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Federal Student Loans: Your Repayment Options

Have you, or your children, taken out federal student loans? Familiarize yourself with your repayment options; otherwise you might find yourself paying more than you expected in the long term!

  • The Basics: You will repay your loans through a loan servicer, which was assigned to you by the U.S. Board of Education after your loan was first disbursed to you. You will have multiple repayment plans to choose from, but if you do not make a selection, you will be placed on the Standard Repayment Plan. At any time, you can switch to a plan that better fits your needs.
  • Repayment Plans: In a Standard Repayment Plan, payments are made at a fixed amount intended to fulfill your debt over a ten-year period. Meanwhile, an Extended Repayment Plan distributes repayment over 25 years. On a Graduated Repayment Plan, payments are also slated to spread over ten years, but will be lower for the first two years before they increase. If your debt is high compared to your income, you might consider an Income-Based Repayment Plan, which offers monthly payments on 10% to 15% of your discretionary income, recalculated annually until 20 or 25 years have passed, after which point your loan will be forgiven. Visit to see which plans you qualify for, as well as to find more information on Pay as You Earn and Income-Contingent Repayment Plans.
  • Can’t Afford Payments?: If you are struggling to make payments on your loan, consider changing your payment date to a different time of the month, consolidating your federal loans into a Direct Consolidation Loan, or deferring your loan payments all together. Caution, as deferred loans still gather interest!
  • Utilize Tax Deductions: For most student loan borrowers, you can take a tax deduction of up to $2,500 annually for student loan interest. When you take this student loan interest tax deduction based on the actual amount of interest you pay, it reduces your Adjusted Gross Income (AGI), so you pay less in taxes. However, keep in mind you lose part of the deduction if your income exceeds certain thresholds.

Bonus tip: If you can afford to, make the larger payments up front. This can save you thousands in interest and reduce your payment period by years!