Once you finish your schooling and complete your grace period, your federal student loans go into repayment. If you’re a recent grad, chances are that the plan you end up on is the standard repayment plan.

The standard repayment plan for student loans is one that is designed for you to pay off your loans over a period of 10 years. Here’s what you need to know about standard student loan repayment and how it works.

How the standard repayment plan works

For the most part, the 10-year standard repayment plan is just what it sounds like — your student loan payments are divided up over 10 years. You make monthly payments based on your interest rate and loan amounts, completing the process in 10 years.

With standard student loan repayment, you know exactly how much you’ll pay each month, and you know that you’ll end up paying off your student loan debt by the end of 10 years. This standard repayment doesn’t apply to private loans. Private student loans come with their own terms. 

In general, you can expect to be put on the standard repayment plan if you have the following federal student loans:

• Direct Unsubsidized
• Direct Subsidized
• Direct PLUS
• Direct Consolidation
• Unsubsidized Stafford
• Subsidized Stafford
• FFEL PLUS
• FFEL Consolidation

It’s worthing noting that standard Consolidation loan repayment is 30 years.

How is standard repayment for student loans calculated?

Similar to how you’d pay off most other installment loans, your balance plus interest is calculated for the life of the loan. Then, the total is divided by 120 monthly payments. 

One quick and easy way to estimate your likely monthly payment under the 10-year standard repayment plan is to figure that your payment will be 1% of your loan balance. If you end school with $20,000 in student loans, there’s a good chance your monthly payment will be in the ballpark of $200 per month. 

Of course, at $200 per month for 120 months, you end up paying about $24,000 over 10 years. The extra is due to interest charges.

You might end up paying a little more or a little less, depending on your interest rate and balance, as well as whether you made interest payments in school or whether you had subsidized loans where the government paid your interest during college.

You should also realize that each year you have a new student loan disbursement, so you could potentially end up making multiple payments to multiple servicers. One way to streamline the process is to consolidate your federal student loans so you only have one payment. 

Consolidated loans are eligible for standard student loan repayment.

Alternatives to the standard repayment plan

If you’re not sure you can afford to make the monthly payments on the 10-year standard repayment plan, there are alternatives. However, you need to talk to your student loan servicer and ask about the options available. 

Some of your choices include the following:

Extended repayment plan

If you have at least $30,000 in federal Direct loan debt, you can have your loans amortized over the course of 25 years. With extended repayment, you have much smaller monthly payments that might be more manageable.

However, with extended repayment, your interest charges will be higher because you’re paying over a longer period of time. Consider whether the increased monthly cash flow is with the extra cost over time.

Graduated repayment plan

You can still pay off your student loans in 10 years, but this plan helps you manage your payments early on. You have a small payment at the beginning of your repayment period, helping you manage your cash flow. Over time, payments increase until you pay off your loan in 10 years. The idea is that you’ll see an improvement in income as you move through your career, so you should be able to handle the high payments later.

Income-driven repayment

Depending on the loans you have and your financial situation, you might be able to get into a plan based on your income. There are four different plans, and each of them can help you manage your cash flow. In general, if there’s still a balance remaining after 20 or 25 years (depending on the plan), it’s forgiven. This is another situation that can result in paying more interest over time. However, if you want to avoid student loan default, it can be a good option.

Student loan forgiveness

You could also have your student loans — or at least a portion of them — forgiven. There are different programs for teachers and healthcare workers to have some of their balances forgiven, making it easier to pay down the remaining student loan debt.

Additionally, if you work for a qualifying government or nonprofit entity, you could potentially go on income-driven repayment and after making 120 payments, have your remaining balance forgiven through the Public Service Loan Forgiveness (PSLF) program. 

Student loan refinancing

Another alternative to the standard repayment plan for student loans is to refinance your loans with a private lender. When you decide to make this move, you lose access to federal programs like income-driven repayment and PSLF. However, if you’re a high earner and you want to tackle your debt even faster, refinancing can make sense — especially if you qualify for a lower interest rate.

With student loan refinancing, you turn to a private lender to help you pay off your loans. You can use refinancing to pay off both federal and private loans. It’s important to carefully consider loan terms and interest rates before moving forward. An organization like Juno can help you find good deals and leverage the power of collective membership to provide you with various options for student loan refinancing.

Bottom line

Unless you take steps to avoid it, you’ll probably be placed on the standard repayment plan when you finish your schooling. For some grads, the 10-year standard repayment plan works well, and they don’t feel a need to change things up. 

However, if standard student loan repayment isn’t right for you, research your other options to settle on a plan that works best for your financial situation.