Federal Student Loan Repayment Tips

Takeaways: Federal Student Loan Repayment Options Have Changed

• The July 2025 tax and spending law launched new federal student loan repayment plan options and eliminated others.
• The outcome of various court cases could impact federal income-driven repayment plans. You can keep track of these cases on the Federal Student Aid website.
• If you don't repay your student loans, it could damage your credit and lead to your paychecks being garnished.
• Federal student loan management options include repayment plans, forbearance, deferment, forgiveness, consolidation and refinancing.

Recent Changes to Federal Student Loan Repayment

Federal student loan repayment has undergone significant changes in the past several years, with more to come. It's enough to give most borrowers whiplash.

As of June 2025, around 6 million (or 34%) of borrowers were late on their federal student loans, while 5.3 million borrowers were in default, according to the U.S. Department of Education.

Student loan payments were largely halted during the COVID-19 pandemic. Loan payments began again in October 2023, after a multi-year pause. In May 2025, the Office of Federal Student Aid resumed collections of defaulted federal student loans for the first time since March 2020.

Then, the expansive tax and spending law signed by the president on July 4, 2025 introduced new repayment plans and removed others, reducing the number of options from seven to two.

Here's initial help if you're navigating student loan repayment and wondering how it works, whether to consolidate or refinance your loan, or how your student loan payments might affect your credit. Check often for new changes — because it can be hard to keep up.

Federal Student Loan Repayment 101

Your Monthly Payments

If you have a subsidized federal loan and attend school at least part-time, you don't have to make payments while you're in school. Interest doesn't accrue (get added to your borrowed total). Any payments made go to your loan principal — or balance — reducing the amount of interest and the total you'll repay over time.

The rules are different for an unsubsidized federal loan, parent loan or Grad Plus loan. After your initial grace period, your loan begins accruing interest while you're in school. Payments are applied to accrued interest and fees, and the remainder goes toward principal. Check your loan balance with your loan servicer to see how your past payments were applied.

You'll be required to make federal student loan payments six months after you graduate or leave school. This is your "grace period.") A loan servicer accepts, applies and manages your payments for federal student loans.

Your loan servicer is typically the first and best place to find answers to questions about your loans and repayment plans available to you.

Federal Student Loan Repayment and Your Credit

On-time, regular payments toward your federal loans should continue to help build your credit history and raise your score.

Not making student loan payments has new consequences in 2025. Like other loans, late and missed payments on your federal student loans will negatively affect your credit. After 30 days past due, your loan servicer will typically report the delinquency to the three major credit bureaus.

Since May 2025, defaulting on federal student loans could lead to involuntary payments (such as payments deducted from your paychecks).

Due to changes included in the 2025 tax and spending law, borrowers with existing and newly defaulted federal student loans can rehabilitate their loans twice instead of once. Loan rehabilitation is the process of making consecutive, on-time loan payments according to an agreement with your loan holder (the current owner of the loan, which may be different from your loan servicer).

The borrower must also pay a minimum payment amount of $10 monthly. Loan rehabilitation can remove the default status for your student loan from your credit history.

A Note About Private Loans

If you have private student loans, your lender or servicer should provide you with information on when and how to make loan repayments. Some lenders require you to make payments while in school, and others allow you to wait until graduation.

If you don't repay your private student loans, your loans could go into default, which could lead to collections or court action.

Federal Student Loan Management Options

In short, your options for managing your student loans may include:

• Loan repayment
• Loan forgiveness
• Loan consolidation
• Loan refinancing
• Loan forbearance and deferment

Federal Loan Repayment Plans

For now, you have seven repayment plans to choose from in two broad categories: fixed and income-driven plans. You can speak to your servicer about which plan could work for you.

These options will soon be merged into just two overall programs, a standard and an income-based program. The new standard repayment option will be similar to the previous version. It features:

• Fixed monthly payments
• Fixed repayment terms ranging from 10 to 25 years
• Terms based on the amount borrowed

At present, there are four types of income-driven repayment plans, which calculate payments based on your income.

Current borrowers can remain on these existing loan repayment plans through July 1, 2028. After that date, they're scheduled to be moved to the new repayment assistance plan or a new, revised Income-Based Repayment plan.

The new repayment assistance plan is more complicated. Borrowers currently in another repayment plan can enroll in this plan, which includes payments calculated based on borrowers' total adjusted gross income, ranging from 1% to 10%. This plan will become available next year.

If You're Already In Federal Loan Repayment

Court and departmental actions have impacted borrowers enrolled in federal loan payment plans. For example, borrowers enrolled in SAVE were moved into forbearance without interest, but interest has restarted as of August 2025.

More changes were made to how the Department of Education calculates monthly payment amounts for other income-based plans, and to how deferments and forbearances can count toward forgiveness.

Switching plans to a new income-based plan could be complicated by your circumstances. Forms and the department's "Loan Simulator" are also undergoing updates. Stay abreast of current information with the Department of Education site.

Public Service Federal Student Loan Forgiveness

If you work for the government or a not-for-profit organization and have federal loans, you may qualify for Public Service Loan Forgiveness if you stay current on all processes and requirements. Additionally, learning about how forgiveness relates to your taxes might be beneficial.

However, the new 2025 legislation changed some ways that forgiveness works, so stay in touch with your servicer about changes and how payments are applied.

Federal Student Loan Consolidation

The government's Direct Loan Consolidation program combines multiple federal student loans into one larger loan you repay, typically at a fixed rate. You can't incorporate private loans into the mix.

Some recent court actions impact how loan consolidation and income-driven plans interact. In addition, consolidating could affect your eligibility to buy back certain months for borrowers pursuing Public Service Loan Forgiveness.

If you used a Direct Consolidation Loan for a defaulted loan, you'll be eligible for benefits such as deferment, forbearance and loan forgiveness. You'll also be eligible to receive additional federal student aid. But consolidation won't remove the record of the defaulted loan from your credit history.

Student Loan Refinancing

Student loan refinancing can be used for federal and private student loans, resulting in a new private loan. This loan would potentially have a lower interest rate and monthly payment than your current loans.

Financial institutions provide student loan refinancing with a variety of terms and rates. For example, BECU partners with LendKey to offer student loan refinancing for students and parents.

Research refinancing options and compare what your new terms and payments might be with the refinanced loan. Some potential benefits to look for include:

• A competitive interest rate.
• Release of the cosigner after meeting certain conditions.
• Interest rate reduction with automatic payment.

If you're approved for private loan refinancing, you might lower your rate, extend your repayment, release a cosigner and other benefits, which differ by lender.

However, you may lose repayment plan options specific to federal loans and other federal loan protections and benefits.

Deferment and Forbearance

If you're struggling to pay your federal student loan, contact your servicer as soon as possible. You may qualify for deferment or forbearance, which provides temporary relief by lowering or stopping payments. You must apply for and qualify for these programs.

Interest may continue to accrue on loans in deferment or forbearance, so speak with your servicer about your options, which could include switching to a new repayment plan.

The new legislation (PDF) made changes to student loans disbursed on or after July 1, 2025:

• Economic hardship and unemployment deferments are no longer available.
• Discretionary forbearances cannot be used for more than nine months during a 24-month period.

Reviewing Your Federal Student Loan Information

Review your servicer's account information for accuracy and upcoming budgeting. Information to verify includes:

• Contact information
• Monthly payment amount
• Payment due date
• Total owed amount
• Interest rate
• Payment plan
• Autopay enrollment
• Contact your loan servicer if any information needs to be corrected or updated

FAQ: Federal Student Loan Repayment

Q: Which Federal Student Loan Management Plan Should I Choose?

Speak with your servicer, personal finance advisor or tax expert to determine the best plan for your situation. Choosing the right loan management plan depends on:

• Your loan type
• Expected and future income
• Amount borrowed
• Repayment timelines
• Interest rates
• Forgiveness qualification
• Other factors, including ongoing litigation

Q: What Happens If I Don't Repay My Federal Student Loan?

If you don't repay your federal student loan or miss many payments, the following could happen:

• Your defaulted student loan will be reported to national credit reporting agencies.
• Your credit score and future borrowing ability might be damaged.
• Your wages could be garnished and tax refunds will be withheld to help repay the loan.
• Borrowing more money for future education could be challenging.

Q: How Can I Pay Less for Federal Student Loans?

Autopay discounts can reduce the interest rate on your federal student loan by 0.25%. To qualify for this discount, link your bank or credit union account to your student loan account. Just make sure your bank or credit union account has the funds necessary to make your monthly payment before it's withdrawn, so it doesn't bounce.

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