Paying off student loans comes down to four moves: know exactly what you owe, pick the right repayment plan, cut the interest rate where you can, and send every extra dollar to the principal. The federal rules behind those moves changed a lot on July 1, 2026. The SAVE plan is gone, there are two new repayment plans, and the autopay discount got bigger. Here is how it all works now.
List every loan with its balance and rate. Stay on a federal plan you can afford, turn on autopay, and aim extra payments at the highest rate first. Do not move federal loans to a private lender until you are sure you will never need income-based payments or forgiveness.
Below: how to find what you owe, what changed for federal loans, every repayment plan that still exists, five ways to pay the balance down faster, how forgiveness and its tax bill work, when refinancing makes sense, and what to do if you cannot make the payment.
Start with what you owe
You cannot plan a payoff around a number you are guessing at. Before anything else, build one list with every loan on it.
For federal loans, log in at StudentAid.gov and open My Aid. It shows each loan, its balance, its interest rate and the company that sends your bill, which is called your loan servicer. Private loans are not listed there. Find those on your credit report or on the lender’s statements.
Write down four things for each loan: the balance, the interest rate, the minimum payment, and whether it is federal or private. That last one matters more than it looks. Almost every protection in this guide applies only to federal loans. If you are not sure how the two differ, start with federal vs. private student loans.
How the interest adds up
Federal Direct Loans charge interest every day. Federal Student Aid’s formula is your balance times your rate, divided by 365.25.
Here is an illustration. A $30,000 balance at 6.52% grows by about $5.36 a day, or roughly $163 a month. Your payment covers that interest first. Only what is left over lowers the balance. That is why a small extra payment does more than it seems: all of it goes to principal once the interest is covered.
The 6.52% is not random. It is the fixed rate on undergraduate Direct Loans first paid out between July 1, 2026 and June 30, 2027. Graduate Direct Unsubsidized Loans from the same year are 8.07%, and Direct PLUS Loans are 9.07%. Loans from earlier years carry the rate that was set the year you borrowed, and it never changes.
What changed for federal student loans
A law signed on July 4, 2025, the One Big Beautiful Bill Act, rewrote federal student loan repayment. Most of it took effect on July 1, 2026. A separate court order ended the SAVE plan. Here is what that means for you.
- SAVE is over. On March 10, 2026, a federal court blocked the Department of Education from running the SAVE plan. If your loans sat in forbearance because you were in SAVE or applied for it, you have to pick a new plan. If you do not, your servicer will move you to one.
- Two new plans exist. The Repayment Assistance Plan (RAP) bases your payment on your income. The Tiered Standard Plan is a fixed payment over 10 to 25 years, depending on how much you borrowed.
- Two older plans are on a clock. Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) will be eliminated no later than July 1, 2028. Federal Student Aid says borrowers in them must choose a new plan by June 30, 2028.
- Income-Based Repayment (IBR) stays, and it is easier to get into. You no longer need to show a partial financial hardship to enroll.
- The autopay discount went from 0.25% to 1% on eligible Direct Loans, for a limited time. More on that below.
Which rules apply to you depends on one date: when your loans were first paid out.
All of your loans were paid out before July 1, 2026, and you are not borrowing more. You keep the widest menu: Standard, Graduated, Extended, IBR, RAP, plus ICR and PAYE until they end. You can switch between the plans you qualify for at any time.
You take any new federal loan on or after July 1, 2026. Once that new loan enters repayment, all of your Direct Loans, old ones included, must be repaid under RAP or the Tiered Standard Plan. You lose IBR, ICR and PAYE even if you were already enrolled. A new Direct Consolidation Loan counts as a new loan, so think hard before you consolidate.
The federal repayment plans you can choose from
Federal plans come in two types. Fixed plans set your payment from your balance, your rate and a set number of years. Income-driven plans set it from what you earn. This is the lineup Federal Student Aid lists now.
| Plan | Who can use it | How the payment is set | How long |
|---|---|---|---|
| Standard | Borrowers whose loans were all paid out before July 1, 2026 | Fixed amount | 10 years, or 10 to 30 for consolidation loans |
| Tiered Standard | Borrowers with a Direct Loan paid out on or after July 1, 2026 | Fixed amount | 10 to 25 years, based on what you borrowed |
| Graduated | Borrowers whose loans were all paid out before July 1, 2026 | Starts low, rises about every two years | 10 years, or 10 to 30 for consolidation loans |
| Extended | Borrowers with more than $30,000 in Direct Loans, all paid out before July 1, 2026 | Fixed or graduated | Up to 25 years |
| Repayment Assistance Plan (RAP) | Most Direct Loans. Not parent PLUS loans | 1% to 10% of your adjusted gross income, divided by 12, minus $50 per dependent. At least $10 a month | Any balance left is discharged after 30 years |
| Income-Based Repayment (IBR) | Borrowers with no new loans on or after July 1, 2026 | 10% or 15% of discretionary income, never more than the 10-year Standard payment | Discharge after 20 or 25 years |
| Income-Contingent Repayment (ICR) | Borrowers with no new loans on or after July 1, 2026 | 20% of discretionary income, or a 12-year fixed payment adjusted for income, whichever is less | Discharge after 25 years. Plan ends by July 1, 2028 |
| Pay As You Earn (PAYE) | Certain newer borrowers with no new loans on or after July 1, 2026 | 10% of discretionary income, never more than the 10-year Standard payment | Discharge after 20 years. Plan ends by July 1, 2028 |
Source: Federal Student Aid’s repayment plan pages, read for this update. Eligibility has more detail than fits in a table. Check the Repayment Calculator on StudentAid.gov for the plans your loans qualify for.
A few things about that table are worth saying out loud.
If you do nothing, you get a fixed plan. Borrowers with loans paid out on or after July 1, 2026 who do not choose are placed on the Tiered Standard Plan. That can mean a higher payment than you expected.
RAP has a floor and no ceiling. The lowest payment is $10 a month, not $0. And there is no cap, so a high earner can pay more on RAP than on a fixed plan.
IBR’s two versions depend on when you first borrowed. If you first borrowed on or after July 1, 2014, it is 10% of discretionary income for 20 years. If you borrowed before that, it is 15% for 25 years.
Income-driven plans need a yearly update. You have to recertify your income and family size every year. If you give consent for Federal Student Aid to pull your tax information, it does this for you automatically.
So which plan is right? If your goal is to be done fastest and pay the least interest, a 10-year fixed plan with extra payments wins. If the fixed payment does not fit your budget, an income-driven plan keeps you out of trouble. You can still pay extra on it whenever you have the money.
Where consolidation fits
A Direct Consolidation Loan rolls several federal loans into one, with one bill. There is no fee. Your new rate is the weighted average of the old rates, rounded up to the nearest one-eighth of a percent. So it does not save you interest.
It also has real costs. Unpaid interest gets added to your principal. A longer term means more interest overall. It cannot be undone. And if you consolidate on or after July 1, 2026, the only plans left for all of your Direct Loans are RAP and Tiered Standard. Consolidate when it unlocks something you need, like getting older FFEL or Perkins loans into a plan that counts for forgiveness. Do not do it just to tidy up.
How to pay off student loans faster
Once you are on a plan you can afford, these five moves shorten the payoff. They are listed from least effort to most.
1. Turn on autopay
Autopay on a federal loan used to cut your rate by 0.25%. Starting July 1, 2026, the cut is 1% on Direct Loans paid out on or after July 1, 2012. FFEL and Perkins loans do not get the bigger cut.
It is temporary. Federal Student Aid says the 1% lasts through June 30, 2028, as long as you stay on autopay and keep repaying. It also says borrowers who are not on autopay yet have until 11:59 p.m. Eastern on December 31, 2026 to enroll through their servicer.
What is it worth? One point on a $30,000 balance is about $300 less interest in the first year. That is our math, for illustration. Your servicer can confirm whether your loans qualify.
2. Pay extra, and aim it at principal
Extra money is the biggest lever you have. Here is the same $30,000 loan at 6.52% on a 10-year schedule, with three sizes of extra payment.
| Monthly payment | Paid off in | Total interest | Interest saved |
|---|---|---|---|
| $341 (the required payment) | 10 years | About $10,914 | None |
| $391 ($50 extra) | 8 years, 4 months | About $8,921 | About $1,992 |
| $441 ($100 extra) | 7 years, 2 months | About $7,555 | About $3,359 |
| $541 ($200 extra) | 5 years, 7 months | About $5,796 | About $5,118 |
Our math, for illustration. It assumes a fixed 6.52% rate, monthly payments and no autopay discount. Your numbers will differ.
One hundred dollars a month takes almost three years off the loan. But the extra money only works if it lands on principal. Ask your servicer to apply the extra to principal, and if you have several loans, tell them which loan gets it. Then check your next statement to make sure it happened.
Where does the extra come from? Usually from a budget you can see. A set of good budgeting tools will show you where $50 or $100 is hiding. Raises, tax refunds and bonuses are the other easy source. And if cutting is not enough, here are ways to make extra money for your student loans.
MoreHow to pay off student loans fast, step by step
3. Pick an order: avalanche or snowball
If you have more than one loan, pay the minimum on all of them and send every extra dollar to one. The avalanche method picks the highest interest rate. The snowball method picks the smallest balance.
Here is an example with three loans: $4,000 at 4.5%, $11,000 at 6.52% and $15,000 at 8.07%. The minimums add up to about $349 a month on 10-year schedules. Add $150 a month on top.
| Method | Extra goes to | Debt-free in | Total interest |
|---|---|---|---|
| Minimums only | Nothing extra | 10 years | About $11,882 |
| Avalanche | The 8.07% loan first | 6 years, 2 months | About $6,725 |
| Snowball | The $4,000 loan first | 6 years, 4 months | About $7,613 |
Our math, for illustration. When a loan is paid off, its payment rolls to the next loan in line.
Avalanche saves about $888 more in this example. Snowball clears the first loan in under two years, and that early win keeps a lot of people going. Both beat minimums by more than $4,000. Pick the one you will stick with. If you carry other debt too, like credit cards, the same order applies across all of it, and our guide on how to pay off debt fast covers that plan.
4. Ask your employer for help
Some employers pay toward their workers’ student loans. Under section 127 of the tax code, an employer with a written educational assistance program can pay up to $5,250 a year toward your loans, and you owe no federal income tax on it. That limit covers tuition help and loan payments combined.
This used to be temporary. The IRS’s 2026 guide for employers says the 2025 law made it permanent for payments after 2025. Anything over $5,250 is generally taxed as wages.
Here is what the full amount does. $5,250 a year is $437.50 a month. On a $30,000 balance, that is more than the whole required payment in the example above. Ask HR whether your company has a program. Many people never do.
5. Claim the student loan interest deduction
You can deduct the student loan interest you paid during the year, up to $2,500. You do not need to itemize to take it. Interest you paid early on purpose counts too.
There is an income limit. For tax year 2025, the return most people filed in 2026, the deduction shrinks once your modified adjusted gross income passes $85,000, and it is gone at $100,000. For joint filers the range is $170,000 to $200,000. The IRS adjusts these limits, so check the current year’s figures before you file.
What is it worth? If you are in the 22% bracket and deduct the full $2,500, your federal tax bill drops by about $550. That is an illustration, not tax advice. Your servicer sends Form 1098-E if you paid $600 or more in interest. Put the refund back on the loan.
Forgiveness: who qualifies and what it costs at tax time
Federal loans have two main forgiveness paths. Both are slow, and both have rules that are easy to break by accident.
Public Service Loan Forgiveness (PSLF)
PSLF wipes out what is left on your Direct Loans after 120 qualifying monthly payments. That is at least 10 years. You have to be working full-time, which means at least 30 hours a week, for a qualifying employer the whole time.
Qualifying employers are government at any level, including the military, and 501(c)(3) nonprofits. Some other nonprofits qualify too. For-profit companies do not, and that generally includes government contractors. It is about who you work for, not what your job is.
The plan matters as much as the employer. Payments count on the income-driven plans (RAP, IBR, ICR and PAYE) and on the 10-year Standard Plan. Payments on the Tiered Standard, Graduated and Extended plans do not count. If you borrowed on or after July 1, 2026, RAP is the only plan that counts, and only payments made in full and on time.
Certify your employment every year with the PSLF Help Tool on StudentAid.gov. Do it again each time you change jobs. It is the only way to know your count is right before year 10.
One warning if you are chasing PSLF: extra payments do not help you. Every extra dollar you pay is a dollar that would have been forgiven.
Income-driven plan discharge
Stay on an income-driven plan long enough and the remaining balance is discharged: after 20 or 25 years on IBR, 25 on ICR, 20 on PAYE and 30 on RAP. Loans in default do not qualify.
Be careful switching. Federal Student Aid says progress you earn on RAP will not count toward discharge under IBR, ICR or PAYE if you move to one of those later.
The tax bill
From 2021 through 2025, a temporary law kept forgiven student loan balances out of your federal taxable income. That break covered discharges before January 1, 2026. It has ended.
Federal Student Aid now says a balance discharged under an income-driven plan could create a federal tax bill, depending on the date of the discharge. There is one exception it spells out: if you hit your repayment milestone before January 1, 2026 and the discharge was processed later, it is not subject to federal tax. Your state may tax it either way.
So if you are years into an income-driven plan and counting on discharge, plan for a tax bill on the forgiven amount. Talk to a tax professional before that year arrives.
Should you refinance your student loans?
Refinancing means a private lender pays off your loans and gives you one new loan, ideally at a lower rate. Whether it is a good idea depends almost entirely on what kind of loans you have.
Private loans: refinancing costs you very little. If your credit and income have improved since school, you may qualify for a lower rate or be able to release a cosigner. Compare the APR and the term, because a lower payment over more years can still cost more in total.
Federal loans: refinancing turns them into a private loan, and you cannot go back. The Consumer Financial Protection Bureau (CFPB) is blunt about what you give up:
- Income-driven repayment. No more payment based on what you earn.
- Federal deferment and forbearance if you lose your job or go back to school.
- Forgiveness. Private loans do not qualify for PSLF or income-driven discharge.
- A fixed rate, if you pick a variable-rate private loan. Your rate and payment can rise.
The 1% autopay discount changes the math too. A private lender has to beat your federal rate after that discount, not before it.
Refinancing federal loans can still make sense for a narrow group: a stable, high income, no chance of using PSLF, an emergency fund in the bank, and a rate offer that is clearly lower. If that is not you, keep the federal loans federal. A common middle path is to refinance only your private loans and leave the federal ones alone.
MoreCompare the best student loan refinance companies
If you cannot make the payment
Call your servicer before you miss a payment, not after. You have more options on day one than on day 91. And you never have to pay a company for help with federal loans. Your servicer does it for free.
First, try an income-driven plan. It lowers the payment to match your income and keeps you in good standing. On IBR, ICR and PAYE the payment can be as low as $0. On RAP it is at least $10.
Second, deferment or forbearance. Both pause your payments for a while. Neither is free. In most cases interest keeps adding up. Federal Student Aid’s own example: a $30,000 loan at 6% left in forbearance for a year adds $1,800 in interest. The time may also not count toward forgiveness. Use these for a short gap, like a few months between jobs. One more change to know: economic hardship and unemployment deferments will not be available on loans made on or after July 1, 2027.
What happens if you just stop paying. A federal loan is delinquent the day after a missed payment. At 90 days, your servicer reports it to the credit bureaus. At 270 days, a Direct Loan is in default. Then it gets expensive:
- The whole balance comes due at once.
- Your tax refund and federal benefits can be taken.
- Your wages can be garnished.
- You lose deferment, forbearance and your choice of repayment plan.
- You can be charged collection costs, and your credit takes years to recover.
If you are already in default, the two main ways out are loan rehabilitation and consolidation. Contact whoever sent the default notice and ask about both. A damaged score is fixable once you are current again, and here is how to improve your credit score from there.
Private loans work differently. There is no federal safety net, and the lender sets the rules. Call them early and ask what hardship options they offer.
If student loans are only part of the pile, step back and look at the whole picture. Four quick tests in how much debt is too much will tell you whether this is a payoff project or a bigger problem. And build a small emergency fund before you throw every spare dollar at the loans, so one car repair does not put you behind.
Paying off student loans: common questions
Only if you are sure you will not need federal protections. Refinancing turns federal loans into a private loan, and it cannot be reversed. You give up income-driven repayment, federal deferment and forbearance, and forgiveness programs like PSLF. If your income is stable, you will never use PSLF and a lender offers a clearly lower rate, it can save money. Our list of the best student loan refinance companies shows what lenders offer.
Usually, yes. Every extra dollar goes to principal once the interest is covered, and that cuts what you pay overall. In our example, adding $100 a month to a $30,000 loan at 6.52% saves about $3,359 and ends the loan almost three years sooner. The main exception is Public Service Loan Forgiveness. If you are on track for PSLF, extra payments only shrink the amount that would be forgiven. Keep a small emergency fund before you pay extra.
For the lowest total cost, a 10-year fixed plan with extra payments on top. If that payment does not fit your budget, use an income-driven plan. Borrowers whose loans were all paid out before July 1, 2026 can still use Income-Based Repayment or the new Repayment Assistance Plan. Borrowers with a loan paid out on or after that date choose between the Repayment Assistance Plan and the Tiered Standard Plan.
It ended. On March 10, 2026, a federal court blocked the Department of Education from running the SAVE plan. Borrowers whose loans were in forbearance because of SAVE have to pick a new repayment plan. If you do not choose, your loan servicer will move you to a different plan. Use the Repayment Calculator on StudentAid.gov to compare what you qualify for.
It can be. A temporary federal law kept forgiven student loan balances out of taxable income for discharges from 2021 through 2025. That break has ended. Federal Student Aid says a balance discharged under an income-driven plan could now create a federal tax bill, depending on the discharge date. Some states tax forgiven balances too. Talk to a tax professional before your discharge year.
On a federal Direct Loan, you are delinquent the day after a missed payment. After 90 days your servicer reports it to the credit bureaus. After 270 days the loan is in default. Then the full balance comes due, your wages can be garnished, and your tax refund can be taken. Call your servicer before you miss a payment and ask about an income-driven plan.
Yes, up to $2,500 of interest paid in the year, and you do not need to itemize. For tax year 2025 the deduction phases out between $85,000 and $100,000 of modified adjusted gross income, or $170,000 and $200,000 on a joint return. Your servicer sends Form 1098-E if you paid $600 or more in interest.
