Option 1: Standard Plan

This is the default plan for federal student loans. If you don’t choose another option, your loan servicer will automatically place you in this plan. It is designed so borrowers can be debt-free in a decade or less.

Monthly Payments

A fixed amount of $50 or more.

Repayment Period

10 years or less. For larger balances, new tiered rules allow repayment for up to 25 years.

Advantages

Shorter repayment period means you’re likely to pay less in interest overall.

Disadvantages

Higher monthly payments could strain your budget (especially if your income is variable or you’re early in your career).

Option 2: Income-Based Plan

If you can’t afford the standard option, you may qualify for an income-driven plan based on your income and family size, with payments that adjust if either change. Historically, there were four types of plans available, each of which had different rules, eligibility and forgiveness periods. The new RAP plan will replace previous income-driven plans for new borrowers.

Monthly Payments

Generally capped at 10% to 15% of discretionary income, depending on when you borrowed.

Repayment Period

20 to 30 years.

Advantages

Lower payments free up more income for essentials. RAP also offers an interest subsidy. Remaining loan balances may be forgiven after 20 or 25 years of qualifying payments, if you meet specific criteria.

Disadvantages

The longer repayment period means you could spend more money overall (RAP extends the maximum repayment term to 30 years). If you qualify for loan forgiveness, you may owe income tax on the amount forgiven. While federal student loan forgiveness has been tax-free through at least 2025, this may change going forward depending on timing and future legislation.

Option 3: Extended Plan

This plan is for those with large loan balances. You must have at least $30,000 in outstanding federal student loan debt to use it.

Monthly Payments

Either a fixed amount or graduated, where payments increase over time.

Repayment Period

Up to 25 years.

Advantages

This plan helps people who struggle with high monthly payments due to a large balance.

Disadvantages

The extended time frame means you may pay more interest in the long term. These plans generally do not qualify for forgiveness.

Remember

You can change your repayment plan at any time by talking with your loan servicer. Carefully consider your options, though, as your choices can have a significant impact on your finances.