A guide to choosing the right student loan repayment plan, evaluating forgiveness programs, considering refinancing, and taking advantage of available discounts and employer assistance.
Evaluate the Standard Repayment Plan (10-year fixed)
The standard plan divides your balance into 120 equal payments over 10 years. On $30,000 in loans at 5% interest, monthly payments are about $318. You pay the least total interest on this plan but have the highest monthly payment.
Consider the Graduated Repayment Plan if income is currently low
Graduated plans start with lower payments that increase every 2 years over a 10-year term. Starting payments can be 50% less than the standard plan. However, you pay more total interest because early payments barely cover interest accrual.
Compare income-driven repayment (IDR) plans
IDR plans (SAVE, PAYE, IBR, ICR) cap payments at 5-20% of your discretionary income. On a $40,000 salary with $50,000 in loans, IDR payments can drop to $100-$200/month versus $530 on the standard plan. Remaining balances are forgiven after 20-25 years of payments.
Apply for the SAVE plan if it offers the lowest payment
The SAVE plan (Saving on a Valuable Education) calculates payments at 5% of discretionary income for undergraduate loans and 10% for graduate loans. It also prevents interest capitalization. Single borrowers earning under $32,800 with undergraduate loans may qualify for $0 monthly payments.
Evaluate Public Service Loan Forgiveness (PSLF)
Determine if your employer qualifies for PSLF
PSLF covers government employees (federal, state, local, tribal) and 501(c)(3) nonprofit employees. This includes teachers, nurses, military, social workers, and nonprofit staff. About 25% of the US workforce qualifies. Use the PSLF Help Tool at studentaid.gov to verify your employer.
Confirm your loans are Direct Loans (or consolidate to qualify)
Only federal Direct Loans qualify for PSLF. If you have FFEL or Perkins loans, consolidate them into a Direct Consolidation Loan first. Consolidation restarts your payment count, so do this as early as possible. Private loans never qualify for PSLF.
Enroll in an IDR plan and submit your Employment Certification Form
PSLF requires 120 qualifying payments (10 years) under an IDR plan while working full-time for a qualifying employer. Submit the Employment Certification Form annually, not just at year 10. This creates a documented record and catches issues early.
Calculate total cost: 10 years of IDR payments vs standard repayment
On $80,000 in graduate loans with a $50,000 salary, you might pay $400/month under SAVE versus $850/month on standard. Over 10 years, that's $48,000 paid before PSLF forgiveness versus $102,000 on standard repayment with no forgiveness. The savings can exceed $50,000.
Evaluate Refinancing
Compare refinancing rates from at least 3 private lenders
Refinancing replaces federal or private loans with a new private loan at a potentially lower rate. Most lenders offer rate quotes with a soft credit pull. Rates for borrowers with strong credit (750+) and income can be 3-5%, well below federal loan rates of 5-8%.
Understand that refinancing federal loans forfeits federal protections
Refinancing federal loans into a private loan permanently eliminates IDR options, PSLF eligibility, forbearance protections, and any forgiveness programs. Only refinance federal loans if you have stable income, no PSLF eligibility, and the rate savings are significant (at least 1-2% lower).
Choose between fixed and variable refinancing rates
Fixed rates stay the same for the life of the loan. Variable rates start 1-2% lower but can increase over time. If you plan to pay off within 3-5 years, a variable rate saves more. For 10+ year terms, fixed rates provide payment stability.
Claim Available Discounts
Enroll in autopay for a 0.25% interest rate reduction
All federal loan servicers and most private lenders offer a 0.25% rate reduction for automatic payments. On $50,000 in loans, this saves about $125 per year. It also eliminates the risk of forgetting a payment and damaging your credit score.
Claim the student loan interest deduction on your taxes
You can deduct up to $2,500 per year in student loan interest paid, reducing your taxable income. The deduction phases out for single filers earning $80,000-$95,000 and joint filers earning $165,000-$195,000 (2024). This is an above-the-line deduction, so you don't need to itemize.
Ask about loyalty or relationship discounts from your servicer
Some loan servicers offer 0.25-0.50% additional rate reductions if you have other accounts (checking, savings) with their parent company. These stack with the autopay discount, potentially lowering your rate by 0.50-0.75% total.
Understand Forbearance vs Deferment
Know the difference between forbearance and deferment
Deferment pauses payments and may also pause interest accrual on subsidized loans. Forbearance pauses payments but interest always continues accruing on all loan types. Both options prevent default, but forbearance increases your total balance. Choose deferment when available.
Apply for deferment if you qualify (unemployment, school, military)
Economic hardship deferment lasts up to 3 years. In-school deferment applies while enrolled at least half-time. Military service deferment covers active duty plus 13 months. Interest on subsidized loans does not accrue during these deferments, saving you hundreds or thousands.
Use forbearance only as a last resort
General forbearance is available for up to 12 months at a time and 3 years cumulative. On $40,000 at 6% interest, 12 months of forbearance adds $2,400 in accrued interest to your balance. If you're struggling, apply for an IDR plan first, as payments can be as low as $0.
Check Employer Assistance Programs
Ask HR if your employer offers student loan repayment assistance
About 8% of employers now offer student loan repayment benefits, up from 3% in 2019. Typical benefits range from $100-$300 per month or $5,000-$10,000 per year. Employers can contribute up to $5,250 per year tax-free under current rules.
Check if employer contributions count toward PSLF payments
Employer payments on your behalf do count toward your monthly payment obligation but do not count as separate qualifying PSLF payments. You still need 120 qualifying monthly payments. The employer contribution reduces what you pay out of pocket each month.
Factor employer benefits into job comparison decisions
A job paying $55,000 with $5,000/year in student loan repayment assistance can be worth more than a $58,000 job without it, especially since the $5,250 annual limit is tax-free. Calculate the after-tax value when comparing offers.
Frequently Asked Questions
What is the SAVE repayment plan and how does it work?
The SAVE (Saving on a Valuable Education) plan replaced REPAYE in 2024 and caps payments at 5% of discretionary income for undergraduate loans and 10% for graduate loans. It excludes more income from the calculation by raising the poverty line multiplier to 225%. Remaining balances are forgiven after 20 years (undergraduate) or 25 years (graduate). Note that student loan programs are subject to policy changes; check studentaid.gov for current terms.
Should I refinance my student loans?
Refinancing makes sense if you have stable income, strong credit (720+), and do not need federal protections like income-driven repayment or Public Service Loan Forgiveness. Private refinancing rates range from 4-8% for well-qualified borrowers compared to 5.5-8.05% on current federal loans. However, refinancing federal loans into a private loan permanently forfeits access to IDR plans, deferment, forbearance, and all forgiveness programs. Consult a financial advisor before refinancing federal loans.
How does Public Service Loan Forgiveness work?
PSLF forgives remaining federal Direct Loan balances after 120 qualifying monthly payments (10 years) while working full-time for a qualifying employer (government, 501(c)(3) nonprofits, some other public service organizations). Payments must be made under an income-driven repayment plan. The average PSLF recipient has $70,000-$130,000 forgiven. PSLF forgiveness is tax-free at the federal level. Program rules and eligibility may change; verify current requirements at studentaid.gov.
What is the student loan interest deduction?
You can deduct up to $2,500 in student loan interest paid per year, reducing taxable income dollar-for-dollar. The deduction phases out at $75,000-$90,000 MAGI (single) or $155,000-$185,000 (married filing jointly). It is an above-the-line deduction, meaning you can claim it without itemizing. At a 22% marginal tax rate, the full $2,500 deduction saves $550 in federal taxes. Verify current income limits with the IRS.