To make a payment on your student loan, choose a repayment plan and sign up for automatic payments or pay every month on the loan servicer’s website.
Choosing a Repayment Plan
The first step in making payments on your student loans is to select your repayment plan. For federal student loans, you may be eligible for up to eight possible schedules.
1. The standard repayment plan is available to all borrowers. You get a fixed monthly payment for up to 10 years on unconsolidated loans and up to 30 years on consolidations. This is the least expensive way to pay your debt.
2. A graduated repayment plan is also available to all borrowers. You start out with one payment but it increases over time, usually going up every two years. The timeline for repayment is the same as the standard plan, but you pay more over the life of the loan.
3. An extended payment plan is available for those who owe more than $30,000 in federal loans. The payments are fixed or graduated for up to 25 years.
4. REPAYE stands for Revised Pay as You Earn. This is a repayment plan available to borrowers who have certain types of loans. Your monthly payment amount is equal to 10 percent of your discretionary income. Each year, your income and family circumstances are updated to recalculate your payment.
If you’re married, your spouse’s income is considered, regardless of how you file your taxes. At the end of 20 to 25 years, any unpaid balance is forgiven. The Internal Revenue Service (IRS) can tax you on any part of the debt that is forgiven.
5. PAYE, Pay as You Earn, is similar to REPAYE with a few important exceptions. You must be a new borrower after October 1, 2007, and you must have received a disbursement of a Direct Loan on or after October 1, 2011. Your debt must be high in comparison to your income. Under this plan, the payment is calculated and recalculated in the same way as the REPAYE, but it is never higher than it would be under a 10-year standard plan.
If you’re married, your spouse’s income is only included if you file a joint tax return. At the end of 20 years, any unpaid balance is forgiven. Again, the IRS can tax you on any part of the debt that is forgiven.
6. IBR stands for Income-Based Repayment. To qualify for this plan, your debt must be high in comparison to your income. Your monthly payment amount is between 10 and 15 percent of your discretionary income. The payment is calculated and recalculated in the same way as the PAYE plan and guaranteed to never be higher than the 10-year standard plan.
The outstanding balance is forgiven after 20 or 25 years, and the IRS may consider the forgiven amount as income for tax purposes.
7. ICR stands for the Income-Contingent Repayment Plan. To qualify for this plan, your debt must be high in comparison to your income, and you must have an eligible loan type. Your monthly payment amount is the lesser of 20 percent of your discretionary income or the amount you would pay under a 12-year standard plan adjusted for income.
Each year, your income and family circumstances are updated to recalculate your payment. Your spouse’s income is calculated only if you file a joint return or if you choose to have it considered. The outstanding balance is forgiven after 20 years. Remember that the IRS can tax you on the forgiven amount.
8. The Income-Sensitive Repayment Plan sets a monthly payment based on your annual income for up to 15 years. The lender establishes the formula for calculating the payment.
With so many options, this decision is sometimes overwhelming. Use the repayment estimator to see all the possibilities. If you’re in a field where loan forgiveness is a possibility, like teaching or social work, be sure to talk to your lender about those options. Also, keep in mind that you can change your payment at any time at no cost.
Make Your Payment
Once you have established a repayment plan, you can sign up for automatic payments on your lender’s website. That’s the easiest and most convenient way to pay your debt since you don’t have to remember to send a payment every month. The other option is to log in each month and make your regular monthly payment.
If you find yourself struggling to make your payment each month, contact your lender. They can help by changing your payment date, your repayment plan, or consolidating your loans.