Is the 10-Year Standard Repayment Plan Right for You?

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Whether you’ve already started repaying your student loan debt or have plans to start paying it off soon, the 10-year Standard Repayment Plan is something every borrower needs to understand.

As the name suggests, this is the standard plan that all borrowers will be placed into if they do not choose another option. And while the Standard Repayment Plan minimizes the total amount of interest you will pay over the lifetime of the loan, remember that it’s not your only option.

Find out how the plan works before you decide if it is the right choice for you. Specifically, let’s look at:

What is the Standard Repayment Plan?

As noted, if you don’t specifically choose another plan, you’ll automatically be placed in the Standard Repayment Plan, and there you’ll stay until and unless you decide to switch. The Standard Plan is designed to pay off your loans in 120 payments over 10 years.

While the monthly payments on this plan may well be higher than with other options, paying off your loan in 10 years will lower the overall interest you pay, compared with some of the alternatives.

Standard Repayment Plan eligibility

All borrowers with the following loans are eligible for the Standard Repayment Plan:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans
  • Direct Consolidation Loans
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • FFEL PLUS Loans
  • FFEL Consolidation Loans

Note that the Standard Repayment Plan applies only to federal loans, not private student loans.

How the Standard Repayment Plan works

Setting up the plan

Though you may choose to stick with the Standard Repayment Plan, it’s worth a look at your other options first to see what’s the best choice for your loans.

The Department of Education recommends that you use its Repayment Estimator. This online tool will ask you for all of your loan balances and the interest rates they carry, along with your tax-filing status, income and family size.

You will also have to create a free online account in order to accurately use the repayment calculator. Based on the information you input, the Repayment Estimator will tell you:

  • Which plans you’re eligible for
  • When your first monthly payment is due
  • When your last monthly payment is due
  • The total amount paid
  • Projected loan forgiveness (if any)
  • Your repayment period

The options it gives you will include the Standard Repayment Plan, as well as any other relevant options. The two most important numbers to focus on are your monthly payments and the total amount paid. You need a monthly payment you can afford, but you also want to pay as little as possible in the long run.

The Standard Repayment Plan tends to be a good balance of both. However, specific repayment options can vary based on your own individual circumstances, so it’s always a good idea to check the Repayment Estimator, and maybe do some additional research, before defaulting into the Standard Repayment Plan.

Payments

When you’re set up on the Standard Repayment Plan, your monthly payments are generally calculated based on what it will take to pay off your balance within 10 years’ time. That said, the plan requires you to pay a minimum of $50 a month.

However, consolidated loans are the exception. If you have Direct Consolidation Loans or FFEL Consolidation Loans, your payment term may range between 10 and 30 years and the repayment calculator will display the consolidated loans in a separate table. The $50 monthly minimum still applies; however, the payment amount is determined not only by what you owe on the consolidated loans, but also any other student loan debt.

Making changes

If you are having trouble making the monthly payment with the Standard Repayment Plan, you can choose to enroll in a different plan at any time, with no cost or penalty to you, providing you continue to make timely payments. Use the Repayment Estimator to get some idea of alternative options, and then contact your student loan servicer.

Remember, switching plans should always be free, and servicers can’t charge you for talking to you about your loans. If anyone tells you otherwise, it could be a debt-relief scam.

How does the Standard Repayment Plan impact you?

Pros

There are three key benefits to sticking with the Standard Plan:

  • Your student loans will be paid off within 10 years, allowing you to free up cash to work toward other financial goals, like buying property, saving for retirement and travel.
  • You’ll save on interest fees. For instance, although Income-Based Repayment plans offer lower monthly payments, that’s because they’re spread over a much longer period of time. As a result, the interest will cost you more in the long run.
  • It’s just one of your federal repayment options, so you can switch anytime.

Cons

There’s really just one major drawback, but it may be very significant, depending on your financial situation. On the Standard Repayment Plan, your monthly payments will be higher than with most other federal options.

And that’s fine if you can swing it, but saving money over the life of the loan won’t do you any good when you’re barely scraping by today. If you can’t afford your daily necessities of life, you should talk to a loan servicer about a plan that works for you.

Note too that in some circumstances, the Standard Plan might not actually get you the lowest monthly payment amount. That’s why it’s really important to use the repayment calculator provided by the U.S. Department of Education in order to ensure it’s the best choice for you.

Alternatives to the Standard Repayment Plan

The Department of Education has seven other repayment plan options for federal loans:

  • Graduated Repayment Plan
    You’re on the same 10-year plan (or 30-year plan for consolidated loans), but your monthly payment starts out low and gets higher over time, increasing every two years.
  • Extended Repayment Plan
    Your monthly payments are either fixed or graduated for up to 25 years and are generally lower than with other plans
  • Revised Pay As You Earn Repayment Plan (REPAYE)
    You pay 10% of your discretionary income. Any remaining balance is forgiven after 20 years for undergraduate loans or 25 years for graduate loans.
  • Pay As You Earn Repayment Plan (PAYE)
    You pay 10% of your discretionary income, but no more than you would on the Standard Repayment Plan. Any remaining balance is forgiven after 20 years.
  • Income-Based Repayment Plan (IBR)
    You pay 10% of your discretionary income, with any remaining balance forgiven after 20 years for loans taken after 2014. Older loans require 15% of your discretionary income, with forgiveness after 25 years.
  • Income-Contingent Repayment Plan (ICR)
    You pay whichever is lower: 20% of your discretionary income, or however much your monthly payment would be over a 12-year fixed payment period. Any remaining balance is forgiven after 25 years.
  • Income-Sensitive Repayment Plan
    You pay a fixed amount based on your annual income for a period of up to 10 years. Notably, though, this plan is only available to borrowers who have a Federal Family Education Loan (FFEL).

Note that for these plans, you may need to provide documentation of your income throughout your loan’s repayment period.

As you can see, there are a lot of similarities among these plans. It’s important that you learn about the alternative plans and their requirements. You can also use the Repayment Estimator to get an idea of which one will actually work for you.

Generally speaking, the Standard Repayment Plan will save you money in interest, making it a good option for those who can keep up with the payments. But if your finances need the breathing room and you’re willing to make the trade-off of potentially paying more in interest, then you might want to look at other options.

Chaunie Brusie contributed to this report.

Interested in refinancing student loans?

Here are the top 6 lenders of 2020!
LenderVariable APREligible Degrees 
1.99% – 5.64%1Undergrad
& Graduate

Visit Earnest

1.89% – 5.90%2Undergrad
& Graduate

Visit Laurel Road

2.25% – 6.09%3Undergrad
& Graduate

Visit SoFi

1.89% – 6.77%4Undergrad
& Graduate

Visit Splash

2.39% – 6.01%Undergrad
& Graduate

Visit Elfi

1.99% – 5.41%5Undergrad
& Graduate

Visit CommonBond

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.

© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

Interest Rate: A simple annual rate that is applied to an unpaid balance.

Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of September 9, 2020. Information and rates are subject to change without notice.
 


3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 2.99% APR to 6.09% APR (with AutoPay). Variable rates from 2.25% APR to 6.09% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.18% plus 2.32% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. 

4 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. ‍All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.