Guide to Federal Student Loan Repayment Programs
The Office of Federal Student Aid, a division of the U.S. Department of Education, provides more than $112 billion in financial aid (the large majority of student loans) each year. They are likely your first stop in funding your education, and in many cases they offer the best options (if you qualify) to take out and repay loans for a wide variety of life, financial, and educational backgrounds. If you’re wondering where federal loans come from, check out this overview from U.S. News & World Report.
As a critical budgetary concern within the Department of Education, the Office of Federal Student Aid’s operations are highly regulated and swayed by the economic climate and other factors. Nevertheless, it is a major pathway for millions of students to achieve their higher educational goals.
If you’re one of the 42.7 million borrowers with federal student loans, you have a number of repayment options at your disposal.
Federal student loan repayment programs
Standard repayment
Upon graduation, federal student loan borrowers are granted a six-month grace period before their first loan payment comes due. If no action is taken, they’ll be placed in either the 10-year Standard Repayment Plan or the Tiered Standard Repayment Plan. The Standard Repayment Plan is only available for borrowers with loans disbursed prior to July 1, 2026. The Tiered Standard plan, for which the repayment period ranges from 10 years to 25 years due to the student loan balance, is only available for borrowers with loans disbursed on/after July 1, 2026.
Both the Standard Repayment Plan and the Tiered Standard Repayment Plan are fixed-payment plans, meaning the monthly payment amounts will be the same for the whole repayment period. 10 years is the shortest standard repayment term offered by the federal government. If the borrower, with loans disbursed prior to July 1, 2026, wants a longer repayment term, they must meet the balance thresholds for their requisite loans. That could qualify them for the Extended Repayment Plans. For more information on federal repayment plans, visit studentaid.gov.
Loan consolidation
If you have multiple federal student loans, you can combine them into a single Direct Consolidation Loan to help simplify repayment or to reach the balance thresholds needed to qualify for extended loan terms. Consolidation involves merging your direct loans into a single payment with one servicer, rather than paying several loan servicers. With consolidation, you forfeit your eligibility for a grace period. A Direct Consolidation Loan disbursed on or after July 1, 2026, is treated as a new loan and may limit access to older repayment plans under federal law.
Consolidating loans other than Direct Loans — such as Federal Family Education Loan (FFEL) Program loans or Federal Perkins Loans — may give you access to additional Income-Driven Repayment plans or forgiveness options.
- Interest Rate Impacts
Direct Consolidation Loans take the weighted average interest rate of all loans included in the consolidation and round that up to the nearest 1/8th percent, which can result in a higher weighted average interest rate. - Targeted Repayment
Once all loans are consolidated, borrowers can no longer implement a targeted repayment approach (paying down your highest rate loans more aggressively), since you now have one loan.
Depending on your circumstances, there may be advantages or disadvantages to loan consolidation. For more information on Direct Consolidation Loans, visit studentaid.gov/loan-consolidation.
Public Service Loan Forgiveness (PSLF)
Public Service Loan Forgiveness1 allows borrowers employed at qualifying nonprofit organizations and government entities to have their Federal Direct Loans forgiven after at least 10 years of qualifying employment and 120 qualifying payments, entirely tax free. To pursue and qualify for PSLF, you must provide paperwork, including an Employment Certification Form (ECF) filled out by each eligible employer in your work history. You will need to complete an ECF at least annually or whenever you change employers while you’re enrolled in the program. If you have questions about how to qualify for either PSLF or IDR student loan forgiveness, our student loan consultants can help you understand all your options, learn more here. For the most up-to-date information regarding PSLF, go to studentaid.gov/pslf.
Eligibility requirements for PSLF include:
- Federal Direct Loans
Federal loans that are not Direct Loans (made directly by the U.S. Department of Education) may be consolidated into Direct Loans. This is often the first step for borrowers who have a wide array of loans that may include Perkins Loans, FFEL loans, and others. Learn more at studentaid.gov/loan-consolidation. - Full-time employment at a qualifying nonprofit or government entity
Full-time employment is defined as a minimum of 30 hours per week. It is not uncommon for borrowers to fulfill the 30 hour per week requirement at a nonprofit and then work another 20 hours a week at a for-profit. This would still meet the program requirement. - Enrollment in a qualifying repayment plan
Borrowers must enroll in a qualifying repayment plan — typically, an IDR plan — to pursue PSLF. The 10-year Standard Repayment Plan is a qualifying repayment program in the pursuit of PSLF, but it would result in the borrower having the loan entirely paid off at the time of forgiveness. - 120 qualifying payments
Participants will need to make 120 on-time qualifying payments over 10 years to qualify for tax-free PSLF forgiveness of any remaining balance. These payments do not need to be consecutive, so if a borrower worked in the private sector for a period of time and came back, they’d pick up where they left off progress-wise. Unfortunately, borrowers can’t accelerate the payments by paying extra to get to the forgiveness point early.
Deferment or forbearance
Deferment and forbearance are a temporary period when the payment towards federal student loans is postponed. Interest is still accruing during this period and will capitalize at the end of the deferment or forbearance. The type and length of the deferment or forbearance are subject to eligibility and are at the discretion of the servicer. Pay off and forgiveness dates are extended anytime a deferment or forbearance is applied to the account. Because of the impact on interest and extension of pay off and forgiveness dates, it might be worth exploring all repayment options before considering a deferment or forbearance. For more information, go to the Federal Student Aid website at studentaid.gov.
Student loan refinancing
Private student loan refinancing may allow you to take advantage of lower interest rates or a shorter loan term to potentially reduce the total amount you owe over the life of the loan. The process is simple. Borrowers pay off their original student loans — both federal and private — and obtain, if eligible, a new, lower-rate loan with different repayment terms. The refinancing of federal student loans can only be done by moving to a private lender. Note that if you refinance federal student loans with a private lender, you will lose access to federal programs, such as federal forbearance, IDR, PSLF, and any other benefits offered to federal borrowers. Learn more at studentaid.gov.
Each lender has its own criteria for determining eligibility and rates, such as credit history, total monthly debt payments, and income. Learn more about KeyBank’s private private student loan refinancing options here.