Can You Change Your Federal Student Loan Repayment Plan?

Federal student loan borrowers can adjust their repayment strategy to suit evolving financial situations. Changing a repayment plan can help manage monthly costs, particularly during periods of financial strain, or align payments with long-term financial goals. The process involves understanding available options and their implications.

Understanding Your Repayment Options

Federal student loan repayment plans offer various structures. The Standard Repayment Plan is the default option, featuring fixed monthly payments over a 10-year period, or between 10 and 30 years for consolidation loans. This plan typically results in the lowest total interest paid due to its shorter term.

The Graduated Repayment Plan begins with lower monthly payments that gradually increase every two years. While payments aim to pay off the loan within 10 years (or up to 30 for consolidated loans), initial lower payments can benefit those expecting income to rise. This plan may lead to paying more interest over the loan’s life compared to the Standard Plan. This option will no longer be available after July 1, 2026, due to the One Big Beautiful Bill (OBBB) signed into law on July 4, 2025.

For borrowers with larger loan balances, the Extended Repayment Plan offers a repayment period of up to 25 years. To qualify, borrowers generally need more than $30,000 in outstanding federal student loans. Payments can be fixed or graduated, and while typically lower than Standard or Graduated plans, extending the term results in more interest paid over time.

Income-Driven Repayment (IDR) plans tailor monthly payments to a borrower’s income and family size, suitable for those with lower earnings. Payments can be as low as $0 per month. Several IDR plans exist, including Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR).

The Saving on a Valuable Education (SAVE) Plan, which replaced REPAYE, offers benefits such as payments as low as 5% of discretionary income for undergraduate loans and a full interest subsidy on any unpaid interest. However, due to recent court actions, key SAVE Plan benefits, including the 0% interest rate, are currently on hold, and interest accrual for SAVE plan loans resumed on August 1, 2025. Furthermore, the OBBB mandates the elimination of PAYE, ICR, and SAVE, and phases out IBR, by July 1, 2028, introducing a new Repayment Assistance Plan (RAP) for future borrowers.

Key Considerations Before Changing Plans

Before changing a federal student loan repayment plan, borrowers should assess several factors that can significantly impact their financial future. Gathering specific financial information is a primary step, as most repayment plans, especially income-driven options, base payment calculations on income and family size. This involves providing adjusted gross income (AGI), often retrieved directly from the IRS with borrower consent, and current family size. For married individuals, both spouses’ income and loan information may be considered.

Understanding interest capitalization is important. Interest capitalization occurs when unpaid interest is added to the principal balance of a loan, increasing the total amount on which future interest accrues. This can happen when switching between certain repayment plans, particularly if moving from an income-driven plan or after periods of non-payment. For instance, if a borrower fails to recertify their Income-Based Repayment (IBR) plan, any unpaid interest may capitalize, increasing the total cost of the loan over time.

Borrowers pursuing loan forgiveness programs like Public Service Loan Forgiveness (PSLF) or Income-Driven Repayment (IDR) forgiveness, must consider how changing plans affects their progress. PSLF requires 120 qualifying payments under a qualifying repayment plan, typically an IDR plan, while employed full-time by a government or non-profit organization. IDR plans lead to forgiveness of any remaining balance after 20 or 25 years of payments. Switching to a non-qualifying plan or experiencing capitalization of interest could reset progress or increase the total amount to be repaid before forgiveness.

A change in repayment plan will result in a new monthly payment amount. Borrowers can use the Federal Student Aid Loan Simulator to estimate potential payments under different plans based on their loan details and financial information. This allows comparison of how different plans might affect their budget and total repayment cost. Considering these financial implications and the long-term effects on loan balance and potential forgiveness is part of making an informed decision.

How to Change Your Repayment Plan

Changing a federal student loan repayment plan can be initiated through several avenues. The primary method is to contact your loan servicer, the company responsible for managing your federal student loans. Loan servicers can provide guidance on available plans and assist with the application. Alternatively, borrowers can apply for income-driven repayment (IDR) plans directly through StudentAid.gov.

The application process typically involves completing a Repayment Plan Request. For IDR plans, this is the Income-Driven Repayment Plan Request. When applying online via StudentAid.gov, borrowers will need their Federal Student Aid (FSA) ID to log in. The online application can often be completed quickly.

Specific documentation will be required to support the application, including personal information, family size, and financial details like income. Borrowers can provide consent for the Department of Education to access their federal tax information directly from the IRS, which can streamline the process and eliminate the need for manually uploading income proof. If a borrower has not filed taxes recently or their income has decreased, they may submit alternative documents like recent pay stubs.

After submitting the application, borrowers can expect confirmation that their request is being processed. Processing time can vary, but the loan servicer will notify the borrower once the new payment amount is determined and takes effect. Monitor your loan servicer account for updates and communications to ensure a smooth transition to the new plan.

Managing Your New Repayment Plan

Once a new repayment plan is in place, particularly an Income-Driven Repayment (IDR) plan, ongoing responsibilities are necessary to maintain its benefits. Borrowers enrolled in IDR plans are required to annually recertify their income and family size. Annual recertification ensures monthly payments remain accurately calculated based on current financial circumstances. Even if income or family size has not changed, recertification is mandatory.

Failure to recertify on time can lead to significant consequences. For most IDR plans, if recertification is missed, the monthly payment amount may increase, potentially reverting to the 10-year Standard Repayment Plan amount. Additionally, unpaid interest may capitalize, meaning it is added to the principal balance, which can increase the total cost of the loan. While borrowers typically remain on their IDR plan even if they miss recertification, the higher payments can become unmanageable. Borrowers can recertify online through the Federal Student Aid website or by submitting a paper form to their loan servicer.

Regularly monitoring your loan servicer account is prudent. This allows borrowers to stay informed about payment due dates, review account statements, and receive important communications from their servicer. Setting personal reminders for the annual recertification deadline, even though servicers typically send reminders, can help prevent missed deadlines and their associated penalties.

Borrowers should consider re-evaluating their repayment plan if significant life changes occur. Events such as a substantial change in income, an increase or decrease in family size, or considering loan consolidation, could warrant exploring whether a different repayment plan might offer more favorable terms. Management ensures the repayment plan continues to align with the borrower’s financial situation and long-term goals.