Student Loan Repayment Options for Consolidation and Refinancing
When you consolidate or refinance your student loans, you typically have access to a number of repayment plans. Federal Consolidation Loans offer more options (including income-based repayment plans for some borrowers) than private refinance loans.
This table shows the options and eligibility rules for Federal Consolidation loans:
| Name of Plan | Description | Loan Eligibility Rules | Must Qualify? |
|---|---|---|---|
| Standard | Equal, fixed payments each month throughout the repayment term | None | No |
| Graduated | Payment starts out low, then gradually increases every 2 years | None | No |
| Extended | Borrowers choose Standard or Graduated payments, and the repayment term is extended up to 25 years | None | Yes — loan balance must be $30,000 or more and you had no outstanding balance on a Direct Loan Program loan as of October 7, 1998 |
| Income-Contingent Repayment (ICR) | Monthly payment is 20% of discretionary income (for most borrowers) | Direct Consolidation Loan cannot include Parent PLUS Loans that entered repayment prior to July 1, 2006 | No |
| Income-Based Repayment (IBR) | Monthly payment is 10% of your discretionary income (new borrower on or after July 1, 2014) or 15% of your discretionary income | Direct Consolidation Loan cannot include Parent PLUS Loans | Yes — borrower must meet the U.S. Department of Education's requirements for a "partial financial hardship" |
| Pay-As-You-Earn Repayment (PAYE) | Monthly payment is equal to 10% of discretionary income | Direct Consolidation Loan cannot include Parent PLUS Loans; Loan must meet U.S. Department of Education date and program rules | Yes — borrower must meet the U.S. Department of Education's requirements for a "partial financial hardship" |
| Revised Pay-As-You-Earn Repayment (REPAYE) | Monthly payment is equal to 10% of discretionary income | Only available to Direct Loan borrowers | No income requirements |
| Income-Sensitive Repayment (ISR) | Monthly payment is 4-25% of monthly gross income | Must be a Federal Family Education Loan (FFEL) Consolidation Loan | Yes — borrower must meet the U.S. Department of Education's requirements for a "partial financial hardship" |
| Alternative Repayment | Determined on a case-by-case basis | Must be a Direct Consolidation Loan | Yes — borrower must apply annually |
*For an in-depth look at federal student loan repayment plans, including payment calculation formulas, visit the Repayment Plans section on Edvisors.com.
Repayment plans for private consolidation loans are set by each individual lender. Here are some common examples:
| Repayment Plan Type | Description | Examples of Eligibility Rules |
|---|---|---|
| Extended Term | Equal monthly payments, extended over a longer term, such as 15, 20, 25, or 30 years | Loan balance must meet lender requirements |
| Interest-Only | Monthly payments are equal to the interest only and do not pay down the principal balance of the loan | Financial hardship, military service; Usually limited to short periods |
| Interest Rate Discounts | Interest rate reductions, such as 0.25% or 0.50% | Payments must be automatically deducted from a bank account |
Losing Repayment Options
When you consolidate federal student loans into a Direct Consolidation Loan, you don’t lose any repayment options. However, when you refinance federal student loans into a private student loan, you will lose access to federal student loan repayment options. Remember, when refinancing private student loans, the lender typically offers far fewer repayment plans. When you refinance private student loans into a private refinance loan, you typically have access to the same payment plans as you did before you refinanced — if you stay with your current lender. If you are refinancing with a different lender, you will need to check with the new lender to find out what payment plans they might offer.
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