How to decide on the right student loan repayment plan

Calendar with a sticky note on top of it that reads "student loan repayment!"

'Republican-led states have filed lawsuits to stop nearly all of [Biden's] previous efforts at eliminating education debt'

(Image credit: atakan / Getty Images)

With the end of President Biden's administration comes the end of the possibility of student loan forgiveness. This leaves millions of borrowers with the renewed reality of their debt and the probability of a long road to repayment.

There is not much apparent hope ahead as far as the Trump administration goes. President-elect Donald Trump is a "vocal critic of student loan forgiveness," going so far as to have called Biden's attempts "'vile' and 'not even legal,'" said CNBC. The possibility of states stepping in does not look too promising either, given that "Republican-led states have filed lawsuits to stop nearly all of [Biden's] previous efforts at eliminating education debt."

While student loan forgiveness, at least as Biden envisioned it, may be off the table for now, there are other options that students can tap to help address their debt. For many with federal student loans, taking advantage of the myriad repayment plan options could make a big difference — which will first require determining which plan is right for you. Here is how to do it.

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Get familiar with the repayment plan options available

A good first step is knowing what your choices are, keeping in mind that these repayment plans are only available for federal student loans and that eligibility requirements vary from plan to plan:

Standard Repayment Plan: With this plan, "payments are fixed and loans are paid off over a 10-year period," said Investopedia.

Graduated Repayment Plan: The Graduated Repayment Plan begins with lower payments that then "increase gradually, with loans paid in full over a 10-year period," said Investopedia.

Extended Repayment Plan: As the name suggests, repayment is extended on this plan "to as long as 25 years," which "lowers monthly payments," said NerdWallet.

Income-Driven Repayment (IDR) plans: The options within this category — which include Saving on a Valuable Education (SAVE), Pay As You Earn (PAYE), Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR) — "tie the amount you pay to a portion of your income and extend the length of time you're in repayment to 20 or 25 years." After that, "you can get income-driven loan forgiveness for your remaining debt," said NerdWallet.

Talk to your loan servicer

As you weigh your options, a good resource to contact is your loan servicer, who can "provide you with information about your current loans including your current repayment plan," said The College Investor. Your servicer is also who you can contact if you decide to switch plans — something federal student loan borrowers can do "at any time, for free," said CNN Politics.

You might also try the Federal Student Aid's online Loan Simulator, a tool that allows borrowers "to compare their estimated payments under different repayment plans," said CNN. The tool also lets you see how switching plans may affect your timeline until repayment, as well as the total amount of interest you will pay over time.

Determine your goal and compare outcomes

The answer to the question of which student loan repayment plan is right for you "hinges on several factors, including what you're earning now and your future earning potential," said Investopedia, alongside eligibility requirements.

But one of the most significant factors affecting the decision is what your ultimate goal is for repayment. For instance, do you want to:

Secure lower monthly payments
Pay less in interest
Achieve student loan forgiveness
Have your loan payments align with your earnings
Get your debt paid down as quickly as possible

Winnowing this down can also quickly narrow down which repayment plan options make sense. Want to pay the least amount of interest and therefore pay down your debt as soon as you can? Stick to the Standard Repayment Plan. On the other hand, if your financial situation necessitates making lower monthly payments, an income-driven repayment plan may make sense — and offer a path toward forgiveness. The Graduated Repayment Plan, meanwhile, is particularly beneficial for borrowers "who expect their income to increase over time and want to pay off their loans as quickly as possible," said Investopedia.

Beyond your goal, make sure to take the broader financial implications of switching plans into account. Remember: "Any option that decreases your monthly payments will likely result in you paying more interest overall," said NerdWallet.

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Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.