Federal Student Loan Repayment Programs

The office of Federal Student Aid, a division of the US Deptartment of Education, provides more than $114 billion in financial aid (the large majority of student loans) each year.

They are likely your first stop in funding your education, and, if you qualify, often offer the best options for student loans. If you’re wondering where federal loans come from, check out this overview from U.S. News & World Report.

As a critical budgetary concern within the Department of Education, the Office of Federal Student Aid’s operations are highly regulated and affected by the economic climate and other factors. Despite these constraints, it is a major pathway for millions of students to achieve their higher education goals, with several different options for loan repayment. Here’s an overview of the different repayment programs available for federal student loans.

Programs to repay your federal student loan

Standard and Extended Repayment

Upon graduation, federal loan borrowers have a six-month grace period before their first loan payment is due. If they don’t take action, they’ll default into the ten-year standard repayment plan. This means they’ll make the same payment every month for ten years, after which the loan willbe completely paid off. Ten years is the shortest standard repayment term for federal student loans. If borrowers want a longer term, they must meet balance thresholds to qualify forthe Extended Repayment Plan. With the Extended Repayment Program, borrowers can qualify for a term of up to 25 years. For more information, visit the Federal Student Aid website at studentaid.gov/repay.

Income-Driven Repayment (IDR)

Income-Driven Repayment was introduced to provide borrowers with options other than forbearance when they have trouble making monthly payments. These plans set the borrower’s payments based on their adjusted gross income and family size – not how much they owe. IDR plan details include:

IDR Comparison Chart

Public Service Loan Forgiveness (PSLF)

PSLF allows borrowers employed at non-profits and government entities to have their Federal Direct Loans forgiven after ten years of income-driven payments, entirely tax-free. There are a number of misconceptions about PSLF. One is that borrowers need to “sign up” or “commit” to the program. In reality, to receive PSLF, borrowers only need to meet the program requirements.

While pursuing PSLF doesn’t require an application, borrowers must have an Employment Certification Form (ECF) filled out by each employer before they can qualify for the program and have their loans forgiven. When pursuing PSLF, it’s best practice for borrowers to complete an ECF annually and when they change employers. The ECF notifies the Department of Education that a borrower plans on pursuing loan forgiveness. Submitting the ECF could also trigger a transfer of the loans to Fedloan Servicing. For more information, go to the Federal Student Aid website at studentaid.gov/publicservice.

What to do if you’re having trouble repaying federal student loans

If you’re having trouble making payments, consider switching to an IDR plan. Depending on your adjusted gross income and family size, your payment could be as low as $0. Getting on an IDR plan also means getting on the path to student loan forgiveness.

If you’re interested in finding repayment and forgiveness options that work for you, consider connecting with a student loan expert. Laurel Road student loan specialists can provide forgiveness counseling and help you come up with a personalized plan. For some, lowering their monthly payments through student loan refinancing might be the way to meet financial goals. Depending on the loan terms, you may be able to save on interest and pay down debt faster. However, keep in mind that if you refinance your federal student loans with a private lender, you’ll lose access to federal student loan benefits like IDR, forbearance, deferment, and PSLF. So be sure to do your research to make the best decision for you.