Student Loan Repayment Options for Physicians

If you have private student loans, repayment options are typically set by each lender. Most plans have fixed monthly payments over a term.

Ryan Inman

25 min read
Last updated November 30, 2020

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There are two main groups of repayment options for federal or private student loans; Income-Driven and Non-Income Driven. Within each of these two main groups, there are many repayment plans for you to choose from, each with their own benefits.

Income-Driven Repayment Plans

This group includes the following repayment plans:

REPAYE
PAYE
IBR
ICR
ISR

Income Driven Repayment Plans are, as the name suggests, have payments that are based on your income. These repayment plans require an annual update, so as your income changes every year so will your payment. Depending on your income to loan ratio, some of the Income Driven Repayment Plans might not be available to you.

Borrowers working towards a forgiveness program, or whose income is low compared to their loan balance benefit the most from being on an Income Driven Repayment Plan. Most Residents and Fellows are on Income Driven Repayment Plans due to their fairly low income to loan ratio.

Non-Income Driven Repayment Plans

This group includes the following repayment plans:

Standard
Graduated
Extended
Perkins Loan Repayment
Private Student Loans
Loans for Disadvantaged Students Repayment Plan

Repayment plans that are not based on your income are based on the loan balance and rate. Each of these repayment plans has different rules for how the payment is calculated, and some offer a payment that starts small and gradually increases over time.

Income-Driven Repayment Plans

Income-Driven Repayment plans have payments that are based on your income.

Signing up for an Income-Driven Repayment Plan

To get on an Income-Driven Repayment Plan, there are a few steps you will need to take.

First, decide which Income-Driven Repayment Plan you would like to sign up for. These include REPAYE, PAYE, IBR, ICR, and ISR. Depending on the types of loans you have, some of these repayment plans might not be available to you without consolidating your loans first.

Once you have decided which Income-Driven Repayment Plan you would like to enter into, the next step is to either call your loan servicer or submit the form through the Federal Student Aid’s website. If you have parent PLUS loans or loans that are in default, you will not be able to use the online portal to begin repayment on an Income-Driven Repayment Plan.

You will be asked for financial information to complete your application. The financial information needed includes either:

Your last filed tax return, which can be pulled with their IRS data retrieval tool
A self-certified statement that you do not have an income
Other documentation of your current income, such as a paystub

If you are married, you will need to submit the financial information for yourself and your spouse. Your spouse will need to cosign on the application, however, this does not obligate them to repay the loan.

Annual Requirements on Income-Driven Repayment Plans

Once you sign up for an Income-Driven Repayment Plan, each year you will need to provide updated information about your income and family size. These changes can cause your payment to go up or down each year.

The Costs of Missing your Annual Update on an Income-Driven Repayment Plan

If you do not complete your annual update each year, your loan servicer will switch you over to the Standard Repayment Plan. This switch causes many borrowers to receive a bill that is higher than their normal monthly payment.

Not only will you be switched to the Standard Repayment Plan if you do not complete your annual update, but your interest will be capitalized as well. Through this process of interest capitalization, the outstanding interest balance is added to your principal balance. Once this happens, you then begin paying interest on the new balance, instead of the lower principal balance you had before.

Let’s say you had $50,000 of interest capitalize on your student loans, and you have a rate of 6%. Once that outstanding interest balance is added to your principal balance, your monthly interest charge would increase by $250.

Once interest capitalizes, it is irreversible. You will be able to switch back over to an Income-Driven Repayment Plan after making at least one monthly payment on the Standard Repayment Plan, but the long-term effects of interest capitalization should be avoided at all costs.

Revised Pay As You Earn (REPAYE)

Physicians are eligible for REPAYE when they fall within certain guidelines.

If you’re considering going the Public Service Loan Forgiveness (PSLF) route to pay off your student loans, you’ve probably already realized it’s a little more complicated than it first looks. Having your loans forgiven isn’t as easy as just filling out a couple of forms and choosing the right career path – you have to pick a specific repayment plan, which can save or cost you thousands depending on which you choose.

That choice is entirely personal and depends on factors like your marital status, how much your spouse earns, your income, and how much you owe overall. One of the newest options is REPAYE, an updated version of the Pay As You Earn (PAYE) plan. Here’s everything you need to know about choosing that path.

What is Revised Pay As You Earn (REPAYE)

REPAYE is a relatively new plan, first announced in 2015. It’s similar to the Pay-As-You-Earn (PAYE) plan, but REPAYE is available to about five million more borrowers than its older counterpart.

Payments under REPAYE are 10% of your adjusted gross income (AGI) minus 150% of the federal poverty guidelines, based on your family size and state of residence. If you earn less than 150% of the federal poverty guidelines, approximately $18,210 for one person, you’ll pay $0 each month.

A major perk of REPAYE is the interest subsidy provided by the government. When you use REPAYE, you often accrue interest faster than you pay it off. This interest collects and capitalizes on your loan.

But if you have subsidized loans, the government will help cover the extra interest – 100% for the first three years and 50% after. If you have unsubsidized loans, they’ll pay 50% of the interest. REPAYE is the only income-driven repayment plan that offers this interest subsidy.

REPAYE structures payments based on a 20-year term for undergraduate loans and 25 years for graduate or professional school loans. If you still have debt after your term has expired, the remaining balance will be forgiven.

You’ll owe taxes on the amount forgiven, which can equal thousands of dollars – or more – depending on the remainder. A graduate with $50,000 forgiven under REPAYE could have to pay an extra $12,500 to $15,000 on their taxes.

Who is eligible for Revised Pay As You Earn (REPAYE)?

Unlike PAYE, which has some restrictions on who is eligible, REPAYE is open to any borrower with Direct student loans. Direct student loans include Direct Subsidized and Unsubsidized Loans, student Direct PLUS Loans, and Direct Consolidation loans. Parent PLUS loans are not eligible for REPAYE.

PAYE requires you to be a first-time borrower, with the loan term starting on or after October 1, 2007, and the first loan disbursement on or after October 1, 2011. REPAYE has no such requirements.

Graduates with Federal Family Education Loans (FFEL) or Perkins loans need to consolidate into a Direct Consolidation loan in order to be eligible for REPAYE. Only consolidation through the federal government is accepted. If you consolidate with a private company, such asSoFi or LendKey, your loans will become private and no longer eligible for REPAYE.

With REPAYE, you don’t have to prove a financial hardship in order to qualify.

How Revised Pay As You Earn (REPAYE) works with PSLF

Public Service Loan Forgiveness (PSLF) is a government program that encourages graduates to work for public institutions or non-profits by forgiving their loans after 10 years of payments.

Because PSLF allows borrowers to choose an income-driven plan, many use that opportunity to lower their monthly payments while working for loan forgiveness. PSLF doesn’t report the amount forgiven as income, so borrowers don’t have to pay any extra taxes on that amount.

Doctors working in a public hospital or not-for-profit can use REPAYE while striving for PSLF – in fact, it might be their best option.

A pediatrician earning $120,000 a year with $450,000 in student loans at 4.25% interest will pay $849 a month. After 25 years, they’ll have paid $130,791 total and have $481,355 forgiven.

How interest works in Revised Pay As You Earn (REPAYE)

Interest on student loans accrues while you’re in repayment. If you choose an income-driven plan like REPAYE, it might accrue faster than you can repay it.

In that case, the federal government can cover the remaining interest. For the first three years, they’ll pay 100% of extra interest for subsidized loans and 50% for unsubsidized loans. After three years, 50% of any leftover interest will be covered.

The remaining interest will be capitalized or added to your original balance. If you finish your REPAYE term without going through PSLF, you’ll owe taxes on that capitalized interest.

To find out if you have a subsidized or unsubsidized loan, log on to your loan servicer’s website. You should see subsidized or unsubsidized next to the name of the loan. If not, call your issuer and ask.

Any income-driven repayment plan will cost you more in interest than the regular 10-year term, so take that into consideration when you’re deciding. It might be better to choose REPAYE at the beginning of your career while you’re just getting started and switch back to the standard plan once you can afford those payments.

Is Revised Pay As You Earn (REPAYE) Right for You?

A good rule of thumb for deciding if REPAYE is right for you is to compare your income to your debt. If you owe double or more than you currently earn, you’ll benefit from REPAYE – especially if you’re struggling to make your student loan payments every month.

One of REPAYE’s few downsides is that it counts spousal income toward your AGI, whereas other plans don’t. This will likely increase your monthly payments unless your spouse earns significantly less than you do.

A couple with one spouse earning $50,000 and another earning $30,000 with $45,000 in student loans will pay $464 a month, compared to $47 on the PAYE or IBR plan which excludes spousal income when couples file their taxes separately.

A single person with $75,000 in student loans and $25,000 in income will pay $58 a month, the same as they would under the PAYE or IBR plan. After 20 years of payments, they would have $103,047 forgiven, compared to $140,003 for the IBR or PAYE plans.

How much you save under REPAYE depends on your marital status, how much your spouse earns, your income, and how much you owe. Use the Department of Education’s repayment estimator to figure out the best option.

You can also contact an accountant or CPA to ask them what your tax liability might be if you choose REPAYE and have your loans forgiven. The cost might seem a bit prohibitive if you’re a new resident, but the expense of hiring a professional to guide you down the right path will end up paying for itself.

A qualified fee-only financial planner can also help decide if REPAYE is the best option for you and your personal situation or if another repayment plan will suit your needs better. They can also show you how to lower your AGI and get a smaller monthly payment if you’re pursuing PSLF with REPAYE.

Pay As You Earn (PAYE)

Finding out if you’re eligible for the Pay As You Earn (PAYE) student loan repayment plan begins here.

The world of student loan repayment can be cruel and unforgiving. Lenders don’t tend to care how hard it is for you to make your monthly payments, and will only consider a more lenient structure if you’re in serious danger of defaulting.

Because of that, too many young doctors and other professionals spend the majority of their youths living on a shoestring budget, barely squeaking by each month as they juggle their job and other responsibilities. Things may get easier as they progress in their careers and begin to earn more, but that’s little consolation for someone who spent their 20s eating ramen noodles and sleeping on a futon.

That’s why income-based repayment plans are a godsend for so many people. If you have the right kind of loans, these plans are essentially guaranteed to offer you a repayment structure that works with your income. They’re also compatible with those seeking Public Service Loan Forgiveness (PSLF).

Pay As You Earn (PAYE) is one of the most popular income-based plans. Here’s what you should know about going down that path.

What is Pay As You Earn (PAYE)?

PAYE is one of the few income-based repayment options offered by the Department of Education. Only federal student loans are eligible for income-based plans such as PAYE.

Under PAYE, monthly payments are limited to 10% of your discretionary income, which is the difference between your adjusted gross income and 150% of the poverty guidelines. Adjusted gross income refers to your annual salary minus retirement, 529, HSA, and other contributions.

PAYE is designed for borrowers who have a high debt-to-income ratio. It guarantees that your payments will never be larger than they would be under the 10-year plan.

Every year, the government recalculates your monthly PAYE amount, which can change depending on your new AGI, family size, and location. If you just got a big raise, for instance, your payment will increase.

PAYE doesn’t take your spouse’s income into consideration, as long as you file taxes separately – a huge bonus if you have a low-paying job and your partner is a high earner.

After 20 years of payments, the remaining loan balance is forgiven. Borrowers will still have to pay taxes on that amount, which can be a substantial sum.

PAYE differs from other repayment plans, such as Income-Contingent Repayment, in that it counts your discretionary income as 150% of federal poverty guidelines minus your adjusted gross income. ICR counts it as 100%, which means PAYE gives you a smaller monthly payment. On a $50,000 loan with a $25,000 salary, that could be a $100 difference each month.

Who’s eligible for Pay As You Earn (PAYE)?

Only those with the following types of federal loans are eligible for the PAYE plan:

Direct Subsidized and Unsubsidized Loans
Direct PLUS loans made to students
Direct Consolidation Loans not including Parent PLUS loans

If you have FFEL or Perkins loans, you can consolidate them through the federal government to create a Direct Consolidation Loan. Only then will your loans be eligible for PAYE.

Qualified applicants must have a loan term starting after October 1, 2007, and have received their first loan on or after October 1, 2011. If you refinanced or consolidated your federal loans with a private company, those loans are no longer eligible for PAYE or any other repayment option.

How Pay As You Earn (PAYE) works with PSLF

Public Service Loan Forgiveness is a program in which borrowers can get their federal student loans forgiven after 10 years of payments. They have to work for an eligible employer, either the government or a not-for-profit organization.

Because PSLF requires 120 payments, most people end up switching from the standard 10-year repayment plan to an income-based option with a 20 or 25-year term. The longer repayment plan gives them lower monthly payments while still allowing them to pursue PSLF.

The amount forgiven under PSLF isn’t considered to be taxable income, so there’s no penalty for making the smallest payment possible. Borrowers working toward PSLF should choose the smallest monthly payment available to them, which will often be PAYE.

How Interest Works in Pay As You Earn (PAYE)

All student loans given from the federal government accrue interest while the borrower is in repayment. Because PAYE is an extended plan, interest accrues faster than under the normal 10-year plan that most graduates stick with. When you choose a longer plan, you end up paying more in interest overall, because interest continues to accrue on the balance even while you’re making payments.

The difference can be staggering. A resident making $60,000 a year for 3 years (then $200,000 a year once they’re attending) with $150,000 in student loans at 6.8% interest will end up paying $207,144 on the standard repayment method. A PAYE borrower would pay $321,094, about $113,950 more in total.

Is Pay As You Earn (PAYE) Best for You?

Choosing PAYE while aiming for PSLF is a great option for people with high loan balances. It allows them to have more manageable student loan payments without getting stuck with a huge tax bill at the end. Mixing PAYE with PSLF is a match made in heaven.

If you’re not going the PSLF route and want to figure out if PAYE is best for you, plug your information into the Department of Education’s Repayment Estimator, which will show how much your monthly payment, the total amount paid and the total amount forgiven will be under each plan. If you’re not applying for PSLF, remember to factor in how much you’ll owe on your taxes for the forgiven loan balance.

An easy way to tally that number is to multiply 25%-30% of the sum forgiven. If your remaining balance after 20 years is $30,000, then your tax liability will be between $7,500 and $9,000. A tax accountant or CPA could give you a better estimate. Compare the total amount paid with how much you’ll save and see if the difference is significant.

Borrowers who use the PAYE program without PSLF will end up paying more in interest overall like they would with other extended income-based programs. If you’re on the fence about whether or not to choose PSLF, remember to take this into consideration.

Choosing PAYE simply because you want lower payments can be a gamble. You’ll owe thousands on your taxes once the loans are forgiven, which could be a nasty shock if you’re used to getting a tax refund. It also means you’ll be in debt for double the time that you would be if you stuck with the standard 10-year term.

PAYE works well for those who need the option of lower payments, like people supporting a family or living in an expensive city. If that describes your situation, apply for PAYE, and switch back to the regular plan once you can afford to pay more. This way, you’ll be safe from missing payments or defaulting on your loan. You can also pay less interest than if you used PAYE for the entirety of your loan balance.

If you’re not sure if PAYE is right for you, do the math and see what your options look like. Make sure to consider your future financial obligations and don’t do just what’s best in the short term.

Income Based Repayment (IBR)

Finding out if you’re eligible for Income-Based Repayment or (IBR) for your student loans begins with you.

Taking out federal student loans is pretty easy. After filling out the necessary paperwork, you’ll likely have your education fully funded within weeks. It’s almost scary how easy it is for a prospective student to take on hundreds of thousands of dollars in debt without realizing the implications.

Repaying those loans is a lot more complicated, and it can be especially difficult for student physicians and residents to navigate that process while dealing with the stressful lifestyle of a budding medical career.

There are a handful of repayment plans available to those with federal student loans, each with their own benefits, drawbacks, and considerations for those who also want to pursue Public Service Loan Forgiveness (PSLF). Depending on your current income, job status, and the type of loans you have, choosing the right repayment plan could save you a significant amount.

Income Based Repayment is one such plan – here’s everything you need to know about pursuing that route.

What is Income Based Repayment (IBR)?

IBR is a repayment plan offered by the Department of Education for students with federal loans. Private loans or federal loans that have been refinanced to a private company are not eligible for IBR. If you have a mix of federal loans and private loans, you can still use IBR with the federal loans.

Graduates with a loan term starting before July 1, 2014, pay 15% of their discretionary income, which equals the difference between your adjusted gross income (AGI) and the federal poverty guideline. The federal poverty guidelines are based on your family size and where you live.

AGI is the sum of your income minus contributions made to your retirement account, HSA, and 529 plan. If you have a traditional 401k, any money you put there will decrease your AGI and therefore how much you pay every month.

Payments are never more than they would be under the 10-year standard plan and are recalculated every year. If your income, family size, or location has changed, your payment will likely also change.

Borrowers who took out loans on or after July 1, 2014, pay 10% of their discretionary income. This change from 15% to 10% occurred in 2010 when President Obama signed the new repayment plan into law.

Any remaining loan balance is forgiven after 20 years for undergraduate loans and 25 years for professional or graduate loans. The amount forgiven is considered to be taxable income by the IRS, so borrowers should factor that in when choosing IBR. If you have $250,000 forgiven through the IBR program, you could pay between $62,500 and $75,000 in taxes alone – although you don’t have to pay that tax bill all at once. The IRS usually lets people set up payment plans if they can’t afford what they owe.

The government only includes your spouse’s income in your AGI if you file taxes jointly. If you have student loans and make significantly less than your partner, consider filing your taxes separately to get the benefits of IBR.

Who is eligible for Income Based Repayment (IBR)?

Students with the following loans are eligible for IBR:

Direct Subsidized and Unsubsidized loans
Subsidized and Unsubsidized Federal Stafford loans
Direct Consolidation loans
Direct and FFEL PLUS loans

Parents with PLUS loans can’t apply for IBR or other income-driven plans. Borrowers with Family Federal Education Loans (FFEL) or Perkins loans must consolidate those loans into a Direct Consolidation loan to gain access to IBR.

Graduates should make sure they’re using the federal government to consolidate and not a private company. Only the Department of Education can consolidate your loans if you wish to remain eligible for IBR.

Borrowers interested in IBR need a high debt-to-income ratio to qualify, a requirement that not all repayment plans have. There are no official DTI ratio criteria, but IBR is best for those with large loans and smaller incomes. IBR has no limit on the amount of loans that may be forgiven.

If you’re unsure if your loans currently qualify, call your loan provider and ask them if you’re eligible for IBR.

How Income Based Repayment (IBR) works with PSLF

Public Service Loan Forgiveness (PSLF) is a federal program that forgives student loans after 120 payments. To remain eligible, borrowers must work for the government or a non-profit while they’re making payments – private practices and private hospitals are ineligible.

PSLF allows graduates to choose what kind of payment plan they want, including IBR and other income-driven plans. Borrowers should choose the lowest monthly payment available so they can pay as little on their loans as possible. The balance forgiven is not taxable, so there’s no drawback to paying less.

A pediatrician making $115,000 a year with $400,000 in student loans at 6.8% interest will pay $808 a month under IBR. After 10 years, they’ll have $547,498 forgiven, having paid $124,502 in total. In this scenario, IBR and PAYE are their best options for paying the smallest amount possible.

The figures change as you earn more. A dermatologist making $400,000 a year with $350,000 in student loans will pay $453,214 total under IBR and have $52,568 forgiven. If they chose income-contingent repayment (ICR), they’d only pay $415,140 total. However, their initial payments under ICR would be $6,466 or more than double what their payment would be at first under IBR.

In this case, the physician needs to decide if the $38,074 total difference is worth paying more upfront. Some doctors fresh out of med school are starting families, buying houses, and setting up retirement accounts so paying $6,000 a month in student loan bills is not feasible. This is a personal decision that only the borrower can make.

How Interest Works in Income Based Repayment (IBR)

Just like with all other repayment plans, interest accrues while you’re on Income-Based Repayment (IBR). Because IBR is an extended plan, interest accrues faster than under the normal 10-year plan that most graduates stick with. When you choose a longer plan, you end up paying more in interest overall, because interest continues to accrue on the balance even while you’re making payments.

Is Income Based Repayment (IBR) best for you?

IBR works best when it’s paired with PSLF since the borrower can focus on making small payments without worrying about taxes. Every year, graduates who get their debt forgiven through IBR without using PSLF are shocked when they get a huge tax bill in April. If you’re considering IBR as a physician, it’s best to pair it with PSLF to reduce your tax burden.

Deciding between IBR and other income plans depends on how much you can afford to pay now, as well as how old your loans are.

If you have $350,000 in student loans and make $200,000 a year, you’ll pay roughly $560,000 in total on your loans if you stay on IBR.

If you go on the Pay As You Earn Repayment Plan, you’ll pay around $465,000 on your loans, and have just over $225,000 forgiven on the time-based forgiveness program.

The payment difference between these scenarios is roughly $700 a month – $2,261 for IBR and $1,507 for PAYE Borrowers. However, by having newer loans, or consolidating your loans, and getting on the PAYE repayment plan, you could save $95,000.

Standard Repayment

Some borrowers don’t want the uncertainty of Income-Driven Repayment Plans such as REPAYE, PAYE, and IBR. These repayment plans are great if you need a lower monthly payment or if you are pursuing Public Service Loan Forgiveness (PSLF). Depending on your current income, the Income-Driven Repayment Plans might be the only repayment plan with a monthly payment that fits in your monthly budget.

If your loan to income ratio is low – you might benefit from the Standard Repayment Plan.

What is the Standard Repayment Plan?

The Standard Repayment Plan is one of the repayment plans offered by the Department of Education for students with federal student loans.

The structure of the Standard Repayment Plan is just like the structure of payments with private student loans, you pay the same monthly payment for a certain number of years and then one day the loan is paid off. For the Standard Repayment Plan, the term is almost always 10 years.

There are no loan disbursement date requirements for this repayment plan, as there are with many of the income-driven repayment plans. Also, you won’t have to verify your income to enroll.

Who is eligible for Standard Repayment?

Students with the following loans are eligible for the Standard Repayment Plan:

Direct Subsidized and Unsubsidized loans
Subsidized and Unsubsidized Federal Stafford loans
Direct Consolidation Loans (Direct or FFEL)
PLUS loans

Borrowers with Family Federal Education Loans (FFEL) or Perkins loans must consolidate those loans into a Direct Consolidation loan to gain access to the Standard Repayment Plan.

How Standard Repayment works with PSLF

PSLF allows graduates to choose what kind of payment plan they want, as long as it is an Income-Driven Repayment Plan. The Standard Repayment Plan does not qualify for Public Service Loan Forgiveness.

A commonly held misconception is that this repayment plan qualifies for Public Service Loan Forgiveness, but it does not. However, if you are on an Income-Driven Repayment Plan with a payment cap of the 10-year standard repayment plan your monthly payment would actually be the same as on the Standard Repayment Plan and would qualify for Public Service Loan Forgiveness.

How Interest Works in Standard Repayment

Just like with all other repayment plans, interest accrues while you’re on the Standard Repayment Plan. Your monthly payment will be high enough to cover the accruing interest and pay down the principal balance over time.

Is Standard Repayment best for you?

The Standard Repayment Plan works best when your loan to income ratio is low. For residents and fellows with six-figure student loan debt, the monthly payment on the Standard Repayment plan is typically too high. In some cases, the monthly payment on this repayment plan is higher than a resident’s entire net pay for a month.

When deciding if the Standard Repayment plan is right for you, consider your desire to pursue Public Service Loan Forgiveness, if the monthly payment fits in your budget, and if you should refinance your federal student loans into private student loans.

Borrowers who are on the Standard Repayment Plan could benefit from refinancing their student loans into private student loans by securing a lower rate and monthly payment.

Graduated Repayment

The Graduated Repayment Plan hardly ever makes sense for a physician to use, however, there are a few rare cases where it does benefit borrowers.

With this repayment plan, your monthly payment starts out small and increases every two years. If you need a lower monthly payment for a few years and are comfortable with a higher payment in later years, this repayment plan could work for you. Before considering this repayment, check to see if your monthly payment would be lower on an Income-Driven Repayment Plan.

What is the Graduated Repayment Plan?

The Graduated Repayment Plan is one of the repayment plans offered by the Department of Education for students with federal student loans.

Payments on the Graduated Repayment Plan start out small, sometimes lower than the payment on an Income-Driven Repayment Plan. These payments increase every two years, growing by a high enough amount to ensure that the loans on this repayment plan are paid off within the Repayment Period defined by the chart below.

If you owe less than…	Your Repayment Period is
$7,500	10 Years
$10,000	12 Years
$20,000	15 Years
$40,000	20 Years
$60,000	25 Years
More than $60,000	30 Years

There are no loan disbursement date requirements for this repayment plan, as there are with many of the income-driven repayment plans. Also, you won’t have to verify your income to enroll.

Who is eligible for Graduated Repayment?

Students with the following loans are eligible for the Graduated Repayment Plan:

Direct Subsidized and Unsubsidized loans
Subsidized and Unsubsidized Federal Stafford loans
Direct Consolidation Loans (Direct or FFEL)
FFEL PLUS Loans
PLUS loans

Borrowers with Family Federal Education Loans (FFEL) (excluding FFEL PLUS Loans) or Perkins loans must consolidate those loans into a Direct Consolidation loan to gain access to the Graduated Repayment Plan.

How Graduated Repayment works with PSLF

PSLF allows graduates to choose what kind of payment plan they want, as long as it is an Income-Driven Repayment Plan. The Graduated Repayment Plan does not qualify for Public Service Loan Forgiveness.

How Interest Works in Graduated Repayment

Interest is charged on your student loans while you are in repayment under the Graduated Repayment Plan. Your monthly payment will always be high enough to ensure that the accruing interest is paid each month and does not add to your balance.

Is Graduated Repayment best for you?

The Graduated Repayment Plan rarely is the best option for borrowers. However, if you need a lower monthly payment for a few years, and then are comfortable with a higher payment in later years, this repayment plan could work for you. You will typically pay more on this repayment plan than on the Standard Repayment plan because you are not paying down as much the loan earlier in the repayment period, causing more interest to accrue.

Before considering this repayment, check to see if your monthly payment would be lower on an Income-Driven Repayment Plan. With Income-Driven Repayment Plans, you may be able to obtain a comparable monthly payment but receive interest subsidies to help keep your balance low while you need a lower monthly payment.

Extended Repayment

The Extended Repayment Plan is a combination of the Standard Repayment Plan and the Graduated Repayment Plan, however, it typically offers lower monthly payments over a longer period of time.

With this repayment plan, your payment can be a fixed or graduated amount for up to 25 years.

What is the Extended Repayment Plan?

The Extended Repayment Plan is one of the repayment plans offered by the Department of Education for students with federal student loans.

Payments on the Extended Repayment Plan can be a fixed amount, meaning you pay the same monthly payment for a number of years or can be graduated and start out small and increase every 2 years.

There are no loan disbursement date requirements for this repayment plan, as there are with many of the income-driven repayment plans. Also, you won’t have to verify your income to enroll.

Who is eligible for Extended Repayment?

Students with the following loans are eligible for the Extended Repayment Plan:

Direct Subsidized and Unsubsidized loans
Subsidized and Unsubsidized Federal Stafford loans
Direct Consolidation Loans (Direct or FFEL)
FFEL PLUS Loans
Direct PLUS loans

How Extended Repayment works with PSLF

PSLF allows graduates to choose what kind of payment plan they want, as long as it is an Income-Driven Repayment Plan. The Extended Repayment Plan does not qualify for Public Service Loan Forgiveness.

How Interest Works in Extended Repayment

Interest is charged on your student loans while you are in repayment under the Extended Repayment Plan. Your monthly payment will always be high enough to ensure that the accruing interest is paid each month and does not add to your balance.

Is Extended Repayment best for you?

The Extended Repayment Plan rarely is the best option for borrowers. Compared to other repayment plans that offer lower monthly payments, such as the Graduated Repayment Plan or an Income-Driven Repayment Plan, this repayment plan typically has one of the highest total out of pocket costs to pay off your student loans.

Income-Contingent Repayment (ICR)

The Income-Contingent Repayment (ICR) Plan is one of the Income-Driven Repayment Plans offered by the Department of Education for students with federal student loans.

This is the only Income-Driven Repayment Plan available for borrowers with parent PLUS loans; if they consolidate their loans into a Direct Consolidation Loan.

What is the Income-Contingent Repayment Plan?

The monthly payment on the Income-Contingent Repayment Plan is the lesser of 20% of your discretionary income or what you would pay on a repayment plan with a fixed monthly payment over 12 years.

The Income-Contingent Repayment Plan has the highest monthly payment out of all of the Income-Driven Repayment Plans.

After 25 years on the Income-Contingent Repayment Plan, your loans can be forgiven through a taxable time-based forgiveness program.

There are no loan disbursement date requirements for this repayment plan, as there are with many of the income-driven repayment plans. Also, you won’t have to verify your income to enroll.

Who is eligible for Income-Contingent Repayment?

Students with the following loans are eligible for the Income-Contingent Repayment Plan:

Direct Subsidized and Unsubsidized loans
Direct Consolidation loans
Direct PLUS loans made to students

Borrowers with parent PLUS loans must consolidate those loans into a Direct Consolidation loan to gain access to the Income-Contingent Repayment.

Graduates and parent borrowers should make sure they’re using the federal government to consolidate and not a private company. Only the Department of Education can consolidate your loans if you wish to remain eligible for the Income-Contingent Repayment.

How Income-Contingent Repayment works with PSLF

PSLF allows graduates to choose what kind of payment plan they want, as long as it is an Income-Driven Repayment Plan. The Income-Contingent Repayment Plan is a qualifying repayment plan for Public Service Loan Forgiveness.

How Interest Works in Income-Contingent Repayment

Interest is charged on your student loans while you are in repayment under the Income-Contingent Repayment Plan. Your monthly payment could be lower than the monthly interest charge if your income is low compared to your loan balance, causing your loans to grow over time even if you are making a payment.

Is Income-Contingent Repayment best for you?

The Income-Contingent Repayment Plan is a good option for parents who took out PLUS loans for their children, and are pursuing Public Service Loan Forgiveness. Even though the payment is 20% of your income, some borrowers could save money by pursuing a forgiveness program for the loans they took out for their children.

Income-Sensitive Repayment (ISR)

The Income-Sensitive Repayment (ISR) Plan is one of the Income-Driven Repayment Plans offered by the Department of Education for students with federal student loans. It is primarily for borrowers with FFEL PLUS Loans and FFEL Consolidation Loans.

What is the Income-Sensitive Repayment Plan?

This repayment plan is for borrowers with FFEL loans, and because FFEL loans are owned by commercial lenders, not the federal government, each lender can have different rules for repayment.

The monthly payment on the Income-Sensitive Repayment Plan is determined by a formula that can vary from lender to lender. It is based on your annual income, but must ensure your loan will be repaid within 15 years.

Who is eligible for Income-Sensitive Repayment?

Borrowers with the following loans are eligible for the Income-Sensitive Repayment Plan:

Subsidized and Unsubsidized Federal Stafford Loans
FFEL PLUS Loans
FFEL Consolidation Loans

How Income-Contingent Repayment works with PSLF

PSLF allows graduates to choose what kind of payment plan they want, as long as it is an Income-Driven Repayment Plan. The Income-Sensitive Repayment is only for FFEL Program loans which are not eligible for Public Service Loan Forgiveness.

How Interest Works in Income-Sensitive Repayment

Interest is charged on your student loans while you are in repayment under the Income-Sensitive Repayment Plan. Your

Is Income-Sensitive Repayment best for you?

The Income-Sensitive Repayment Plan is a good option for borrowers with FFEL PLUS Loans or FFEL Consolidation Loans. However, you should check with your loan servicer to see what their repayment terms are before signing up for this repayment plan.

Perkins Loan Repayment

Perkins loans have special repayment terms compared to other federal student loans. Schools could no longer make new Perkins loans as of September 30, 2017, so students can no longer receive Perkins loans.

If you have Perkins loans, your school defines the repayment terms and you will need to reach out to them to begin repayment. Many schools offer a fixed monthly payment over a few years, based on the size of the loan.

Perkins loans have a nine-month grace period, compared to the normal six month grace period of other federal student loans.

Loans for Disadvantaged Students Repayment

Loans for disadvantaged students have unique repayment guidelines.

After you graduate or lose full-time status, repayment begins after a one year grace period. There are extensions to this grace period if you are Active duty, a Peace Corps volunteer, or in advanced professional training (such as a residency and fellowships). Interest accrues during periods of in-school and deferment during a grace period, but no payment is due.

Once repayment begins, your repayment plan will follow these guidelines:

Payments at least once a quarter
Follow a fixed or graduated installment plan
Have a minimum monthly payment of $40
Be over a period of 10 to 25 years

Loans for disadvantaged students can be consolidated into a Direct Consolidation Loan to obtain access to forgiveness programs, Income-Driven Repayment Plans, and other federal student loan benefits. Once consolidated, borrowers lose access to the repayment terms that are specific to loans for disadvantaged students.

These loans can be canceled at the death or total and permanent disability of the borrower.

Paying Back Private Student Loans

If you have private student loans, repayment plans are typically set by each lender. Most of these repayment plans have fixed monthly payments over a set term, such as 5 years.

Lenders such as SoFi offer residency private student loan repayment plans that offer a $100 monthly payment while you’re in residency, with no interest compounding until you are attending. These tiered monthly payment schedules help free up cash while in residency that can be used for building an emergency fund. If you sign up for one of these repayment plans, be sure to know what your monthly payment will be after your residency ends.

Once you are in repayment on a fixed monthly payment repayment plan, you could lower your rate and monthly payment by refinancing your student loans into a new private student loan.