Preparing For Student Loan Repayment

Are you ready to add your student loan payments into your budget? Prepare using these helpful tips.

Managing student loan payments can feel overwhelming, especially with competing financial goals – like building an emergency fund, buying or maintaining a vehicle, or paying off other debt. Whether you’re just starting your repayment journey or looking to optimize your current plan, taking a proactive approach now can help you stay on track and reduce stress.

Here are a few practical steps to help you prepare for and manage your student loan repayment with confidence.

What You Can Do To Prepare

Know Your Loan Details

Before you can create a repayment strategy, it’s essential to understand the details of your student loan. Knowing who your servicer is, how much you owe, your interest rate, and your payment start date will help you make informed decisions and avoid missed deadlines.

You can find everything you need to know by logging in to the Federal Student Aid website using your FSA ID. If you don’t already have an account, you can create one or if you’re having trouble logging in, you can call 800.4.FED-AID.

Research Your Options

Repayment Plans

There’s a good chance your current financial situation looks different than it did a few years ago – maybe you’ve changed jobs, relocated, started a family, or taken on new expenses. The good news is whether you selected or were assigned your repayment plan, you can change it at any time.

The best place to start when deciding on a repayment plan is the U.S. Department of Education’s Loan Simulator. This tool will tell you which repayment options your eligible for, your estimated monthly payment, and how much you’d be paying overall.

Here’s a brief rundown of the different repayment plans available:

1. Standard Repayment Plan:

All borrowers are eligible for this plan; payments are fixed and will be made over a ten-year period. You’ll usually pay less over time than on other plans but if you’re seeking Public Service Loan Forgiveness (PSLF) this is NOT a good option for you.

2. Graduated Repayment Plan:

All borrowers are eligible for this plan; payments are lower at first and then increase every two years over a ten-year period. This is a good option if you want smaller payments up front, but keep in mind you’ll pay more in interest than with the standard plan.

3. Extended Repayment Plan:

To qualify for this plan, you must have more than $30,000 in outstanding Direct Loans or FFEL Program loans. Payments may be fixed or graduated, and will be paid over a 25-year period. Your monthly payments will be lower but you’ll pay more in interest than with the first two plans.

4. Income-Driven Repayment (IDR) Plans:

There are four IDR plans that can lower your monthly payment based on your income and family size, with any remaining balance forgiven at the end of the repayment period. These options can help protect against pay cuts, furloughs, and unemployment, giving you the opportunity to adjust your monthly payment – sometimes to as little as zero if your income is low enough.

Each plan has it’s own eligibility constraints, involves an application process, and requires you to recertify your income and family size annually.

• • Saving on a Valuable Education (SAVE) Plan, as of Feb 2025, is under a federal court injunction preventing the U.S. Department of Education from implementing its provisions. Borrowers currently enrolled in the plan have been placed in a general forbearance – during which no payments are due and no interest accrues. Loan servicers anticipate that accurate payment calculations will resume sometime in September 2025.

• • Pay As You Earn (PAYE) Repayment Plan is best for those who don’t expect their income to increase; it’s also an eligible repayment plan for those seeking to qualify for Public Service Loan Forgiveness. But the biggest difference from the other plans is that it caps your monthly payment amount at 10% or 15% of your discretionary income depending on when you received your loan.  

• • Income-Based Repayment Plan is unique because its features change depending on if you took out your loan before or after July 1, 2014. If you borrowed before that date, payments cap at 15% of your discretionary income and your loan is forgiven after 25 years. After that date, the numbers improve, decreasing to 10% and 20 years. 

• • Income-Contingent Repayment Plan costs more each month than other IDR plans but is the only Income-Driven Repayment Plan for Direct Plus or FFEL Loans and Direct or FFEL Consolidation Loans made to parents.

For the latest information regarding court actions that paused portions of the various IDR plans, please visit Federal Student Aid website.

Temporary Relief

If you’re in a financial bind and can’t afford your student loan payments, you may qualify for a deferment or forbearance. Both can postpone your student loan payments helping you to avoid student loan default. However, these are meant to be short-term solutions and can have drawbacks – for example, you’ll likely see interest still accrue and any progress toward loan forgiveness will stop.

Contact your loan servicer to discuss deferment or forbearance as well as other repayment plans to find out which is the better option for you.

Student Loan Forgiveness

In certain situations, you can have your federal student loans forgiven, canceled, or discharged. This means you won’t have to pay back some or all of your loans. The two most common routes for forgiveness are Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment (IDR) forgiveness.

Save With Auto Pay

One benefit you’ll like the most from setting up auto pay for your student loans is that all federal loan servicers and most private lenders will provide a 0.25% discount on your interest rate – saving you money. Automatic payments can also help ensure on-time payments, which can help boost your credit score.

Anything to do with your student loan payment is handled by your loan servicer. To set up auto pay, you’ll need to sign in to your account or contact them directly.

Summary

Successfully managing student loan repayment starts with preparation. By understanding your loan details, exploring repayment options, and staying up to date on policy changes, you can take control of your financial future. No matter your current situation, taking small, informed steps today can lead to long-term progress and peace of mind.