How to Successfully Change Your Student Loan Repayment Plan

If you’re readjusting to making monthly federal student loan payments again, you might consider getting on a new repayment plan. You can change your student loan repayment plan whenever you want, at no cost to you. 

This benefit is typically reserved for student loan borrowers with federal loans from the U.S. Department of Education. Private loan borrowers have limited flexibility when it comes to repayment options. In this guide, learn the steps you need to take to change your student loan repayment plan and what to consider.

Understand your current repayment plan

Before changing your student loan repayment plan, be clear about what your current plan offers. Federal loan borrowers are put on the Standard Repayment Plan unless they request a change. The Standard Plan pays off your student loans within 10 years and has the least interest cost to you. The downside is it can result in higher monthly payments. 

To confirm your current repayment plan, log in to your StudentAid.gov account. After logging in with your Federal Student Aid ID, go to the “My Aid” page. Find your loans and current plan by scrolling through the list. 

If you don’t have an account just yet, you can create one with your Social Security Number, and phone or email on the Federal Student Aid website.

Research other repayment plans

Once you know the repayment plan you’re currently on, research on the other repayment plans out there. Federal loan borrowers may qualify for the following options:

• Standard Repayment Plan. Offers borrowers fixed payments with a repayment term of 10 years. 
• Graduated Repayment Plan. Offers borrowers monthly payments that start low and gradually increase about every two years, with a repayment term of 10 years. 
• Extended Repayment Plan. Allows for fixed or graduated payments with a repayment term of 25 years. 
• Income-Driven Repayment Plans (IDR). The four IDR plans allow borrowers to reduce monthly payments to a percentage of their discretionary income. 
  • Income-Based Repayment (IBR) Plan. Payments are 10% to 15% of income with a repayment term of 20 to 25 years, based on when you took out loans. 
  • Income-Contingent Repayment (ICR) Plan. Payments are typically 20% of income with a repayment term of 25 years. 
  • Pay As You Earn (PAYE) Repayment Plan. Payments are 10% of income with a repayment term of 20 years. 
  • Saving on a Valuable Education (SAVE) Plan. This new plan replaces the pre-existing REPAYE plan and offers payments that are currently 10% of income with a repayment term of 20 to 25 years, depending on whether you have undergraduate or graduate loans.

You might need to meet additional eligibility requirements to get on certain plans. IDR plans give borrowers access to student loan forgiveness if they have a remaining balance when the repayment term ends.  

To see what your prospective monthly payments on a particular repayment plan are, you can use the Loan Simulator tool.  

Federal student loan borrowers have an abundance of repayment options to choose from, so you can find the best fit for your goals and budget. Private loan borrowers might not have many options but can contact their lenders. 

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Contact your loan servicer

After deciding on a different repayment plan, contact your loan servicer to make it official. Your loan servicer is the entity that manages your loan repayment and can set you up with a new repayment plan. 

You can find your loan servicer through your StudentAid.gov account and go to “My Loan Servicers.” Right now, there are five main federal loan servicers, including:

• Edfinancial
• MOHELA (which is the loan servicer for Public Service Loan Forgiveness) 
• Aidvantage
• Nelnet
• ECSI

After identifying your loan servicer, find their contact information on their website, including phone number, email, or chat, if available. From there, submit a formal request to change your student loan repayment plan. 

Fill out the necessary forms

Your loan servicer might ask you to fill out additional paperwork. For example, if you’re interested in an IDR plan, you must submit an Income-Driven Repayment Plan Request form. Your loan servicer can let you know which plans you qualify for. 

You’ll need to provide information about your family size and income. This process takes about 10 minutes. 

Certify your income

Since Income-Driven Repayment Plans are based on your earnings, you must take steps to certify your income. To make this requirement easier, use the IRS Data Retrieval Tool to import your financial information based on your tax return. You’ll do this when you first get on an IDR plan and every year going forward. 

For IDR plans, borrowers are required to recertify their income and family size annually. Due to this requirement, your monthly payments can change. For example, if you’re unemployed or have a low income you might qualify for a $0 payment. If your income increases, your payment might, too. 

Even if there are no current changes to report, you must recertify to remain in good standing with the plan. It’s important to provide current contact information to your loan servicer, as they’ll send a reminder to you when it’s time for recertification. 

4 Things to consider before making the switch

Any changes to your federal student loan repayment plan must go through your loan servicer. Before changing plans, consider the following factors to ensure you’re making the right choice for you, and at the right time. 

1. Recertification of income

Make sure that you can recertify your income every year if pursuing an IDR plan. If you fail to submit your recertification by the deadline, your monthly payment will likely go up. 

Additionally, it’s important to understand how recertification might impact your payments. Run the math ahead of your recertification deadline so you know approximately how your payments are affected. 

If you’re currently on an IDR plan, and your income has gone up, it’s in your best interest to recertify as close to your deadline as is safe. For example, consider waiting to recertify until you get the annual reminder from your loan servicer. 

Your payments won’t change until it’s time to recertify, so you can enjoy your current payments until the deadline. On the other hand, if your income dropped, it can benefit you to recertify ASAP to get lower monthly payments sooner. 

2. Financial situation

Consider your financial situation if you want to change your student loan repayment plan. A Standard Repayment Plan is the most affordable plan available since it charges the least amount of interest. But if the higher monthly payments leaves you feeling financially strapped or your employment is tenuous, it might make more sense to get on an IDR plan.

3. Impact on loan forgiveness

If you’re pursuing student loan forgiveness, you’ll need to get on an IDR Plan. Under an IDR repayment option, you might be eligible for:

• Public Service Loan Forgiveness (PSLF) 
• Income-Driven Repayment Forgiveness

PSLF has employment requirements to qualify and eligible borrowers must make 10 years of payments. IDR forgiveness is possible after 20 to 25 years, but has no employment requirement. 

4. Future goals

Consider your future goals when evaluating repayment plan options. If you’re not interested in loan forgiveness and instead want to become debt-free ASAP, sticking to the 10-year Standard Repayment Plan is the best path forward. 

If you want more manageable payments today, and want forgiveness in the future, an IDR plan can help you reach your goals. 

Borrowers who don’t qualify for loan forgiveness, but who want to reduce costs, can consider student loan refinancing. This strategy might offer a lower interest rate overall, and is particularly ideal for private loan borrowers. 

Federal borrowers can also consider private student loan refinancing. However, it’s crucial that you weigh this option carefully. Refinancing converts your federal loan debt into a private loan. Once this occurs, you’ll be ineligible for federal benefits, like forgiveness or IDR plans. 

Should you consider the SAVE plan?

The Biden Administration launched the SAVE plan which replaces the former Revised Pay As You Earn Plan (REPAYE). If you were on the REPAYE plan, you don’t need to take any action; you’ll be automatically put on SAVE. 

For others, the SAVE plan can be an attractive option as it has numerous benefits that can lower costs. Currently, the SAVE plan has monthly payments at 10% of discretionary income. 

Starting in July 2024, that percentage will lower to 5% for borrowers for undergraduate loans only. Payments for borrowers with both undergraduate and graduate loans will be calculated as a weighted average between 5% and 10%.

The repayment term will depend on the type of loan. If you only have undergraduate loans, you’ll have a 20-year term. Borrowers with any graduate loans will have a 25-year term. 

The main benefits of SAVE are:

• The income exemption is increased from 150% to 225% of the poverty line, which can lower payments. 
• Borrowers won’t pay unpaid interest if there’s a scheduled payment on subsidized and unsubsidized loans. So if your payment doesn’t cover all of your interest, you won’t be charged the rest, which can prevent larger increases. 
• If you file taxes “married, filing separately” your spouse’s income will no longer be included in the calculation — a change from REPAYE.

Given all these major benefits, the SAVE plan might be the most affordable option for many borrowers. However, it’s not the best option for everyone so run your own calculations, based on your goals. 

When to stay on PAYE

The primary reason to stay on PAYE is if you have graduate student loans and are looking for forgiveness. PAYE has a repayment term of 20 years. SAVE has a 25-year repayment term for borrowers with graduate loans. Even though SAVE offers attractive benefits, it could keep you in repayment longer. If this sounds like your situation, use our Student Loan Forgiveness Calculator to see how the numbers add up.

Additionally, you may consider staying on PAYE if you think recertifying right now will increase your payment. Switching plans forces you to certify your income earlier than expected.

Avoid student loan repayment mistakes

If you want to change your student loan repayment plan, consider the pros and cons. 

For example, if you don’t qualify for forgiveness, and get on an IDR plan, you might receive repayment relief now, but pay more interest overall. Conversely, a plan with higher monthly payments can get you out of student loan debt faster, but might be financially burdensome. 

If you need guidance on the best move for your specific situation, speak with a knowledgeable Student Loan Planner consultant.