Federal Student Loan Repayment Plans
| Plan | Term | Payment | Best For |
|---|---|---|---|
| Standard | 10 years | Fixed | Lowest total cost |
| Graduated | 10 years | Increases every 2 years | Expect income growth |
| Extended | Up to 25 years | Fixed or graduated | Balances over $30K |
| SAVE / IDR | 20-25 years | 10-20% of discretionary income | Low income-to-debt ratio |
| PSLF Track | 10 years | IDR payments | Public sector workers |
The Cost of Stretching Payments
A $35,000 loan at 5.5% on the standard 10-year plan costs $380/month and $10,600 in total interest. Switch to a 20-year plan: payment drops to $242/month but total interest jumps to $23,000. Lower payments cost you $12,400 extra. The money goes to the lender, not you.
Extra Payments Make a Big Difference
Adding $100/month to that $35,000 loan at 5.5% on a 10-year plan cuts repayment to about 7.5 years and saves roughly $3,000 in interest. Adding $200/month finishes in about 6 years and saves $5,000. Specify the extra amount toward principal—some servicers apply it to future payments otherwise.
Refinancing: When It Works
Refinancing replaces federal loans with a private loan at a lower rate. If you have strong credit and stable income, you might drop from 6.5% to 4%. The catch: you lose federal protections like income-driven repayment, deferment, and loan forgiveness. Only refinance if you don't need those benefits.
Student Loan Interest Deduction
You can deduct up to $2,500 in student loan interest per year. For single filers, the deduction phases out between $80,000-$95,000 MAGI. On a $35,000 loan at 5.5%, you'd pay about $1,900 in interest the first year, saving roughly $420-$570 in taxes depending on your bracket.