Student Loan Repayment Plans Compared

Federal student loans offer at least eight repayment plan options. Choosing the right one can save you tens of thousands of dollars — or cost you that much if you pick wrong. This guide compares every plan with real numbers so you can make an informed decision.

The Plans at a Glance

For a $35,000 loan balance at 5.5% interest:

• Standard Repayment: $380/month for 10 years. Total paid: $45,602.
• Graduated Repayment: Starts at $213/month, rises every 2 years to ~$639. 10-year term. Total paid: $48,900.
• Extended Repayment: $230/month for 25 years. Total paid: $68,820.
• SAVE Plan (IDR): Based on income. On $50k salary: ~$190/month. Forgiveness after 20 years.
• PAYE: 10% of discretionary income. On $50k: ~$240/month. Forgiveness after 20 years.
• IBR: 10-15% of discretionary income. On $50k: ~$240-$360/month. Forgiveness after 20-25 years.
• ICR: 20% of discretionary income or 12-year fixed. Forgiveness after 25 years.

Standard Repayment (10-Year)

Fixed payments over 10 years. The highest monthly payment but the lowest total cost. This is the default plan and the best option if you can comfortably afford the payment. You pay the least total interest and are debt-free the fastest.

Income-Driven Repayment Plans

All income-driven plans tie your payment to a percentage of your discretionary income (income above 150-225% of the federal poverty level). The key differences:

SAVE Plan (Replacing REPAYE)

The most generous IDR plan. Payments are 5% of discretionary income for undergraduate loans, 10% for graduate loans. Discretionary income calculated using 225% of poverty level (higher threshold = lower payment). The government covers unpaid interest, so your balance doesn't grow even if your payment doesn't cover the full interest charge. Forgiveness after 20 years for undergrad, 25 for graduate.

PAYE (Pay As You Earn)

Payments are 10% of discretionary income, capped at what you'd pay on the standard plan. Forgiveness after 20 years. Only available to newer borrowers (loans after October 2007 with disbursements after October 2011). Good middle ground between SAVE and standard.

When to Choose Standard Repayment

• You can comfortably afford the payment
• You want to pay the least total interest
• Your income is high relative to your loan balance
• You want to be debt-free in 10 years
• You're not pursuing Public Service Loan Forgiveness (PSLF)

When to Choose Income-Driven Repayment

• Your standard payment would take more than 10-15% of your gross income
• You're pursuing PSLF (need to be on IDR for qualifying payments)
• Your income is low relative to your debt — especially if debt exceeds annual salary
• You need flexibility while building your career or starting a family
• You're confident your balance will be forgiven before you'd finish paying it off

The PSLF Strategy

If you work for a government or non-profit employer, Public Service Loan Forgiveness eliminates your remaining balance after 120 qualifying payments (10 years) on an IDR plan. The optimal strategy: enroll in the SAVE plan for the lowest possible payments, make 120 payments while working in qualifying employment, and get the remaining balance forgiven tax-free. On $100,000 in loans, this can save $50,000-$80,000+.

The Tax Bomb Warning

IDR forgiveness (after 20-25 years, not PSLF) is currently treated as taxable income. If $50,000 is forgiven, the IRS considers that $50,000 income for that year. At a 22% tax rate, you'd owe $11,000 in taxes. Note: Through 2025, forgiven student loan debt is exempt from federal taxes under the American Rescue Plan, but this exemption may not be extended.

Bottom Line

Standard repayment is the cheapest option if you can afford it. Income-driven plans are essential for borrowers whose debt exceeds their income, and critical for anyone pursuing PSLF. Don't choose extended repayment — you pay far more interest without any forgiveness benefit. Run your specific numbers through a student loan calculator to compare total costs across plans.