Best Student Loan Repayment Plan: Choose the Right Option for You

Federal student loan repayment plans offer different paths. Your choice depends on income, debt amount, and financial goals. Options range from fixed payments to income-driven plans that adjust with earnings.

Big changes arrive in 2026. Most current income-driven plans will be replaced by the Repayment Assistance Plan (RAP). Understanding your options now helps you choose wisely. You can avoid being automatically moved into a plan that doesn’t work.

⚠️ Important Update: Many income-driven plans—including SAVE, PAYE, and ICR—close to new borrowers after July 1, 2026. These plans phase out completely by July 1, 2028. Enroll before then to stay on your chosen plan. A new Repayment Assistance Plan (RAP) will replace most IDR plans. All borrowers will transition unless grandfathered in.

Federal Student Loan Repayment Options

Currently, four main types of federal student loan repayment plans exist. Major changes begin July 1, 2026. Enrolling soon in plans like SAVE, PAYE, or ICR helps you stay grandfathered in.

Here’s a quick overview before we explore each plan:

• Standard Repayment Plan: The default 10-year plan. You’re automatically enrolled unless you choose differently.
• Income-Driven Repayment (IDR) Plans: Based on income and family size. Four main programs exist:
  • Income-Based Repayment (IBR)
  • Income-Contingent Repayment (ICR)
  • Pay As You Earn (PAYE)
  • Saving on a Valuable Education (SAVE)
• Graduated Repayment Plan: Payments increase every two years over 10 years.
• Extended Repayment Plan: Payments increase every two years over 25 years.

What Is the Repayment Assistance Plan (RAP)?

The Repayment Assistance Plan (RAP) launches July 1, 2026. Starting in 2028, RAP becomes the default plan for most borrowers. Exceptions apply if you’ve enrolled in a grandfathered plan like SAVE or PAYE.

💰 Under RAP, monthly payments range from 1% to 10% of adjusted gross income (AGI). Minimum payment is $10. You get a $50 monthly deduction per dependent claimed on taxes.

RAP differs from other IDR plans. It uses your full AGI instead of discretionary income. This could mean higher payments for some borrowers, especially lower earners.

🗓️ Forgiveness under RAP takes 30 years. Much longer than the current 20-year timeline. Public Service Loan Forgiveness (PSLF) remains at 10 years.

RAP includes interest subsidies. If your payment doesn’t cover interest, excess interest won’t increase your balance. Principal subsidies are limited to $50 monthly.

Which Student Loan Repayment Plan Should You Choose?

Your finances and goals determine the best plan. Which statement resonates most with you:

• I want the lowest monthly payment possible.
• I want to pay the least interest possible.
• I want to qualify for Public Service Loan Forgiveness (PSLF).

Jump to the section matching your goal. We’ll examine pros and cons later.

I Want the Lowest Monthly Payment Possible

If you need the lowest payment, you have two options.

1️⃣ If your income is too low for Standard Repayment Plan payments, explore income-driven repayment options.

2️⃣ If you can afford Standard Plan payments but want them lower, consider a Graduated Repayment Plan.

Most borrowers fit the first situation. They can’t afford Standard Repayment Plan amounts due to limited income.

I Want to Pay Off My Loans Fast and Cheaply

Want to pay off loans quickly and minimize interest? Stick with the Standard Repayment Plan. The SRP has the shortest repayment period—just 10 years.

If you’re committed to tackling debt, pay extra toward principal monthly. Put windfall money toward your principal balance. Many people use tax refunds to make extra student loan payments.

I Want to Qualify for Student Loan Forgiveness

PSLF is the most popular forgiveness program. You must enroll in an income-driven repayment plan and work for a qualifying employer.

Other types of student loan forgiveness exist. Each has specific eligibility requirements you’ll need to meet.

Standard Repayment Plan (SRP): Pros and Cons

After graduation, you get six months before payments start. Federal student loans automatically enter the Standard Repayment Plan. This happens unless you choose a different plan.

The Standard Repayment Plan requires fixed monthly payments for 10 years. Every borrower qualifies for the SRP. You don’t need to apply unless you previously changed plans.

✅ Main benefits: You’ll pay off loans in 10 years. You’ll pay the least interest of any plan. Since loans automatically enter this plan, no extra effort needed.

❌ Main downside: You’ll have the highest monthly payment. If you can’t afford it, you risk missing payments. Falling behind comes with serious consequences.

Graduated Repayment Plan: Pros and Cons

All borrowers qualify for the Graduated Repayment Plan. Unlike Standard Repayment, your monthly payments increase over time. Payments start lower and increase every two years.

Your federal student loans are paid off within 10 years. Consolidated loans take 10–30 years to repay.

Federal student loans eligible for Graduated Repayment include:

• Direct subsidized and unsubsidized loans
• Subsidized and unsubsidized federal Stafford loans
• All PLUS loans
• All consolidation loans—Direct or FFEL

Not ideal for Public Service Loan Forgiveness seekers. Generally doesn’t qualify for PSLF.

Under Graduated Repayment, you’ll pay more over the loan’s life. Higher accruing interest in initial years causes this.

Extended Repayment Plan for Federal Student Loans

You qualify for Extended Repayment if you have these loans:

• Direct Loans* (subsidized and unsubsidized)
• Federal Stafford loans (subsidized and unsubsidized)
• PLUS loans (any)
• Direct Consolidation Loans or Consolidated FFEL loans

*Direct Loan borrowers need more than $30,000 in outstanding Direct Loans to qualify.

Under this plan, monthly payments are lower than Standard and Graduated plans. Since loans are paid off within 25 years, you’ll pay more overall.

You can choose fixed monthly payments for 25 years. Or start with lower payments that increase over time.

Income-Driven Repayment Plans: Pros and Cons

Four different income-driven repayment plans exist. They share common features:

• Monthly payment ties to your income and family size. You must recertify annually, even if nothing changes.
• After making payments for the full term, remaining balance gets forgiven. Term length varies by plan type.
• Your monthly payment is always lower than under the 10-year Standard Repayment Plan.

Here’s an overview of different IDR plans by payment and term.

Income-Based Repayment Plan (IBR Plan)

To qualify for Income-Based Repayment, you need high debt relative to income. Monthly payments equal 10% or 15% of discretionary income. Percentage depends on when you first borrowed.

Your repayment period is 20 or 25 years. Again, timing depends on when you received first federal loans.

Income-Contingent Repayment Plan (ICR Plan)

If you have Direct Loans (subsidized or unsubsidized), you qualify. Direct PLUS loans to students and Direct Consolidation Loans also qualify.

Monthly payments equal 20% of discretionary income. Or the amount you’d pay on a fixed 12-year plan, adjusted for income. Your loan servicer can explain what you’d pay under this plan.

Parent borrowers benefit from this plan. They don’t qualify for income-based repayment. Parents can access ICR by consolidating parent PLUS loans into Direct Consolidation Loans.

Pay As You Earn Repayment Plan (PAYE)

To qualify for PAYE, you must meet both requirements:

• You must be a new federal student loan borrower on or after Oct. 1, 2007.
• You must have received Direct loan disbursement on or after Oct. 1, 2011.

The Pay As You Earn Plan calculates monthly payments at 10% of discretionary income.

Saving on a Valuable Education Plan (SAVE)

The SAVE Plan decreases monthly payments compared to previous REPAYE. It increases the income exemption from 150% to 225% of poverty line.

Your monthly payment under SAVE is 5% of discretionary income for undergraduate loans. It’s 10% for graduate loans. A weighted average applies if you have both.

Forgiveness timeline: 10 years for low balance borrowers*, 20 years for undergraduate loans, 25 years for graduate loans.

*Low balance borrowers owe less than $12,000 in federal student loans.

If you’re married and file taxes separately, SAVE excludes spousal income.

Do Private Student Loans Qualify for Repayment Plans?

Federal student loan options are standardized by government. Private lenders back private student loans. The lender sets repayment terms.

If you have private student loans, your repayment plan is in your loan agreement. Can’t afford monthly payments? Call your lender about other repayment options.

If you qualify, you can refinance your loan. Get new terms like lower interest rates or payments. You usually need good credit to refinance.

Help! I Still Can’t Pay My Student Loans

If you’ve explored repayment plans but still struggle, bankruptcy might help. Bankruptcy is a legal process giving people a fresh start from debt.

Only certain federal student loans discharge in Chapter 7 bankruptcy. You must show they cause undue hardship. Meeting this standard is tough. In 2022, the U.S. Department of Justice and Department of Education streamlined the process. More borrowers can now qualify.

Want to explore bankruptcy options? You can speak with a bankruptcy attorney for free to understand if it’s right for your situation.