Repaying Student Loans: What are my options?

Navigating the financial aid process can feel daunting, but we are here to help! One of the biggest concerns students have when considering and applying for financial aid is what options are available to support the repayment process. Are there any ways to pay less? Are there any programs that could help? MSP Director of Financial Aid Roger Maki-Schramm is here with some (tough love and) answers.

I’ll start right out by saying, this won’t be fun.  It’s like preparing your taxes.  It is necessary, and it helps greatly to be informed. 

The federal government, although well-intentioned, has managed to make the process fairly complex with no fewer than 8 different repayment options to select from when deciding how to repay your student loans.  The Department of Education (ED) contracts with 9 loan servicers to manage the job of loan repayment for them.  There are conversations happening at ED exploring the possibility of consolidating to just one federal loan servicer, and only 2-3 repayment options.

Every borrower is unique, and it depends on what your goals are.  Your goals will drive what repayment option you choose. 

One over-riding goal is to pay the least amount back that is required.  Take advantage of federal and state loan forgiveness programs, if you are eligible.  If loan forgiveness is not an option and your loan payments are manageable, you’ll pay the least amount of interest if you can manage the “standard” 10 year repayment plan.  If you have a significant amount of student loan debt, one of the income driven repayment options is for you.

One of the more popular forgiveness programs has been Public Service Loan Forgiveness (PSLF).  If you are planning to apply for PSLF then you’ll need to use one of the income-based repayment plans.  Both the PAYE and REPAYE programs would serve you well.  Consider the PAYE program if you are married and your income is very different than your spouse’s.  If you are single and not pulling in a 6 digit income, then REPAYE is probably a good choice. 

The Income Contingent Repayment (ICR) has the highest requirement of percentage of your income (20%), but is the only option if you have to consolidate a loan such as a Parent PLUS Loan.

Educate yourself on your options – this blog on loan forgiveness programs is great!  It was passed along to me recently and it had comprehensive information on several loan forgiveness programs.

If you had private education loans, they cannot be consolidated with your federal loans and are not eligible for the various repayment options, nor are they eligible for forgiveness.  However, many borrowers do well to refinance their private loans to lower the interest rate being assessed, or to get a loan with repayment terms that make it more affordable.  A service such as NerdWallet or Credible, will quickly compare various loan options.

Roger Maki-SchrammRoger Maki-Schramm is MSP’s Director of Financial Aid and Development. Learn more Financial Aid, including student scholarships and FAQs here. Have a specific Financial Aid question for Roger? Contact him at [email protected].