Is the 10-Year Standard Repayment Plan Right for You?

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Whether you’ve already started repaying your student loan debt or have plans to start paying it off soon, the 10-year Standard Repayment Plan is something every borrower needs to understand.

As the name suggests, this is the standard plan that all borrowers will be placed into if they do not choose another option. And while the Standard Repayment Plan minimizes the total amount of interest you will pay over the lifetime of the loan, remember that it’s not your only option.

Find out how the plan works before you decide if it is the right choice for you. Specifically, let’s look at:

What is the Standard Repayment Plan?

As noted, if you don’t specifically choose another plan, you’ll automatically be placed in the Standard Repayment Plan, and there you’ll stay until and unless you decide to switch. The Standard Plan is designed to pay off your loans in 120 payments over 10 years.

While the monthly payments on this plan may well be higher than with other options, paying off your loan in 10 years will lower the overall interest you pay, compared with some of the alternatives.

Standard Repayment Plan eligibility

All borrowers with the following loans are eligible for the Standard Repayment Plan:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans
  • Direct Consolidation Loans
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • FFEL PLUS Loans
  • FFEL Consolidation Loans

Note that the Standard Repayment Plan applies only to federal loans, not private student loans.

How the Standard Repayment Plan works

Setting up the plan

Though you may choose to stick with the Standard Repayment Plan, it’s worth a look at your other options first to see what’s the best choice for your loans.

The Department of Education recommends that you use its Repayment Estimator. This online tool will ask you for all of your loan balances and the interest rates they carry, along with your tax-filing status, income and family size.

You will also have to create a free online account in order to accurately use the repayment calculator. Based on the information you input, the Repayment Estimator will tell you:

  • Which plans you’re eligible for
  • When your first monthly payment is due
  • When your last monthly payment is due
  • The total amount paid
  • Projected loan forgiveness (if any)
  • Your repayment period

The options it gives you will include the Standard Repayment Plan, as well as any other relevant options. The two most important numbers to focus on are your monthly payments and the total amount paid. You need a monthly payment you can afford, but you also want to pay as little as possible in the long run.

The Standard Repayment Plan tends to be a good balance of both. However, specific repayment options can vary based on your own individual circumstances, so it’s always a good idea to check the Repayment Estimator, and maybe do some additional research, before defaulting into the Standard Repayment Plan.

Payments

When you’re set up on the Standard Repayment Plan, your monthly payments are generally calculated based on what it will take to pay off your balance within 10 years’ time. That said, the plan requires you to pay a minimum of $50 a month.

However, consolidated loans are the exception. If you have Direct Consolidation Loans or FFEL Consolidation Loans, your payment term may range between 10 and 30 years and the repayment calculator will display the consolidated loans in a separate table. The $50 monthly minimum still applies; however, the payment amount is determined not only by what you owe on the consolidated loans, but also any other student loan debt.

Making changes

If you are having trouble making the monthly payment with the Standard Repayment Plan, you can choose to enroll in a different plan at any time, with no cost or penalty to you, providing you continue to make timely payments. Use the Repayment Estimator to get some idea of alternative options, and then contact your student loan servicer.

Remember, switching plans should always be free, and servicers can’t charge you for talking to you about your loans. If anyone tells you otherwise, it could be a debt-relief scam.

How does the Standard Repayment Plan impact you?

Pros

There are three key benefits to sticking with the Standard Plan:

  • Your student loans will be paid off within 10 years, allowing you to free up cash to work toward other financial goals, like buying property, saving for retirement and travel.
  • You’ll save on interest fees. For instance, although Income-Based Repayment plans offer lower monthly payments, that’s because they’re spread over a much longer period of time. As a result, the interest will cost you more in the long run.
  • It’s just one of your federal repayment options, so you can switch anytime.

Cons

There’s really just one major drawback, but it may be very significant, depending on your financial situation. On the Standard Repayment Plan, your monthly payments will be higher than with most other federal options.

And that’s fine if you can swing it, but saving money over the life of the loan won’t do you any good when you’re barely scraping by today. If you can’t afford your daily necessities of life, you should talk to a loan servicer about a plan that works for you.

Note too that in some circumstances, the Standard Plan might not actually get you the lowest monthly payment amount. That’s why it’s really important to use the repayment calculator provided by the U.S. Department of Education in order to ensure it’s the best choice for you.

Alternatives to the Standard Repayment Plan

The Department of Education has seven other repayment plan options for federal loans:

  • Graduated Repayment Plan
    You’re on the same 10-year plan (or 30-year plan for consolidated loans), but your monthly payment starts out low and gets higher over time, increasing every two years.
  • Extended Repayment Plan
    Your monthly payments are either fixed or graduated for up to 25 years and are generally lower than with other plans
  • Revised Pay As You Earn Repayment Plan (REPAYE)
    You pay 10% of your discretionary income. Any remaining balance is forgiven after 20 years for undergraduate loans or 25 years for graduate loans.
  • Pay As You Earn Repayment Plan (PAYE)
    You pay 10% of your discretionary income, but no more than you would on the Standard Repayment Plan. Any remaining balance is forgiven after 20 years.
  • Income-Based Repayment Plan (IBR)
    You pay 10% of your discretionary income, with any remaining balance forgiven after 20 years for loans taken after 2014. Older loans require 15% of your discretionary income, with forgiveness after 25 years.
  • Income-Contingent Repayment Plan (ICR)
    You pay whichever is lower: 20% of your discretionary income, or however much your monthly payment would be over a 12-year fixed payment period. Any remaining balance is forgiven after 25 years.
  • Income-Sensitive Repayment Plan
    You pay a fixed amount based on your annual income for a period of up to 10 years. Notably, though, this plan is only available to borrowers who have a Federal Family Education Loan (FFEL).

Note that for these plans, you may need to provide documentation of your income throughout your loan’s repayment period.

As you can see, there are a lot of similarities among these plans. It’s important that you learn about the alternative plans and their requirements. You can also use the Repayment Estimator to get an idea of which one will actually work for you.

Generally speaking, the Standard Repayment Plan will save you money in interest, making it a good option for those who can keep up with the payments. But if your finances need the breathing room and you’re willing to make the trade-off of potentially paying more in interest, then you might want to look at other options.

Chaunie Brusie contributed to this report.

Interested in refinancing student loans?

Here are the top 7 lenders of 2019!
LenderVariable APREligible Degrees 
Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.45% APR (with Auto Pay) to 7.49% APR (with Auto Pay). Variable rate loan rates range from 2.14% APR (with Auto Pay) to 6.79% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of September 6, 2019, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 09/06/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on our student loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.49% APR to 7.94% APR (with AutoPay). Variable rates from 2.14% APR to 7.84% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.14% APR assumes current 1 month LIBOR rate of 2.14% minus 0.15% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.  
  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for Laurel Road.

Laurel Road Disclosures

FIXED APR
Fixed rate options consist of a range from 3.50% per year to 5.55% per year for a 5-year term, 4.00% per year to 6.00% per year for a 7-year term, 4.30% per year to 6.40% per year for a 10-year term, 4.60% per year to 6.80% per year for a 15-year term, or 5.05% per year to 7.02% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan). The monthly payment for a sample $10,000 loan at a range of 3.50% per year to 5.55% per year for a 5-year term would be from $184.00 to $193.00. The monthly payment for a sample $10,000 loan at a range of 4.00% per year to 6.00% per year for a 7-year term would be from $138 to $148. The monthly payment for a sample $10,000 loan at a range of 4.30% per year to 6.40% per year for a 10-year term would be from $104 to $115. The monthly payment for a sample $10,000 loan at a range of 4.60% per year to 6.80% per year for a 15-year term would be from $79 to $91. The monthly payment for a sample $10,000 loan at a range of 5.05% per year to 7.02% per year for a 20-year term would be from $68 to $80.

However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.

VARIABLE APR
Variable rate options consist of a range from 2.43% per year to 6.05% per year for a 5-year term, 3.75% per year to 6.10% per year for a 7-year term, 4.00% per year to 6.15% per year for a 10-year term, 4.25% per year to 6.40% per year for a 15-year term, or 4.50% per year to 6.65% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.25% to 3.80% for the 5-year term loan, 1.50% to 3.85% for the 7-year term loan, 1.75% to 3.90% for the 10-year term loan, 2.00% to 4.15% for the 15-year term loan, and 2.25% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 2.43% per year to 6.05% per year for a 5-year term would be from $179 to $195. The monthly payment for a sample $10,000 loan at a range of 3.75% per year to 6.10% per year for a 7-year term would be from $137 to $148. The monthly payment for a sample $10,000 loan at a range of 4.00% per year to 6.15% per year for a 10-year term would be from $103 to $114. The monthly payment for a sample $10,000 loan at a range of 4.25% per year to 6.40% per year for a 15-year term would be from $77 to $88. The monthly payment for a sample $10,000 loan at a range of 4.50% per year to 6.65% per year for a 20-year term would be from $65 to $77.

However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.


4 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.19% effective August 10, 2019.


6 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.


7 Important Disclosures for College Ave.

College Ave Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

1College Ave Refi Education loans are not currently available to residents of Maine.

2All rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

3$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.

4This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 08/01/2019. Variable interest rates may increase after consummation.

2.14% – 6.79%1Undergrad
& Graduate

Visit Earnest

2.14% – 7.84%2Undergrad
& Graduate

Visit SoFi

2.43% – 6.65%3Undergrad
& Graduate

Visit Laurel Road

2.43% – 7.60%4Undergrad
& Graduate

Visit Splash

2.14% – 8.01%5Undergrad
& Graduate

Visit CommonBond

2.06% – 8.93%6Undergrad
& Graduate

Visit Lendkey

2.74% – 7.24%7Undergrad
& Graduate

Visit College Ave

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

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