How to Choose Your Best Repayment Plan for Student Loans

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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.

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Paying off student loans is stressful, but there is a silver lining: Federal student loans have a lot of flexibility when it comes to paying them back. In fact, the Federal Student Aid office offers eight different repayment plan options. With all these choices, how can you select your best student loan repayment plan?

Here are four steps you can take to figure out which student loan repayment plan is best for you.

1. Learn about the different student loan repayment plans
2. Determine how much you can pay each month
3. Use a student loan calculator to estimate interest costs
4. Change your plan or refinance if your circumstances change

Plus: Final thoughts on finding your best student loan repayment plan

1. Learn about the different student loan repayment plans

Your first step in choosing your best repayment plan for your student loans is learning about your options.

Federal student loans come with eight different plans. Not every loan type qualifies for every plan, but you can follow the links to learn about each plan and its eligibility requirements in full detail.

Most of the income-driven plans end in loan forgiveness if you haven’t paid off your balance after 20 or 25 years.

If you don’t request an alternative plan, you’ll make payments on your federal loans under the standard 10-year repayment plan. But for some borrowers, the standard plan is too burdensome. For others, though, this approach is not aggressive enough for paying off debt.

Private student loans don’t qualify for these plans

Note that private student loans are different. They probably won’t come with flexible student loan repayment options, and they don’t qualify for federal plans such as IDR. Each lender sets its requirements, with most letting you choose a term between five and 20 years when you initially borrow, so you’ll want to shop around before borrowing.

But if you already borrowed and are struggling to keep up with payments, you’ll need to speak with your lender to see if you can choose a new term or postpone payments through forbearance.

Refinancing student loans could be another option if you’re looking to restructure your debt. Since private lenders determine their student loan repayment options, you’ll need to call your lender or servicer to learn what’s available to you.

2. Determine how much you can pay each month

After learning about the different student loan repayment plans, it’s time to take a close look at your budget. Use a spreadsheet or download an expense-tracking app to get a clear picture of your monthly cash flow.

Based on your income and expenses, figure out how much you can afford to pay toward your student loans each month. Then, use a tool like the Federal Student Aid Loan Simulator to calculate your payments on different plans.

If you need to lower your payments…

If your student loan payments under the standard repayment plan are dragging down your budget, apply for a different plan. Each has its own eligibility requirements, so factors such as your income, loan type, date of loan disbursement and total debt might narrow down your options.

When considering changing your repayment plan, ask yourself these questions:

  • Do I expect my income to rise over time? If so, you might opt for the graduated repayment plan. With this option, your payments will start low and gradually rise, but you’ll still pay off your debt in 10 years.
  • Do I need long-term relief? If so, opt for the extended repayment plan or an IDR plan, both of which lengthen your repayment term to 20 or 25 years. IDR plans are usually a better option, since they could end in loan forgiveness.
  • Am I working toward Public Service Loan Forgiveness (PSLF)? If you’re working toward PSLF, you’ll need to put your loans on an IDR plan to qualify.
  • Do I have parent PLUS loans? If you’re a parent borrower, your only available IDR plan is Income-Contingent Repayment, and you’ll have to consolidate your loan first.
  • Do I need to pause my student loan payments altogether as a result of losing my job or returning to school? If this is the case, consider student loan deferment or forbearance to avoid default.

The right plan will match your circumstances and make your monthly payments more manageable. But keep in mind that if you lower your monthly payments, you’ll likely pay more in interest in the long run.

Again, if you have private student loans and need relief, you’ll need to speak with your loan servicer. It might offer temporary forbearance in the case of economic hardship.

If you can pay more each month…

After taking a close look at your budget, you might reach the opposite conclusion: You can pay more each month and get out of debt even faster. If that’s the case, you can set up extra payments without penalty.

You can set up recurring or one-time extra payments to pay off your debt faster. However, you might need to instruct your loan servicer to apply your extra payments to your balance rather than save them for future bills.

3. Use a student loan calculator to estimate interest costs

Once you’ve compared your budget with the various student loan repayment plans, do the math to see what each plan would look like for you. Not sure where to start? Student loan calculators can take the guesswork out of the process.

For example, let’s say you owe $30,000 in loans with a 5.70% rate. On the 10-year standard plan, you can expect to pay $329 a month for 10 years. Over the life of your loans, you’ll pay about $9,427 in interest.

But if you can pay just $50 more a month, you’ll save about $1,700 in overall interest and get out of debt a year and eight months ahead of schedule. If you can ramp up your payments to $500 a month, you’ll save over $4,000 in interest and get out of debt about four years early.

By revealing your total savings, these calculators can motivate you to pay off your loans faster.

Student loan prepayment calculators

Calculators can also show you what happens if you lower your monthly payments. This IBR calculator, for example, gives a bird’s-eye view of your loans. It even takes annual salary raises into account.

INCOME BASED REPAYMENT (IBR) CALCULATOR

First month

Last month

Balance paid

Total forgiveness

Repayment term

OriginalIBRSavings
First month
Last month
Balance paid
Total forgiveness
Repayment term
Your monthly payment on IBR would be , a difference of from what you are currently paying. If your income increases over time, your payments may increase. Assuming annual income growth of 3.5%, your final monthly payment would be . After making payments for — years, you will have paid a total of and would receive in forgiveness, compared to your current plan where you will pay over the next — years.

Student loan refinancing rates as low as % APR. Check your rate in 2 minutes.

Total

Total

CURRENT

$0

CURRENT

IBR

$0

IBR

$0

Student loan calculators reveal the relationship between your monthly payments and the interest you pay over the long run. By crunching the numbers, you can see how your actions now will affect your finances in the future.

4. Change your plan or refinance if your circumstances change

There’s no one-size-fits-all approach when it comes to repaying student loans. The plan you choose might be different from someone else’s. Plus, your approach as a new grad might look different than it does in your 30s or 40s.

If your bills are overwhelming, an IDR plan could be exactly what you need to lower your monthly payments and avoid default. But if you start making more money with a high-paying job or a side hustle, you could ramp up your student loan payments to get out of debt faster.

Once your finances are in good shape, you could even refinance your loans under new terms. When you refinance, you turn over one or more of your student loans to a new, private lender. You could refinance one loan or combine multiple ones. Ideally, you’ll get a lower interest rate when you do so.

Plus, you could choose new terms, perhaps lowering your monthly payments or accelerating your payoff date. If you go from a 10-year plan to a five-year one, for instance, you’ll be out of debt much faster. Just make sure to do the math so you understand exactly what your new terms will mean for your budget.

For example, let’s say you refinanced a 10-year, $30,000 loan at 5.70% interest. Your new plan has a five-year term at 4.50% interest. In this case, your monthly payments would increase by $230, but you’d get out of debt five years early and save $5,870 on interest.

Typically, the best candidates for student loan refinancing have a steady income and strong credit score. Keep in mind, though, that if you refinance your federal student loans, you’ll lose out on federal student loan repayment options, such as IDR plans and forgiveness programs.

Final thoughts on choosing your best student loan repayment plan

If you’re confused about the different student loan repayment plans available, you’re not alone. There are a lot of options, and each has its pros and cons.

Careful research and a bit of patience can pay off, whether you land big savings from a new repayment plan or free up more of your money each month. Explore your student loan repayment options if you need some financial relief or want to pay off your debt faster.

Interested in refinancing student loans?

Here are the top 6 lenders of 2020!
LenderVariable APREligible Degrees 
1.89% – 6.66%1Undergrad
& Graduate

Visit Splash

1.89% – 5.90%2Undergrad
& Graduate

Visit Laurel Road

2.25% – 6.09%3Undergrad
& Graduate

Visit SoFi

1.99% – 5.64%4Undergrad
& Graduate

Visit Earnest

1.98% – 8.55%5Undergrad
& Graduate

Visit Lendkey

2.39% – 6.01%Undergrad
& Graduate

Visit Elfi

Check out the testimonials and our in-depth reviews!
1 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 October 1, 2020.


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 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.


5 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 10/15/2020 student loan refinancing rates range from 1.98% APR to 8.55% Variable APR with AutoPay and 2.99% APR to 8.77% Fixed APR with AutoPay.

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.