How to repay student loans

Log in to studentaid.gov and list every federal loan: the type, the balance, the interest rate and the servicer. The servicer is the company that takes your payments, and it can change without your loans changing.

Anything not appearing there is private, and its terms are governed by the contract you signed rather than federal law.

Note the interest rates individually. Federal loans issued in different years carry different fixed rates, and knowing which is most expensive matters if you ever pay extra.

Understand subsidised versus unsubsidised. On subsidised loans the government covered interest while you studied; on unsubsidised loans interest accrued throughout and may have been added to the balance.

Check your grace period. Most federal loans give around six months after leaving school before payments begin, and interest usually accrues during it on unsubsidised loans.

Make sure your servicer has current contact details. A large share of missed payments come from borrowers who moved and never received the notices.

The standard plan spreads payments over a fixed term. It costs the least in total interest, and if you can afford it comfortably it is the cheapest way out.

Graduated plans start lower and rise over time. They suit borrowers confident of rising income, and cost more overall.

Extended plans stretch the term for larger balances, cutting the monthly figure and substantially increasing total interest.

Income-driven repayment plans set the payment as a share of discretionary income rather than as a function of the balance. At low incomes the payment can be very small, and in some circumstances zero — and a zero payment still counts as a qualifying payment for forgiveness purposes.

Income-driven plans require annual recertification of income and family size. Missing recertification can push your payment back up sharply and, on some plans, capitalise unpaid interest onto the balance. Put the date in a calendar.

You can change plans free of charge at any time. There is no penalty and no application fee — use the official loan simulator to compare what each would cost you before switching.

Public Service Loan Forgiveness cancels the remaining federal balance after 120 qualifying monthly payments made while working full time for a government body or a qualifying nonprofit. The payments need not be consecutive.

The requirements are specific and each has caught people out: the loans must be the right type, you must be on a qualifying repayment plan, the payments must be made while employed by a qualifying employer, and the employment must be full time as the programme defines it.

Submit the employer certification form annually rather than waiting until you believe you have finished. It confirms as you go that your employment and payments count, and it is far easier than reconstructing a decade of history afterwards.

Teacher loan forgiveness exists separately for eligible teachers in low-income schools, and cannot always be combined with the same payments used for public service forgiveness.

Income-driven plans also carry forgiveness of any remaining balance at the end of their repayment term, which is considerably longer than the public service route.

Discharge is different from forgiveness and is available in narrow circumstances: total and permanent disability, closure of the school while you were enrolled, or a successful borrower defence claim where an institution misled you.

Act before you miss a payment, not after. Every federal option is easier to arrange while the loan is current.

Switching to an income-driven plan is usually the first move and is free. For many borrowers in difficulty it reduces the payment more than any other option, and unlike a pause it keeps the loan progressing toward forgiveness.

Deferment and forbearance both pause payments temporarily. The distinction matters: on subsidised loans during deferment the government may cover the interest, while in forbearance interest almost always continues to accrue and is added to the balance.

Use pauses sparingly. They solve a cash-flow problem and enlarge a debt problem, and time spent in forbearance generally does not count toward forgiveness.

Private loans have none of this by right. Some lenders offer hardship programmes, but they are discretionary — contact the lender early and get any arrangement in writing.

Never pay a company for help with federal loans. Every plan change, consolidation, forgiveness application and rehabilitation is free at studentaid.gov, and firms charging fees for it are at best selling you a free service and at worst taking payments and doing nothing.

These two words are used interchangeably in advertising and they mean opposite things for your rights. Getting them confused is one of the few genuinely irreversible mistakes available to a student loan borrower.

Federal consolidation combines multiple federal loans into a single Direct Consolidation Loan. It is free, done at studentaid.gov, and the new rate is a weighted average of the old ones — so it simplifies rather than saves money. Its real value is that it can make older loan types eligible for income-driven repayment and forgiveness programmes they were previously shut out of.

The catch is that consolidating can reset progress on some forgiveness counts, so if you already have qualifying payments banked, check what happens to them before consolidating rather than after.

Private refinancing is something else entirely. A private lender pays off your federal loans and issues you a new private loan, usually at a lower advertised rate.

That lower rate is bought by permanently surrendering everything federal: income-driven repayment, Public Service Loan Forgiveness, deferment and forbearance rights, death and disability discharge, and rehabilitation after default. There is no route back — you cannot convert a private loan into a federal one.

For a borrower with high income, stable employment in the private sector and no forgiveness prospect, refinancing can genuinely save money. For anyone in public service, anyone whose income might fall, or anyone who might need those protections, it is usually a bad trade dressed up as a good rate.

Federal student loans behave unlike almost any other consumer debt in default. There is no statute of limitations, so the debt does not become unenforceable with age.

Collection does not require a court judgment. The government can garnish wages administratively, offset federal tax refunds, and in some circumstances withhold a portion of federal benefit payments.

Default also damages credit severely, can make you ineligible for further federal aid, and adds collection costs to the balance.

But there are two routes out that private debt has no equivalent for. Rehabilitation involves a series of agreed affordable payments, after which the default is removed from your credit report. Consolidation into a new loan can also resolve a default, usually faster but without the credit-report benefit.

Rehabilitation is generally available only once, so it is worth using deliberately rather than early.

If you believe your loans are being mishandled, complain to the Federal Student Aid feedback system and to the Department of Education. Servicer errors are common, and documented complaints have led to corrections including reinstated forgiveness credit.