Paying off your student loan debt is one of the best financial moves you can make. But, as you most likely know, it isn’t easy. 

If you’ve taken out a student loan before, there’s a good chance it’s a federal student loan. According to the academic data sharing platform MeasureOne, 92% of all student loans are federal student loans. But how much you pay and how quickly you can pay them off depends on your student loan repayment plan.

That’s why it’s important you review each repayment plan and make an informed decision about the best one for you. To help you do just that, we’ll start by going over the repayment plan everyone gets put onto by default, the Standard Repayment Plan, and then move on to talking about the more popular income-driven repayment plans.

But, if you’re scanning this blog post and already thinking tl;dr, you can save yourself some time by signing up for Scholly PayOff! It’s our new tool that helps you instantly find the best federal student loan repayment plan specifically for you (i.e. the one that will save you the most $$$ while still working toward paying off your student loans).

Standard Repayment Plan

If you’ve never looked into your student loan repayment options, you’re likely on the Standard Repayment Plan right now. Why? Because this is the repayment plan you’re automatically put on when it comes time to start paying back your loans post-graduation.

Does that mean it’s the best repayment plan for you? Not necessarily. But it could be a good fit for you if you have a high income and can afford to make large monthly payments (the benefit here is that you’ll minimize interest payments).

How does the Standard Repayment Plan work?

The Standard Repayment Plan sets your payments at a fixed amount that allows you to pay off your student loans in 10 years or less. This includes paying for any interest accrued during that period.

So, for example, let’s say you owe $35,000 on your student loans, which have a student loan interest rate of 6.5%. With a repayment period of 10 years, your monthly payments would be $409.

To quickly calculate what your monthly payments would be under the Standard Repayment Plan, you can use this student loan calculator.

What happens if that standard monthly payment is too high for your budget?

Well, you could apply for forbearance to postpone your payments. But because you’d be racking up interest during that time, that’s not your best option. What is? Switching repayment plans!

The most popular repayment plans are the income-driven repayment plans, which allow you to make affordable monthly payments that are relative to your income. Let’s look at those now!

Income-Based Repayment (IBR) Plan

Of all of the income-driven repayment plans, the Income-Based Repayment plan is the most popular – it’s used by 2.82 million people!

Again, that doesn’t necessarily mean it’s the best repayment plan for you. But it definitely could be if:

You’d benefit from having your monthly payments reduced to fit your current income

You’d like to have a longer repayment period that could end with your student loans being forgiven

How does the Income-Based Repayment plan work?

The Income-Based Repayment plan sets your monthly payment at 10% (for new borrowers on or after July 1, 2014) or 15% of your discretionary income (your annual income minus 150% of the poverty guideline for your state and family size).