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Making Sense of Student Loan Repayment & Forgiveness

Matthew Levy Updated: May 27, 2024 • 6 min read
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Key Points:

  • There are options for student loan repayments.

  • Student loan forgiveness can significantly reduce your debt burden.

  • Even if you don't qualify for federal student loan forgiveness, student loan consolidation might be a good debt relief option.

If you’re trying to understand what options you have with your student loan repayments, you first need to understand your options. Below we are going to go through the SAVE Program, Student Loan Forgiveness, and Student Loan Consolidation. As you start to go through your options, you can find a plan that will suit your financial situation and help you stay on track with your loan repayments.

The SAVE Program is considered one of, if not the best, repayment plans for student loans.

Understanding Student Loan Repayment Options

When it comes to managing your student loans, you might wonder which student loan repayment plan is best. Here we will discuss several student loan repayment options to help you make an informed decision.

Standard Repayment Plan

The Standard Repayment Plan is the most straightforward option, where borrowers pay a fixed amount each month for up to 10 years. This plan is for those who can afford higher monthly payments and wish to pay off their loans quickly, minimizing interest costs over time.

Income-Driven Repayment Plans (IDR)

Income-Driven Repayment (IDR) plans adjust your monthly payments based on your income and family size, making them more affordable for those with lower incomes or high debt levels. These plans can also extend the repayment period, which can result in lower monthly payments but more interest paid over time.

Common IDR plans include:

  • SAVE (Saving on a Valuable Education) Plan: This new plan offers significant benefits, such as lower monthly payments and interest subsidies for those with low incomes.
  • REPAYE (Revised Pay As You Earn) Plan: REPAYE caps monthly payments at 10% of your discretionary income and offers loan forgiveness after 20 or 25 years, depending on the level of education.
  • PAYE (Pay As You Earn) Plan: PAYE also limits payments to 10% of discretionary income but requires financial hardship to qualify and offers forgiveness after 20 years.
  • IBR (Income-Based Repayment) Plan: IBR is similar to PAYE but has slightly different qualification criteria and payment caps.
  • ICR (Income-Contingent Repayment) Plan: ICR sets payments at the lesser of 20% of discretionary income or the amount you would pay on a fixed 12-year plan adjusted for income, with forgiveness after 25 years.

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SAVE Program

The SAVE (Saving on a Valuable Education) Program is considered one of, if not the best, repayment plans for student loans, especially for borrowers with low or moderate incomes. This Income-Driven Repayment (IDR) plan is designed to make monthly payments more manageable and to prevent the accumulation of unpaid interest.

The SAVE Program calculates monthly payments based on your discretionary income, so they remain affordable relative to your earnings and family size. Unlike other IDR plans, SAVE includes significant interest subsidies, so your loan balance doesn't grow even if your payments are low.

Benefits and Eligibility Criteria:

  • Lower Monthly Payments: Payments are capped at a percentage of discretionary income, potentially as low as $0 per month for qualifying borrowers.
  • Interest Subsidy: Any unpaid interest that accrues while you’re making regular payments is covered by the government, so your loan balance won’t increase during that time.
  • Loan Forgiveness: After making the equivalent of 10 years of payments for those who borrowed $12,000 or less, or up to 20-25 years depending on your total loan amount, any remaining loan balance is forgiven.

Starting in July 2024, the SAVE Program will introduce several updates:

  • Shorter Time to Forgiveness: For borrowers who originally borrowed $12,000 or less, loan forgiveness will occur after 10 years of payments. For every additional $1,000 borrowed, one additional year is added to the repayment term.
  • Reduced Payments for Undergraduate Loans: Monthly payments for those with only undergraduate loans will be cut in half, from 10% to 5% of discretionary income.

These updates make the SAVE Program an attractive debt relief option for many borrowers who are trying to repay their student loans.

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Student Loan Forgiveness

Student loan forgiveness can significantly reduce your debt burden, so you’re going to want to pay attention here if you are eligible. Various forgiveness options cater to specific types of borrowers, such as those working in public service or those enrolled in income-driven repayment plans.

Public Service Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness (PSLF) program is designed for borrowers employed in public service jobs. To qualify for PSLF, you must:

  • Work full-time for a qualifying employer, which includes government organizations, non-profit organizations, and some other public service employers.
  • Make 120 qualifying monthly payments under a qualifying repayment plan, such as an Income-Driven Repayment (IDR) plan.
  • Have Direct Loans or consolidate other federal loans into a Direct Consolidation Loan.

Once you meet these requirements, the remaining balance on your Direct Loans will be forgiven. PSLF is a great option for those dedicated to public service careers, offering huge relief after 10 years of service and payments.

Income-Driven Repayment Forgiveness

Income-Driven Repayment (IDR) plans not only make monthly payments more affordable but also offer loan forgiveness after a certain period. Here’s how it works:

  • Under IDR plans like SAVE, REPAYE, PAYE, IBR, and ICR, your monthly payments are based on your income and family size.
  • After making payments for 10 to 25 years, depending on the specific plan, any remaining loan balance is forgiven.
  • The forgiveness period varies: PAYE and IBR plans generally offer forgiveness after 20 years for new borrowers, while REPAYE and ICR plans offer it after 25 years.

IDR forgiveness can be particularly beneficial for those with high loan balances relative to their income, providing a long-term solution to manage and eventually eliminate student loan debt.

Student Loan Consolidation

Should You Consider Student Loan Consolidation?

Student loan consolidation can simplify your repayment process by combining multiple loans into a single loan with one monthly payment. However, weigh the pros and cons before deciding.


  • Simplifies loan management by merging multiple loans into one.
  • May lower monthly payments by extending the repayment term.
  • Fixed interest rate based on the weighted average of your existing loans.


  • Extending the repayment term can increase the total interest paid over time.
  • May result in the loss of borrower benefits such as interest rate discounts or principal rebates.
  • Consolidation of federal loans into a Direct Consolidation Loan can impact eligibility for certain repayment plans or forgiveness programs.

Steps to Consolidate:

  • Apply for a Direct Consolidation Loan through the Federal Student Aid website.
  • Choose your servicer and repayment plan.
  • Continue making payments on your existing loans until the consolidation process is complete.

Consolidation can impact your repayment options, so consider how it aligns with your financial goals.

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Choosing the Best Repayment Plan

Selecting the right repayment plan has several factors to consider:

  • Income and Family Size: Income-driven plans adjust payments based on your earnings and household size.
  • Loan Amount and Type: Different plans suit different loan amounts and types.
  • Repayment Goals: Whether you aim to pay off your loans quickly or need lower monthly payments.

There are some resources you can look at online to help you decide, such as:

  • Loan Simulator: Use this tool to estimate monthly payments and compare repayment plans.
  • Loan Servicers: Contact your loan servicer for personalized advice and assistance in choosing the best plan.

Conclusion/Bottom Line

When you understand what your options are for student loan repayments, you’ll be able to manage your financial future better, and eventually get out of debt. We looked at the SAVE Program, various forgiveness options, and even student loan consolidation as options here. Each will have different benefits and will impact your repayment strategy. Explore these options online and use some online resources to find the best plan for you and your situation. If you stay informed and proactive, you can make better decisions, and maybe even get some debt relief as well.


What are the different types of student loan repayment plans?

There are several types of student loan repayment plans, including: ● Standard Repayment Plan: Fixed monthly payments over 10 years. ● Graduated Repayment Plan: Payments start low and increase every two years. ● Income-Driven Repayment (IDR) Plans: Payments based on your income and family size, including SAVE, REPAYE, PAYE, IBR, and ICR. ● Extended Repayment Plan: Extended payment period up to 25 years with fixed or graduated payments. FAFSA repayment plans offer various options to help you manage your loans effectively, so you can find a plan that fits your financial situation and goals.

How do I apply for the SAVE Program?

To apply for the SAVE Program: 1. Log in to your StudentAid.gov account with your FSA ID. 2. Complete the Income-Driven Repayment (IDR) application. 3. Provide information about your income, family size, and employment status. 4. Submit proof of income or consent to access your federal tax information. 5. Review the repayment plans you qualify for and select the SAVE Program. 6. Confirm the accuracy of your information and submit the application.

Can I switch repayment plans if my situation changes?

Yes, you can switch repayment plans if your financial situation changes. To switch plans: 1. Log in to your StudentAid.gov account. 2. Complete a new IDR Plan Request or contact your loan servicer. 3. Provide updated income and family size information. 4. Review the new repayment plan options and select the one that best fits your current situation.

Written by Matthew Levy

Matthew is a freelance financial copywriter with 14+ years in financial services. He holds a Bachelor of Science degree in Economics with business and finance options and is a CFA Charterholder. He is from Vancouver, Canada, but writes from all over the world.