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How to Pay Federal Student Loans
Updated On September 14, 2022
Editorial Note: This content is based solely on the author's opinions and is not provided, approved, endorsed or reviewed by any financial institution or partner.
If you want to know how to pay federal student loans, you have several options for student loan repayment. Your financial goals, financial situation, student loan interest rate and student loan balance also may help determine the best way for you to pay federal student loans.
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Here’s how to pay federal student loans:
- Standard repayment plan
- Income-driven repayment plans
- Student loan consolidation
- Student loan forgiveness
- Refinance student loans
- Frequently asked questions
Standard Repayment Plan
When you pay federal student loans, the standard repayment plan may be your first option. The standard repayment plan has fixed monthly student loan payments for 10 years. Your federal student loans may have a grace period for six months before your start the process to pay federal student loans. After the grace period ends, you could use the standard repayment plan. The advantage of the standard repayment plan is that you have a fixed monthly payment, so you will know each month how much you will owe. Another advantage of the standard repayment plan is that you can pay off federal student loans in 10 years, which can save you interest. The disadvantage is that you may pay a higher monthly payment compared to other federal student loan repayment options.
Read: How to pay off $100,000 of student loans
Income-driven repayment plans
If you want to know how to pay federal student loans, an income-driven repayment plan can help lower your monthly payment. An income-driven repayment plan sets your monthly student loan payment based on your discretionary income and family size. Unlike the standard repayment plan, an income-driven repayment plan gives you 20 to 25 years to pay federal student loans.
There are four income-driven repayment plans:
- Income-Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Contingent Repayment (ICR)
Importantly, your monthly student loan payments can vary depending upon which income-driven repayment plan you choose. Therefore, compare income-driven repayment plans to find the best one for you.
After 20 years (undergraduate student loans) or 25 years (graduate student loans), you can get student loan forgiveness on your remaining federal student loan balance.
Student loan consolidation
Student loan consolidation is another tool that can be used to pay off federal student loans. What is student loan consolidation? Federal student loan consolidation helps you to combine your current federal student loans into a new, single, federal student loan called a Direct Consolidation Loan.
With a Direct Consolidation Loan, you will only have to make one monthly student loan payment, have one interest rate and one student loan servicer. A Direct Consolidation Loan also can convert FFELP Loans and Perkins Loan into a Direct Loan, which can make you eligible for various federal student loan forgiveness programs.
When you consolidate federal student loans, you can lower your monthly student loan payment because you can pay federal student loans over 30 years. However, a longer student loan repayment period means you will pay more student loan interest over the life of your student loan.
Federal student loan consolidation is a helpful organizational tool to help you manage federal student loan repayment. The disadvantage of federal student loan consolidation is that you won’t get a lower student loan interest rate. Rather, your interest rate will be equal to a weighted average of the interest rates on your current federal student loans, rounded up to the nearest 1/8%.
Compare: the top lenders to refinance student loans.
View: the latest rates for student loan refinancing.
Know: the difference between student loan refinancing and student loan consolidation.
Student loan forgiveness
To pay federal student loans, you could enroll in student loan forgiveness.
The federal government offers several options for student loan forgiveness. These program often have requirements and apply only to federal student loans. Typically, there isn’t student loan forgiveness available for private student loans.
(Read our student loan forgiveness guide).
The Public Service Loan Forgiveness program is one example of a popular student loan forgiveness program. How do you qualify for public service loan forgiveness?
To qualify for public service loan forgiveness, you must:
- have federal student loans;
- work full-time (at least 30 hours a week)
- be employed by a qualified public service or non-profit employer
- enroll in an income-driven repayment plan
- make 120 monthly federal student loan payments
- make at least a majority of your federal student loan payments while enrolled in an income-driven repayment plan
If you pursue public service loan forgiveness, make sure your employer qualifies. Submit an Employer Certification Form to the U.S. Department of Education each year and whenever you change jobs.
Student loan forgiveness is available for student loan borrowers such as public servants, police officers, military servicemembers, firefighters, teachers, first responders, doctors, nurses and many other professions.
This public service loan forgiveness calculator helps you decide which income-driven repayment plan is best for you to save more money for public service loan forgiveness.
Refinance student loans
If you want to know how to pay federal student loans, student loan refinancing can be a smart option to save money. When you refinance student loans, you can get a lower interest rate, lower student loan payment or both. Therefore, student loan refinance helps you save money and pay off student loans faster.
When you pay federal student loans, student loan refinancing is best if you have:
- a high interest rate on your student loan debt,
- an expensive monthly student loan payment,
- good to excellent credit,
- no intention to enroll in income-driven repayment or student loan forgiveness
With student loan refinancing, you will get a new private student loan that will be used to pay off your current student loans. Student loan refinance is flexible for student loan repayment. This means you can choose either a fixed or variable repayment plan as well as a student loan repayment term from 5 to 20 years.
Compare the latest rates for student loan refinancing.
Private student loans don’t offer federal benefits such as income-driven repayment or student loan forgiveness, for example. If you think you’ll need access to these benefits, then you should consider not refinancing federal student loans. Alternatively, you may decide to refinance private student loans only. Or, you may choose that the advantages of refinancing federal student loans outweigh the disadvantages.
This student loan refinancing calculator shows you how much you can save when you refinance student loans.
For example, let’s assume that you have $100,000 of federal student loans at 8.0% interest rate and a 10-year repayment term. Let’s assume you refinance student loans at a 3% interest rate and a 10-year repayment term. You would save $248 each month and $29,720 overall.
Learn more about how to refinance student loans:
- 7 reasons why you should refinance student loans now
- How to refinance student loans
- Why refinance student loans
- Is student loan refinancing worth it?
- Top 30 questions about student loan refinancing
Frequently Asked Questions
How long will it take to pay federal student loans?
The amount of time it takes to pay federal student loans depends on your strategy for student loan repayment.
For example:
- Standard Repayment Plan: 10 years
- Income-Driven Repayment Plan: 20 or 25 years
- Student Loan Refinancing: 5 to 20 years
- Direct Loan Consolidation: 10 to 30 years
A shorter student loan repayment term such as 5 years will have a higher monthly student loan payment. However, you will pay less total student loan interest, which will save you money over the long term. In comparison, a longer student loan repayment terms such as 30 years will have a lower monthly payment, but you will pay more student loan interest over the long term.
Are student loans forgiven after 20 years?
Student loans can be forgiven after 20 years. However, it depends on what type of student loans you have.
For example, federal student loans can be forgiven after 20 years if you have undergraduate student loans and you are enrolled in an income-driven repayment plan. However, if you have graduate student loans, it can take 25 years to get student loan forgiveness for your federal student loans.
If you have private student loans, private student loan forgiveness or enrollment in an income-driven repayment plan isn’t an option.
Can you pay off student loans in one lump sum?
Yes, you can pay off student loans in one lump sum. This includes both federal student loans and private student loans. With both federal student loans and private student loans, there is no prepayment penalty. Therefore, you can pay off your student loans any time. For example, with student loan refinancing, there is no prepayment fee so you can also pay off student loans faster.
This lump-sum extra payment calculator shows you how much money you can save when you make a lump-sum student loan payment.
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