ultimately pay depends on the plan you choose and when you borrowed, but in all cases, it should be something you can afford.
  • Your monthly payment amount will be lower than it would be under the 10-Year Standard Repayment Plan if you qualify to make payments based on your income. In fact, it could be as low as $0 per month!
  • Any remaining balance on your loans is forgiven if your federal student loans are not fully repaid at the end of the repayment period (20 or 25 years).

Income-driven repayment plans are a great option if you need lower monthly payments. However, like all benefits, there are also costs. All of these benefits will ultimately increase the amount of interest you pay over time. The income-driven repayment plans also have tax consequences for any forgiveness received.

Apply for an income-driven repayment plan now

If one of the income-driven repayment plans is not a good option for you, we offer other options. Your servicer can help you identify the best plan to fit your needs.

2. Consolidate your Student Loans

Loan consolidation can simplify your payments by combining multiple federal student loans into one loan. Consolidation can also lower your monthly payment.


  • Can lower your monthly payment by extending your repayment period (spreading your payment out over more years). The repayment term ranges from 10 to 30 years, depending on the amount of your consolidation loan, your other education loan debt, and the repayment plan you select.
  • Will allow you to qualify for additional repayment options. If you have FFEL or Direct PLUS Loans, consolidating your loans into a Direct Consolidation Loan will allow you to qualify for additional repayment plans, such as the Pay As You Earn or Income-Contingent Repayment Plans, that you wouldn’t have qualified for if you hadn’t consolidated.
  • Your variable interest rate loans will switch to a fixed interest rate. It’s important to note that consolidation will lock-in interest rates on variable-rate loans, but will not lower them further. This would be a benefit if, like now, interest rates are low.

The benefits listed could provide relief to some borrowers. However, it’s important that you also weigh the costs before consolidating. For example, because you’re restarting and possibly extending your repayment period, you’ll pay more interest over time. Additionally, you may lose borrower benefits, such as interest rate discounts and loan cancellation benefits, offered with the original loans.

Apply for a direct consolidation loan now

3. Postpone your Payments

Under certain circumstances, you can receive a deferment or forbearance that allows you to temporarily postpone or reduce your federal student loan payments.

Deferment and forbearance may be a good option for you if you are temporarily having a difficult time paying back your student loans. Deferment and forbearance are not good long-term solutions. If you think you’ll have trouble paying back your loans for more than a year or you’re uncertain, you should consider an income-driven repayment plan or consolidation.


  • You do not need to make student loan payments during a deferment or forbearance.
  • The federal government may pay the interest on your loan during a period of deferment. This depends on the type of loans you have.

Again, deferment and forbearance are not good long-term solutions for borrowers who are struggling to pay back their student loans. Some reasons why:

  • With a deferment, interest will continue to be charged on your unsubsidized loans (or on any PLUS loans).
  • With a forbearance, interest will continue to be charged on all loan types, including subsidized loans.
  • The interest you accrue during periods of deferment or forbearance may be capitalized (added to your principal balance), and the amount you pay in the future will be higher.

If you can, you should consider making interest payments on your loans during periods of deferment or forbearance

To request a deferment or forbearance, contact your loan servicer

If you need help deciding which of these options is best for you, contact your loan servicer. They can help you weigh the different options based on your unique situation.

Nicole Callahan is a Digital Engagement Strategist at Federal Student Aid.

TurboTax Users to Have New Tools to Learn About Student Loan Repayment Options

Sometimes life throws us curveballs. Maybe that curveball means losing a job, or having a hard time finding one after college. Some borrowers may have a growing family or just struggle to pay a high monthly bill. These circumstances may make it difficult for some to afford their monthly federal student loan payments. If you’ve found yourself in a similar situation, you may be eligible for a repayment plan that bases your monthly payment on your income.

Income based repayment graphicBorrowers interested in these income-driven repayment plans can visit studentaid.gov to learn more, and for those that use TurboTax Online tax preparation software, a new collaboration among the U.S. Department of Education, the Treasury Department and Intuit Inc. (the company behind TurboTax) will make it easier to learn about their repayment choices.

This tax-filing season, a banner will be featured on the TurboTax software that lets users know they have options for repaying federal student loans. The banner will link to ED’s online Repayment Estimator, where users will be able to determine if they could lower their monthly student loan payments through an income-driven repayment plan. From there, users can apply for the plan that makes the most sense for them.

This new collaboration is just one step the Obama Administration is taking to make college more affordable and to tackle rising college costs. Read more about today’s announcement on our website.

Cameron Brenchley is director of digital strategy at the U.S. Department of Education

Which Student Loan Repayment Plan Should You Choose?

If you graduated from college within the last six months, you have probably been contacted by one of the U.S. Department of Education’s loan servicers, reminding you that it’s almost time to begin repaying your student loans.

Your loan servicer will automatically enroll you in our Standard Repayment Plan unless you tell them otherwise. Under a Standard Plan, your payments will be fixed over a 10-year period of time.

But, this isn’t your only option. Did you know that the Department offers several different repayment plans? You can read more about that below or you can  try our repayment estimator to find out which repayment plan is best for you. Just log in, and the tool will pull your federal student loan information and allow you to compare our different repayment plans side by side:

Here are the details on each repayment plan we offer:

Repayment Estimator Graphic

Standard Repayment Plan

The most basic type of repayment plan is the Standard Repayment Plan. This is the default plan for most types of student loans. It breaks down your loan balance into monthly payments of at least $50 for up to ten years. In general, this is the plan that will cost you the least amount of money in interest payments.

Graduated Repayment Plan

Under the Graduated Repayment Plan, monthly payments start out low and increase every two years during the 10-year repayment period. This plan is best for borrowers whose income may start out low but is expected to increase. One downside is you will pay more in interest than you would under the Standard Repayment Plan.

Extended Repayment Plan

The Extended Repayment Plan allows borrowers with more than $30,000 in debt to extend the repayment period from ten years to up to twenty-five years. Payments under the Extended Repayment Plan can be either standard or graduated. This plan is best for borrowers whose loan burden is too large to bear the standard monthly payments over the course of just ten years.

Income-Based Repayment Plan

The Income-Based Repayment (IBR) Plan allows borrowers with a demonstrated financial hardship to limit their monthly loan payments to 15 percent of their discretionary income (that is, the difference between their adjusted gross income and 150 percent of the poverty guideline for their individual situation). Under this plan, if the balance of the loan has not yet been paid off after 25 years of payments, it can be forgiven. Under IBR, borrowers will pay more in interest over the life of the loan. This plan is best for borrowers who are struggling to afford their monthly payments under other repayment plans.

Pay As You Earn

The Pay As You Earn Repayment Plan allows new borrowers with a demonstrated financial hardship to limit their monthly loan payments to 10 percent of their discretionary income. Under this plan, if the balance of the loan has not yet been paid off after 20 years of payments, it can be forgiven. However, borrowers will pay more in interest over the life of the loan than under the Standard Repayment Plan. 

Income-Contingent Repayment Plan

Under the Income-Contingent Repayment Plan, a borrower’s monthly payment amount is calculated based on annual income and family size as well as his total loan amount. If a loan balance remains after 25 years of payments, it may be forgiven. Unlike the IBR and Pay As You Earn Repayment Plans, borrowers need not be facing financial hardship to qualify for this plan. However, a borrower will likely pay more in interest than in other repayment plans. This plan is best for borrowers who are not facing demonstrated financial hardship, but whose financial situation is insufficient to bear the monthly payments under other repayment plans.

Remember that these are for federal loans only. If at any point, you need advice or have questions about your federal student loans, don’t hesitate to contact your loan servicer. If you have private loans as well, be sure to check with your lender to see what repayment options they have available.

For more information on student loans and federal financial aid, visit StudentAid.gov.

Making College Affordable for Every American

I’m thrilled today that President Obama is moving forward with an ambitious new plan to make college more affordable for every American. We know that higher education is more important than ever, but we also know it’s never been more expensive. We have heard from students and families across the country who are worried about affording college, and we believe that higher education cannot be a luxury that only advantages the wealthy.

Cost of College GraphicsCollege must remain an accessible and affordable opportunity that provides a good value for all Americans. We want college to be a secure investment for every student from every background who is willing to work hard, an investment that prepares our nation’s students for a good job and a bright future.

We believe the cost of college is a shared responsibility among the federal government, states, colleges and universities, and our students and families. Since 2009, the Obama Administration and Congress have worked together to make historic investments in higher education. We  raised the maximum Pell Grant grant award by more than $900, created the American Opportunity Tax Credit, now offer additional loan repayment programs that help students manage their debt, and enacted landmark federal student aid reforms that eliminated wasteful bank subsidies and increased by more than 50 percent the number of students attending college from low-income families.

There are remarkable examples of states and institutions across our nation who have taken innovative steps to help American families afford college. New York has committed to restraining tuition growth in its public community colleges and universities over five years, and the University of Maryland system, which operates an Effectiveness and Efficiency Initiative, has saved more than $356 million and helped stabilize tuition for four straight academic years.

But we need to see more innovation and initiative to ensure that college remains a good value for students and families, and that’s what the President’s announcement today is all about. Earlier today at the University at Buffalo, the President laid out a plan with three concise steps to make college affordable. The steps are outlined in this White House fact sheet, and include:

  • Linking federal financial aid to college performance, so colleges must demonstrate they provide good value for the investment students make in higher education
  • Sparking innovation and competition by shining a spotlight on college performance, highlighting colleges where innovations are enabling students to achieve good results, and offering colleges regulatory flexibility to innovate
  • And – because we know that too many students are struggling to repay their debt today – President Obama is committed to ensuring that students who need it can have access to the ‘Pay As You Earn’ plan that caps federal student loan payments at 10 percent of discretionary income, so students can better manage their debt

We need more colleges and universities to keep college affordable while delivering a high quality education, not only for students who are first in line, but for all, especially students who are first in their families to enter college, students from disadvantaged circumstances, students with disabilities and veterans who chose service before completing their education. We need states to increase higher education funding, with proven strategies for student access and success. And we need to make sure that our annual investment of over $150 billion in federal student aid is achieving all that it can to ensure the economic and social prosperity of our nation.

The Obama Administration is going to continue to do everything we can to make college more affordable, and ensure students and families get as much value possible from their investment of effort, time and money in higher education. We’re looking forward to seeing states and institutions do their part, as well.

Additional reading: President Obama Explains His Plan to Combat Rising College Costs.

Martha Kanter is the U.S. Under Secretary of Education 

New Tools for Student Loan Borrowers

Federal Student Aid image

Spring is here, college finals are looming, commencement speakers are being announced, and before long, a new group of college graduates will need to start thinking about paying back their student loans. Earlier this week, the Department of Education announced new tools that will help recent college grads better understand their loan debt and stay on track in repayment.

These two new features include a Complete Counseling Web page and a new Repayment Estimator that lets the borrower easily compare monthly payment options under the seven repayment plans available. Both tools are part of the Obama Administration’s ongoing effort to help students and families make informed and sound financial decisions throughout each step as they pursue their higher education goals.

During his State of the Union address in February, President Obama unveiled the new College Scorecard to help empower students and families with more transparent information about college costs and outcomes. The Scorecard provides clear, concise information on cost, graduation rates, loan default rates and the amount families borrowed for every degree-granting institution in the country. The College Scorecard, along with the resources from Federal Student Aid, will help students take the right steps, financially and academically, to achieve their college degree.

As many know, managing loans can often be confusing and overwhelming for college students, and we want to ensure that graduates have access to tools that will help them successfully navigate this process. We encourage federal student loan borrowers to log in at StudentLoans.gov to take advantage of these new resources today!

Click here for an alternate version of the video with an accessible player.

Kelsey Donohue is a senior at Marist College (N.Y.), and an intern in ED’s Office of Communications and Outreach

3 Things to Do During Your Student Loan Grace Period

Student Loan Grace PeriodYour student loan grace period is a set amount of time after you graduate, leave school, or drop below half-time enrollment, but before you must begin repayment on your loan. The grace period gives you time to get financially settled and to select your repayment plan. Not all federal student loans have a grace period. Note that for many loans, interest will accrue during your grace period.

Here are three things you can do during your grace period to prepare for repayment:

1. Get Organized

Start by tracking down all of your student loans. There is a website that allows you to view all your federal student loans in one place. You can log in to www.nslds.ed.gov using your Federal Student Aid PIN to view your loan balances, information about your loan servicer(s), and more.

Note: Don’t forget to check to see if you have private student loans. The Consumer Financial Protection Bureau has a great Student Debt Repayment Assistant to help you learn about the repayment process, whether you have federal loans, private loans or both.

2. Contact Your Loan Servicer

loan servicer is a company that handles the billing and other services on your federal student loan. Your loan servicer can help you choose a repayment plan, understand loan consolidation, and complete other tasks related to your federal student loan, so it is important to maintain contact with your loan servicer. If your circumstances change at any time during your repayment period, your loan servicer will be able to help.

To find out who your loan servicer is, visit nslds.ed.gov. You may have more than one loan servicer, so it is important that you look at each loan individually.

3. Explore Your Repayment Plan Options

Although you may select or be assigned a repayment plan when you first begin repaying your student loan, you can change repayment plans at any time. Flexible repayment options are one of the greatest benefits of federal student loans. There are options to tie your monthly payments to your income and even ways you can have your loans forgiven if you are a teacher or employed in certain public service jobs. Work with your loan servicer to determine which repayment plan is right for you.