How to Change Your Student Loan Repayment Plan

student loan repayment options

When it comes to your student loan repayment plan, it’s easy to feel like you’re stuck with what you’ve got. However, you may have a few more student loan repayment options than you realize.

Perhaps you’ve often found yourself wondering: “How do I change my student loan repayment plan?” Or even “can you change student loan repayment plans?” Well, look no further. Here’s everything you need to know about getting the best student loan repayment plan for your particular situation.

How do I change my student loan repayment plan for federal loans?

First off, federal student loans are more flexible when it comes to modifying your payments. There are a few different ways you can go about it, from changing the number of years you have to repay to changing your monthly payment. You can even pause payments or consolidate your loans.

Therefore, choosing the right student loan repayment plan for you depends on the goal you have in mind. Do you want to pay your loans off faster? Or do you need to have lower monthly payments? Maybe you prefer to have all of your loans in one?

The answers to these questions will lead to different types of student loan repayment options. You need to understand your biggest pain point first and then go from there. Consider which of the following four scenarios applies directly to your situation:

1. I need to lower my monthly payments

There are a few options you can look into if you’re struggling to pay your bills:

  • Deferment
  • Forbearance
  • Income-driven repayment plans

Deferment and forbearance give you a temporary break on your student loan repayment. Both of these options enable you to pause your student loan repayment, although loans in forbearance always accrue interest during that time, while only some types of loans in deferment do.

Income-driven repayment plans, however, don’t pause your payments but do lower them. These plans include:

Income-Based Repayment Plans (IBR)

  • IBR plans apply to PLUS Loans, Federal Stafford Loans, Direct Loans, FFEL, or Direct Consolidation loans that don’t include Direct or FFEL PLUS loans to parents.
  • Payments are 10 or 15 percent of your discretionary income. You are eligible for forgiveness after consecutive payments for 20 or 25 years.

Revised Pay As You Earn Payment Plan (REPAYE )

  • Direct Loans and Direct Consolidation Loans qualify for REPAYE plans.
  • Payments are 10 percent of your discretionary income. You’re eligible for forgiveness after consecutive payments for 20 or 25 years.

Pay As You Earn Payment Plan (PAYE)

  • PAYE plans are for Direct Loans and Direct Consolidation Loans borrowed on or after October 1, 2007, and received on or after October 1, 2011.
  • Payments are 10 percent of your discretionary income. You are eligible for forgiveness after consecutive payments for 20 years.

Income-Contingent Repayment Plan (ICR)

  • ICR plans are available for Direct Loans and Direct Consolidation Loans.
  • Payments will be calculated by whichever of the following is less: 20 percent of your discretionary income or the amount you’d pay on a fixed 12-year repayment plan, adjusted to your income. Eligible for forgiveness after consecutive payments for 25 years.

Income-Sensitive Repayment Plan

  • This type of repayment plans is available for Federal Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans.
  • Your annual income is the basis for how much your payments are — the formula used will vary by lender. Ten years is the maximum repayment term.

Remember, you have to reapply for these repayment plans annually and the amount forgiven might be subject to taxes. Also, the above plans — except for the Income-Sensitive Repayment Plan — will keep you in debt longer unless you qualify for loan forgiveness.

2. My loans are varied and confusing

If your loans are hard to track, thanks to a jumble of due dates, interest rates, and balances, you have an option to consolidate them into a Direct Consolidation Loan. And doing so can make your loans eligible for some of the income-driven repayment plans mentioned above.

The idea behind consolidation is to combine federal loans with various servicers and interest rates into one. Applying for Direct Loan Consolidation is a free process.

However, keep in mind that one you consolidate your federal loans through Direct Loan Consolidation, it restarts the clock on any progress you’ve made toward loan forgiveness.

Here are a few other pros and cons of Direct Loan Consolidation, according to Federal Student Aid:

Pros of Direct Loan Consolidation

  • Simplify your repayment.
  • Lower your monthly payment by lengthening your repayment plan.
  • New access to income-driven repayment plans, getting rid of any variable rates if you have them.

Cons of Direct Loan Consolidation

  • Could be in debt longer and pay more if you increase the length of your repayment plan.
  • Might lose access to options like interest rate discounts and other benefits.
  • Lose credit for any payments you’ve made so far towards forgiveness.

3. I’m hoping to have my loans forgiven

If your main objective is to have your loans forgiven, then you’ll be happy to know that this option is available under the income-driven repayment plans mentioned above.

But first, a list of federal loan forgiveness options:

  • Closed School Discharge: Your school closes while you’re in attendance or within 120 days of your withdrawal.
  • Public Service Loan Forgiveness: Forgiveness for those who’ve made 120 qualifying payments while employed in certain nonprofits or government organizations.
  • Teacher Loan Forgiveness: Teachers who’ve taught for five consecutive years in eligible schools can have up to $17,500 of their loans forgiven.
  • Perkins Loan Cancellation and Discharge: Perkins Loans holders of all kinds can have their loans forgiven, including nurses, teachers, firefighters, and more.
  • Total and Permanent Disability and Discharge: Student loan forgiveness for various federal loan holders who’ve endured a permanent disability.
  • Discharge Due to Death: Federal loans of the deceased can be discharged.
  • Rare: Discharge in Bankruptcy: Borrowers who can prove undue hardship might be able to have their student loans discharged.
  • False Certification of Student Eligibility or Unauthorized Payment Discharge: Some federal student loans can be discharged if you were not truly eligible, if the loan was taken out without your knowledge, or if you will never be able to qualify to work in the field you intend to study.
  • Unpaid Refund Discharge: Your loans might be eligible for discharge if you withdrew in the proper timeframe but your school didn’t send a refund to the government.
  • Borrower Defense Discharge: Students of schools who misled them or violated specific laws might be able to have their student loans forgiven.

As you can see, most of these forgiveness plans are circumstantial. However, here are several that you can actively work to qualify for and how they work.

Public Service Loan Forgiveness

  • Applies to Direct Loans or Direct Consolidation Loans.
  • Full-time employees of governmental organizations, 501(c)(3) not-for-profits, and other qualifying not-for-profits become eligible for forgiveness after making 120 qualifying payments on a 10-year Standard Repayment Plan or an income-driven repayment plan.

Teacher Loan Forgiveness

  • Not available for PLUS Loans or Federal Perkins Loans. (However, teachers with Perkins loans can go through Teacher Cancellation.)
  • Full-time teachers working at qualifying schools for five years are eligible for up to $17,500 of forgiveness.

Forgiveness from Income-Driven Repayment Plans

  • Anyone on an Income-Driven Repayment Plan can qualify for forgiveness after the required number of years of consecutive payments, usually 20 or 25 years.

All of these are subject to change as laws around student loans change. Also, remember that forgiven debt might be taxable, depending on the laws at the time you receive debt forgiveness.

4. I can afford my payments, and I want out of debt faster

If you’re wondering “What are my student loan repayment options if I want to get out of debt faster?”, consider the following three types of repayment plans that aren’t income-driven:

  • Standard Repayment Plan
    Fixed payments with a repayment plan up to 10 years, or up to 30 years for Consolidation loans.
  • Graduated Repayment Plan
    Payments start small and gradually increase on a pre-set schedule. Repayment plan is up to 10 years or, up to 30 years for Consolidation loans.
  • Extended Repayment Plan
    Can be fixed or graduated payments. Repayment plan is up to 25 years.

If you want to switch to a different student loan repayment option, ask your servicer to do this for you. It’s a free service and can be done anytime.

There are other ways to pay your loans off faster besides switching your student loan repayment plan. For example, refinancing for a lower interest rate can be most effective. With a lower interest rate, more of your money can go to your principal balance.

However, keep in mind:

  • If you choose a longer repayment plan, you could end up paying more on your loans (depending on the interest rate and the length of the plan).
  • Refinancing federal loans turns them into private loans, thus removing federal student loan repayment options such as income-driven repayment plans.

Other things you could do include switching to biweekly payments and applying extra money such as tax refunds to your loans so you can make even more progress quickly.

Can you change student loan repayment plans with private student loans?

There are clearly a wide variety of student loan repayment options with federal student loans. Unfortunately, there are not nearly as many options for private loans.

While it might seem like this lack of options is unfair, private student lenders have their hands tied. U.S. News explains why:

Private student loans fall under a category called retail credit, and all its associated rules and multiple state and federal regulators. With very few exceptions, lenders of retail credit are not allowed to offer any programs or alternatives to a loan that would substantially alter the terms of the loan.

U.S. News goes on to explain that this is the reason most private student lenders can rarely offer relief for more than six months — or 12 at the absolute most. That relief, which can include things like interest-only payments or forbearance, can usually be utilized for longer on federal student loans.

That said, you’re not without options. So if now you’re wondering, “Can you change student loan repayment plans on private loans?”, the answer is yes, sometimes you can. Here are repayment options for two of the most common pain points:

1. I can barely afford my monthly payments

If you’re struggling to make ends meet, there are some options available to you for your private loans. However, those options will depend on your lender.

For example, some private student loan lenders will offer short-term forbearance or even unemployment protection.

The best thing you can do if you’re struggling with your private student loan payments is to contact your lender immediately. Even if you can’t find options on their website, call and ask. You lose nothing by asking.

2. I want to get out of debt faster

If your main goal is to pay off debt faster, then refinancing for a lower interest rate is a great option. However, there are a few things to consider, as the terms you pick can make a big difference:

  • Don’t accept a variable rate unless you’re very comfortable with knowing your interest rate (and thus payments) can go up at any time.
  • If you can afford the payments on the shortest repayment plan, choosing that will help you get out of debt faster.
  • Another option could be to select a term you’re more comfortable with and paying extra anytime you have more room in your budget or receive a large sum of money, such as a birthday gift or a bonus.

It can be hard to pick the right length of repayment because you want to be ambitious and pay the debt off faster. However, try not to squeeze your budget so tightly that you could end up going delinquent on your loans.

Try to strike the right balance — and remember, you can always make extra payments.

Don’t forget: You do have student loan repayment options

Student loans can be difficult to manage at times, but that doesn’t mean you have to be completely stuck. If you need to change your student loan repayment plan, tackle it head-on.

The more quickly you can change your monthly payments for the better, the sooner you’ll be able to get your loans back under control.

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