Paying off your student loan debt is one of the best financial moves you can make. But, as you most likely know, it isn’t easy. 

The 2020 CARES Act has provided some relief from just how difficult it can be in the form of forbearance on federal student loans. But with mandatory payments set to resume again in February 2021, it’s important to either develop or revisit your strategy for paying off your student loans. 

So, to help you out, we’ll be covering everything you need to know on how to pay off your student loans in this in-depth blog post. Specifically, we’ll be looking into:

Let’s dive right in! 

(Wait! One more thing. If you’re actually looking for information on what you should know before taking out student loans, start with How to Choose a Student Loan and Avoid Debt Regret!) 

Federal Student Loan Repayment Plans

If you’ve taken out a student loan before, there’s a good chance it’s a federal student loan.  According to the academic data sharing platform MeasureOne, 92% of all student loans are federal student loans. But how much you pay and how quickly you can pay them off depends on your repayment plan.

That’s why it’s important you review each repayment plan and make an informed decision about the best one for you. To help you do just that, we’ll start by going over the repayment plan everyone gets put onto by default, the Standard Repayment Plan, and then move on to talking about the more popular income-driven repayment plans. 

But, if you’re scanning this blog post and already thinking tl;dr, you can save yourself some time by signing up for Scholly PayOff! It’s our new tool that helps you instantly find the best federal student loan repayment plan specifically for you (i.e. the one that will save you the most $$$ while still working toward paying off your student loans).

Standard Repayment Plan

If you’ve never looked into your student loan repayment options, you’re likely on the Standard Repayment Plan right now. Why? Because this is the repayment plan you’re automatically put on when it comes time to start paying back your loans post-graduation. 

Does that mean it’s the best repayment plan for you? Not necessarily. But it could be a good fit for you if you have a high income and can afford to make large monthly payments (the benefit here is that you’ll minimize interest payments).

How does the Standard Repayment Plan work? 

The Standard Repayment Plan sets your payments at a fixed amount that allows you to pay off your student loans in 10 years or less. This includes paying for any interest accrued during that period. 

So, for example, let’s say you owe $35,000 on your student loans, which have a student loan interest rate of 6.5%. With a repayment period of 10 years, your monthly payments would be $409. 

To quickly calculate what your monthly payments would be under the Standard Repayment Plan, you can use this student loan calculator. 

What happens if that standard monthly payment is too high for your budget? 

Well, you could apply for forbearance to postpone your payments. But because you’d be racking up interest during that time, that’s not your best option. What is? Switching repayment plans! 

The most popular repayment plans are the income-driven repayment plans, which allow you to make affordable monthly payments that are relative to your income. Let’s look at those now! 

Income-Based Repayment (IBR) Plan

Of all of the income-driven repayment plans, the Income-Based Repayment plan is the most popular – it’s used by 2.82 million people

Again, that doesn’t necessarily mean it’s the best repayment plan for you. But it definitely could be if: 

  • You’d benefit from having your monthly payments reduced to fit your current income 
  • You’d like to have a longer repayment period that could end with your student loans being forgiven 
  • You have federal direct loans 

How does the Income-Based Repayment plan work?

The Income-Based Repayment plan sets your monthly payment at 10% (for new borrowers on or after July 1, 2014) or 15% of your discretionary income (your annual income minus 150% of the poverty guideline for your state and family size). 

Either way, your monthly payments will never be more than what you’d pay under the Standard Repayment Plan. But you will need to submit new information on your income and household every year to have your payments updated accordingly.

Your repayment period under the IBR plan is also much longer. If you’re a new borrower (on or after July 1, 2014), your repayment period is 20 years. If you’re not a new borrower, your repayment period is 25 years.

If you still have student loan debt at the end of the repayment period, the remaining balance is automatically forgiven – leaving you to just pay the tax. 

Income-Contingent Repayment (ICR) Plan

The Income-Contingent Repayment plan is another income-driven repayment plan that’s similar to the IBR, but your monthly payments will be a bit higher. Consequently, this repayment plan is less popular. 

Still, it could be a good fit for you if: 

  • You’d benefit from having your monthly payments reduced slightly to better fit your current income 
  • You’d like to have a longer repayment period that could end with your student loans being forgiven 
  • You have federal direct loans (including parent PLUS loans)

How does the Income-Contingent Repayment plan work? 

The Income-Contingent Repayment plan sets your payment at 20% of your discretionary income OR the amount you would pay on a repayment plan with a fixed payment period of 12 years. Your monthly payment will be whichever amount is lower. 

With the ICR plan, you’ll also need to submit new information on your income and household every year to have your payments updated accordingly.

Your repayment period with an ICR plan is 25 years. And, just like the IBR plan, If you haven’t paid off your loan in 25 years, the remaining balance is forgiven – leaving you to just pay the tax.

Pay As You Earn (PAYE) Repayment Plan

The Pay As You Earn repayment plan is another income-driven repayment plan. And it’s very similar to the Income-Based Repayment plan but could be a better fit for you if:  

  • You don’t qualify as a new borrower under an IBR plan
  • You took out your loan on or after Oct. 1, 2007, OR received a disbursement of a direct loan on or after Oct. 1, 2011 (necessary to qualify for PAYE)
  • You’d benefit from having your monthly payments reduced to fit your current income 
  • You’d like to have a longer repayment period that could end with your student loans being forgiven 
  • You have federal direct loans 

How does the PAYE repayment plan work? 

The PAYE repayment plan sets your monthly payment at 10% of your monthly discretionary income, regardless of whether or not you’re a new borrower. Your monthly payments will never be more than what you’d make under the Standard Repayment Plan. 

With the PAYE plan, you’ll also need to submit new information on your income and household every year to have your payments updated accordingly.

Your payment period under the PAYE repayment plan is 20 years. After that, your remaining student loan balance is forgiven – leaving you to just pay the tax. 

Revised Pay As You Earn (REPAYE) Repayment Plan 

The Revised Pay as You Earn Repayment is an updated version of the PAYE plan. Consequently, it’s also quite similar to the IBR plan. But the REPAYE repayment plan could be a better option for you if: 

  • You don’t qualify as a new borrower under an IBR plan
  • You don’t qualify for the PAYE plan based on when you took out your student loan or received a disbursement of a direct loan 
  • You’d benefit from having your monthly payments reduced to fit your current income 
  • You’d like to have a longer repayment period that could end with your student loans being forgiven 
  • You have federal direct loans (not including parent PLUS loans)

How does the REPAYE repayment plan work? 

The REPAYE plan sets your monthly payment at 10% of your discretionary monthly income – even if this means your payments would be higher than what you’d pay under the Standard Repayment plan. 

Your repayment period under the REPAYE repayment plan is 20 years if all of your loans were for undergraduate studies. If any of your loans were for graduate studies, then your repayment period jumps to 25 years. 

With the PAYE plan, you’ll also need to submit new information on your income and household every year to have your payments updated accordingly.

Either way, after the repayment period ends your remaining student loan balance is forgiven – leaving you to just pay tax. 

Income-Sensitive Repayment (ISR) Repayment Plan 

The Income-Sensitive Repayment plan is an income-driven repayment plan only available to you if you took out Federal Family Education Loans (FFEL), which were discontinued in 2010. 

So, this plan could only be an option for you if: 

  • You’ve taken out Federal Family Education Loans (Subsidized FFEL Stafford Loans,

Unsubsidized FFEL Stafford Loans, FFEL PLUS Loans, and/or FFEL Consolidation Loans)

  • You’d benefit from having your monthly payments reduced to fit your current income 
  • You’d like to have a longer repayment period that could end with your student loans being forgiven 

How does the Income-Sensitive Repayment plan work? 

If your student loan payments under a different student loan repayment plan exceed 20% of your income, you can apply for Income-Sensitive Repayment to have your payment amount be changed to something more manageable for your annual income. 

The exact amount for your monthly payment is determined by your lender. But it is typically 4% and 25% of your gross income and can change every year depending on your income.

You can only use the ISR plan for a maximum of 5 years and you’ll need to reapply each year, updating information on your income and household. After 5 years, you’ll be automatically switched to another student loan repayment plan. 

Graduated Repayment Plan

The Graduated Repayment Plan is not an income-driven repayment plan. It’s actually quite similar to the Standard Repayment plan – except instead of fixed monthly payments, your monthly payments start low and then increase, gradually, over time. 

The Graduated Repayment plan could be a good option for you if: 

  • You want to pay off your student loans quickly and pay as little interest as possible 
  • Your current income doesn’t currently allow you to make high monthly payments – as you would on the Standard Repayment plan – but you expect to be able to make higher payments in at least two years  

How does the Graduated Repayment plan work? 

The Graduated Repayment plan sets your initial payments at a low rate. But every two years your required monthly payments will increase so that you’re still able to pay off the loan within the standard repayment period of 10 years. 

Extended Repayment Plan

Much like the Standard Repayment plan and Graduated Repayment plan, the Extended Repayment plan allows you to make fixed monthly payments to pay off your student loans in a set period of time. But, under this plan, that repayment period is extended. 

The Extended Repayment plan could be a good fit for you if: 

  • Your income allows you to make fixed monthly payments on your student loans
  • You need your monthly payments to be lower than what you’d pay under the Standard Repayment plan or Graduated Repayment plan 
  • You don’t mind your repayment period being 15 years longer than the Standard Repayment plan or Graduated Repayment plan 

How does the Extended Repayment plan work?

The Extended Repayment Plan allows you to make monthly payments that are fixed (same every month) or graduated (increasing over time) – either option ensures you’ll pay off your student loans within a 25 year repayment period. 

Because the repayment period is longer, your monthly payments are generally lower than what you’d pay under the Standard Repayment plan or Graduated Repayment plan.

Private Student Loan Repayment Plans

Unlike federal student loans, private student loans and the terms for repayment aren’t regulated by the government. That means you’ll need to speak directly with your private student lender to know for sure what options you have. In general, though, you’re likely to find the following private student loan repayment plans.  

Immediate Repayment Plan

With an immediate repayment plan, you’ll be making full monthly payments on your loans while you’re still in school. This plan could be a good option for you if: 

  • You’re currently in college and have the income or financial support to make payments on both your principal balance and accrued interest 
  • Your goal is to pay off your private student loan by the time you graduate 

Interest-Only Repayment Plan

With an interest-only repayment plan, you’ll make monthly payments that cover the monthly interest being accrued on your loans while you’re still in school. This plan could be a good fit for you if: 

  • You’re currently in college and have the income or financial support to make monthly payments that prevent your balance from growing due to interest 

Partial Interest Repayment Plan 

With a partial interest repayment plan, you’ll make a fixed monthly payment that covers part of the interest being accrued on your loans while you’re still in school. This plan could be a good fit for you if: 

  • You’re currently in college and have the income or financial support to make small monthly payments that keep your loan balance from growing too much while in school

Lender-Specific Flexible Repayment Plans 

You probably noticed that the three private student loan repayment plans we just mentioned are for current students. That’s because, generally, once you’ve graduated you’ll need to make monthly payments that cover both your principal and interest during a set repayment period. 

But, if those payments are too high for your current income, try speaking with your private loan lender to see if they have flexible repayment plans. For example, Sallie Mae has a Graduated Repayment Period program. 

Deferment or Forbearance 

If you’re not able to make your private student loan payments, you can also apply for deferment or forbearance.

Deferment is typically granted if you’re going back to school (e.g. graduate school) or enrolling in the military. Forbearance is typically granted if you have extenuating circumstances that make it hard to pay off your student loans (e.g. lost your job). 

Both of these options would postpone any payments you would need to make. But you should only apply for them if you really need to because your student loans will accrue interest while in deferment or forbearance. 

Should You Consolidate Your Student Loans?

Consolidating your student loans could make them easier to manage. How? Because it would combine all of your student loans into one loan that then only requires one monthly payment. It could also help you lower your monthly payments and extend your repayment period. 

But, there are some drawbacks to consolidating student loans. For example, you might end up paying more in interest over time and you’d give up federal loan benefits (e.g. income-driven repayment plans). 

On top of that, it’s a decision you can only make once. So, make sure to carefully consider all of your options before deciding to consolidate! 

What About Student Loan Forgiveness Programs?

These days, student loan forgiveness is a hot topic as politicians have started discussing ways to address the $1.6 trillion student loan debt crisis. But student loan forgiveness programs and the idea of canceling student loan debt aren’t really the same thing.  

Student loan forgiveness programs help people in certain professions by forgiving a portion of the student loan debt. That portion of your debt is usually forgiven in exchange for meeting a list of conditions and requirements, like working in a high need field for a set number of years. 

There are many different student loan forgiveness programs – each with its own application requirements and amount of loan debt that can be forgiven. But here are a few examples: 

Public Service Loan Forgiveness 

This program is for full-time employees of a qualified U.S. federal, state, local, or tribal government or not-for-profit organization. 

It forgives the remaining balance on your direct loans after you have made 120 qualifying monthly payments under a qualifying repayment plan.

Teacher Loan Forgiveness 

This program for teachers who have worked full-time for five complete and consecutive academic years in a low-income school or educational service agency, and meet other qualifications.

It forgives up to $17,500 on your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans.

Nurse Corps Loan Repayment Program 

This program is for licensed registered nurses, advanced practice registered nurses, or nurse faculty members with qualifying debt. 

To be eligible, you must have received your nursing education from an accredited school of nursing located in a U.S. state or territory and work full-time in an eligible CSF in a high need area or an accredited school of nursing. It forgives up to 85% of unpaid nursing school debt. 

National Defense Student Loan Discharge

This program is for military service members who served in a location that qualifies a military member for hostile-fire or imminent-danger pay. 

If your military service ended before Aug. 14, 2008, this program forgives up to 50% of debt from Federal Perkins Loans, which were discontinued in 2017. If your service began on or after that date, you may have up to 100 percent of your Federal Perkins Loans forgiven.

Attorney Student Loan Repayment Program

This program is for any employee serving in or being hired to serve in an attorney position who has qualifying Federal student loans totaling at least $10,000. To qualify, you must enter a three-year service agreement with the employer. 

The Department of Justice will match your student loan payments up to a maximum of $6,000.

Income-Driven Repayment Plans

As you may have noticed, all of the income-driven repayment plans we discussed earlier (income-based, PAYE, REPAYE, etc.) also offer student loan forgiveness at the end of your repayment period.

How Long Does it Typically Take to Pay Off Student Loans?

The amount of time it will take you to pay off your student loans in full depends on multiple factors. 

For example, the type of loan (e.g. federal vs. private), the starting balance, the interest rate, your repayment plan, and whether or not you’re able to pay more than the minimum monthly payment will all affect how quickly you’re able to pay off your student loan. 

But, there is some data on the average time it takes to pay off student loans: 

  • In 2013, One Wisconsin Institute conducted a study of 61,762 people and found that it took respondents an average of 21.1 years to pay off their student loan debt.
  • The Department of Education reports that the average time to pay off student loans depends on the total loan debt. 

Average Time to Pay Off Student Loans, According to the Department of Education

Total Loan Debt  Repayment Period 
$0-7,500 10 years
$7,500-$10,000 12 years
$10,000-$20,000 15 years 
$20,000-$40,000 20 years 
$40,000-$60,000 25 years 
$60,000 or more  30 years

5 Tips to Pay Off Your Student Loans Even Faster

If that average repayment period seems a bit too long for you, we get it! Luckily, there are a few things you can do to pay off your student loans faster and become debt-free. 

#1 Pay more than the monthly minimum

Paying more than the monthly minimum on your student loan doesn’t just help you pay down your principal balance faster. It also helps you pay less toward interest over time. Even an additional $50-100/month could make a huge difference, taking years off the time it takes you to pay the loan in full. 

#2 Enroll in auto-pay

Enrolling in auto-pay is a good idea to make sure you never miss a payment. But it’s also a good strategy to pay off your student loans faster. Why? Because you can get a 0.25% reduction of your interest rate on federal direct loans and some private student loans when you sign up for auto-pay. 

#3 Make extra payments whenever you can

On any student loan repayment plan, you’ll only be asked to make 12 student loan payments per year. But if you can fit it into your budget or come into money unexpectedly, make an extra payment. If you decide to do this, just make sure you contact your lender so they know you want the extra payment to go toward your principal balance instead of the next month’s interest. 

#4 Use the debt snowball or the debt avalanche method 

The debt snowball and debt avalanche methods are popular strategies for paying off any kind of debt fast. Both methods require you to keep paying the monthly minimum payments on all of your loans. 

But with the debt snowball method, you’ll put extra focus and money toward paying off the student loan with the smallest balance first. On the other hand, by using the debt avalanche method, you’ll put extra money toward paying off the student loan with the highest interest rate. 

#5 Refinance high-interest student loan debt

Do you have a high student loan balance with a high-interest rate? If so, it may make sense to refinance your student loans. By refinancing, you replace your student loans with a new private loan that has a lower interest rate. This can help you lower your monthly payments in the short-term and pay less overall in the long-term. 

But before you choose this option it’s important to understand that refinancing your student loans involves some risk. For example, if you refinance your federal student loans you’ll no longer have access to income-based repayment plans or student loan forgiveness programs.

Final Thoughts 

Depending on how much you owe, successfully paying off your student loans can take some significant time, financial planning, and persistence. But the moment you get it done and see that remaining balance at $0, you’ll know it was all worth it! We hope what we’ve shared in this blog post can help guide you toward that goal. 

And, if you’d like some help finding and enrolling in the best federal student repayment plan for your current budget and income, don’t forget to sign up for Scholly PayOff!