Student Loan Repayment: Everything You Need to Know

What Are the Student Loan Repayment Options?

The U.S. Department of Education currently offers several different repayment options, giving borrowers a lot of flexibility with their budgets. Here's a quick summary of what's available.

Standard Repayment Plan

The standard repayment plan is the default plan for federal student loans. In most cases, you'll pay fixed monthly payments over 10 years. However, if you consolidate your student loans, you may be able to extend that to up to 30 years.

Graduated Repayment Plan

As its name suggests, the graduated repayment plan starts out with lower monthly payments, which increase over time—usually every two years—so that your loans will be paid in full within 10 years (or 30 years with consolidation loans).

Extended Repayment Plan

If you have more than $30,000 in outstanding loans, you may qualify for an extended repayment plan. This option allows you to choose fixed or graduated monthly payments, ensuring that your debt will be paid off within 25 years.

Pay As You Earn (PAYE) Plan

If your student loan balance is higher than your annual discretionary income or it represents a significant portion of your annual income, you may qualify for the PAYE plan.

This plan can cut your monthly payment to 10% of your discretionary income, calculated as the difference between your annual income and 150% of the federal poverty guideline. Your payment will never be more than the 10-year standard repayment plan amount.

If you still have a balance after 20 years, the remaining amount will be forgiven.

Income-Based Repayment (IBR) Plan

Like the PAYE plan, the IBR plan is designed for student loan borrowers who have a significant amount of student loan debt relative to their income. However, your payment may vary depending on when you took out your first student loan.

If it was on or after July 1, 2014, it'll be 10% of your discretionary income, which is calculated the same way as with the PAYE plan. If you have a balance after 20 years, the remaining amount will be forgiven.

If you took out your first loan before July 1, 2014, your payment will be 15% of your discretionary income, and any remaining balance after 25 years will be forgiven.

Income-Contingent Repayment (ICR) Plan

The ICR plan calculates your monthly payment as the lesser of 20% of your discretionary income or what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income. That said, discretionary income is calculated as the difference between your annual income and 100% of the federal poverty guideline.

If you still have a balance after 25 years, the remaining amount will be forgiven. Note that if you have Parent PLUS loans, the ICR plan is the only income-driven repayment plan available to you, and you'll need to consolidate your loans to take advantage of it.

What Is the Best Student Loan Repayment Plan?

Ultimately, the best option for you will depend on your situation. If you're struggling to keep up with your monthly payments, the PAYE plan may be the best option because it offers the most generous calculation for your monthly payment.

But if you have a high income relative to your student loan debt, an income-driven repayment plan may not reduce your monthly payment by much, or at all. In that case, it may make sense to stick with the standard repayment plan or look into a graduated or extended repayment plan.

If you're a parent who has taken out federal loans to help your child pay for college, consider the ICR plan if you're having trouble with monthly payments.

How Do New Repayment Rules Affect Your Credit?

Even as student loan repayment resumed, there have been developments in repayment rules that impact millions of borrowers.

Saving on a Valuable Education (SAVE) Plan Forbearance

Shortly after the Biden administration created the SAVE plan, it was challenged in federal court. After the plan was blocked pending litigation, the Education Department put the roughly 8 million borrowers who had enrolled in forbearance.

During that time, SAVE borrowers don't need to make payments or worry about interest accruing on their balances. It also won't impact their credit score. The Education Department currently expects SAVE borrowers to resume payments in December 2025, though that might change.

Education Department Resuming Collection Efforts

In April 2025, the Trump administration announced that it would resume collection efforts on defaulted loans beginning in May.

Borrowers with defaulted loans will receive notices about the Treasury offset program and negative credit reporting. They'll have 65 days from the date of the notice to resolve their default status. Otherwise, they may see certain federal payments reduced to pay what they owe and take a hit to their credit scores.

If you'd like to see how your student loans are being reported on your credit reports from the three credit bureaus (Experian, TransUnion and Equifax), you can request a free copy of your credit reports through AnnualCreditReport.com. You can also get your free Experian credit report anytime.

How to Budget for Student Loan Repayment

Restarting student loan payments after a few years can impact your financial situation, even if you can afford it. Depending on your circumstances, you may need to make adjustments to your investing and savings goals, debt payoff plan or lifestyle spending.

Here are some tips to help you make room in your budget for student loan payments:

• Evaluate your income and expenses. Take a look at your income and expenses for the past few months to get a general idea of how much you earn and where your money is going. Categorizing your expenses can give you an even better look at how you're spending your money, so you can decide your next steps.
• Look for opportunities to cut spending. As you evaluate your expenses, consider ways you can reduce your spending. For example, you may consider canceling subscriptions you don't use or sharing subscriptions with a family member or friend to reduce your cost. You can also minimize eating out and entertainment and even evaluate your necessary expenses—such as utilities, insurance premiums and groceries—to see if you can save.
• Consider ways to increase your income. Earning more money may be difficult if you have special demands on your time outside of work, or you're subject to other circumstances outside of your control. But if you do have the time and capacity, consider ways to increase your income, such as working overtime hours, asking for a raise, switching jobs or adding a second job or side hustle.
• Look at other financial goals. If you were able to take advantage of the student loan payment pause to put more money toward other financial goals, such as retirement, education, emergency savings or paying off high-interest debt, consider adjusting some of those contributions to make room for student loans.

What to Do if You Can't Afford to Repay Your Loan

If your budget is tight, and your options for earning more or spending less are limited, there are several different options to consider:

• Get on an income-driven repayment plan. Because these plans tie your monthly payment to your income, you may be able to enjoy a much lower payment, or even not have a payment at all.
• Request deferment or forbearance. Consider talking to your student loan servicer about deferment and forbearance options, which can allow you to skip payments for a specified number of months.
• Look into student loan forgiveness programs. The federal government offers several different student loan forgiveness programs. Research the different options and determine whether you're eligible and what you need to do to get some or all of your loans canceled.
• Get help from your employer. Many employers offer student loan repayment assistance as an employee benefit. In fact, the IRS allows employers to provide up to $5,250 in student loan payments each year through 2025 with no tax consequences for the employee. Check with your employer to see if it's an option and whether there are requirements to receive the help.

Should You Refinance Your Student Loans?

If you have an excellent credit score and a high income, student loan refinancing can potentially help you secure a lower interest rate than what you're currently paying. You could also shorten your repayment term to as little as five years with some lenders, which can be helpful if you can afford a higher monthly payment and want to pay down your debt faster.

However, most federal student loan borrowers won't benefit from refinancing their loans with a private lender. Doing so would cause you to lose access to federal loan benefits, including forgiveness programs, income-driven repayment plans and generous forbearance and deferment options.

Frequently Asked Questions

Monitor Your Credit Regularly to Build and Maintain Good Credit

Making on-time payments with your student loans can help you build and maintain a good credit score.

With Experian's free credit monitoring service, you'll get access to your Experian credit report and FICO^® Score^☉ powered by Experian data. These resources will give you the information you need to understand which factors are impacting your score and the steps you can take to improve your credit score.

You'll also get real-time alerts when changes are made to your credit report, making it easier to address developments as they happen.