Have you ever felt paralyzed when you have had to make a choice when there were too many options? Once, we were eating at a restaurant where the menu looked like a novel. There were hundreds of options and so many varieties that it left this slow decision maker completely paralyzed. Not only did it take me FOREVER to make a decision, but when I finally did, I felt like I had made the wrong one. Federal student loan repayment is exactly like that. There are hundreds of options, each more perplexing than the last, and no matter what repayment plan you choose, you are probably going to feel like its not right for you after all. So, how do you choose the best student loan repayment plan for you? Let’s dive in.

choose the best student loan repayment plan

(***UPDATE: if you want a break down of literally every single repayment option out there, be sure to check out my student loans simplified series. There is a post on each of the repayment plans, all in easy to understand words 😉 )

Danny’s graduation just keeps getting closer and closer which means one excellent thing: we are getting closer to having a real income. But it also means that we are getting closer and closer to having to make a decision on how we are going to tackle his MOUNTAIN of debt. So, I’ve gone through each of our options (or lack of options, but hopefully it is helpful for you). Without further ado:

Lets start off by looking at this fancy chart. You should create your own HERE as it is helpful in reviewing what the best option is for you.


We are only trying to decide between the standard repayment plan, one of the student loan forgiveness plans, or refinancing our student loans. If you’d like to see a full, thorough, simple discussion of each of the student loan repayment options make sure you check out my student loans simplified series here. 


Income Based Repayment (IBR) is one of the  student loan forgiveness programs for federal student loans. It’s often used as a catch-all term for all of the student loan forgiveness plans, rendering it even more confusing than it already is. What people usually mean when they refer to an “income based repayment” is usually an “income driven repayment,” meaning any of the income driven repayment plans like IBR, PAYE, REPAYE, ICR. The idea behind IBR is that you pay a percentage of your discretionary income every month for 20-25 years and then whatever balance remains of your student loans is forgiven the 20th or 25th year. The catch? You are taxed on whatever balance is forgiven as if you earned that amount as income the year your loans are forgiven.

To qualify you must have FFEL, Stafford/Graduate Plus loans (can’t have anything that contains Parent Plus loans)


  • Loan forgiveness. After 25 years, the remaining balance of your loans disappear.
  • Live better lifestyle immediately after graduation. This is as a result of the fact that you will  be making low monthly payments.This is appealing to people who have been students (and living like students) for more than 10 years.
  • Never have to pay more than what would be required under 10 year standard repayment plan.
  • Payments change with income.This helps ensure that your payments are affordable- if you get a job that pays less, then your payments will decrease.
  • Possibility for saving and investing money earlier
  • Doesn’t incentivize you to make lots of money (since its based off percentage (15%) of income. The more I earn, the more I pay, while interest is accruing).
  • Pay FAT taxes the year that your loan is forgiven. You are taxed on the remaining balance of your loan (which, for medical and dental students, can easily be more than $1million). Meaning, you might be paying $100k – $400k JUST IN TAXES the year your loan is “forgiven”
  • You have debt hanging over your head for 25 years
  • Your loans will earn more interest
IN SUM: Good for people who have high debt compared to income and or family size. Or who want to live a more comfortable lifestyle and not concerned about lifetime value of the loan.


PAYE is a student loan forgiveness repayment plan that requires you to pay 10% of your discretionary income for 20 years. Like all of the other federal student loan forgiveness programs, you have to make sure that you follow the rules exactly in order to qualify. All of the federal student loan forgiveness programs are needlessly complicated– PAYE is no different. So here we are breaking down PAYE into small bite size parts to make it more simple. Simple is good.

To Qualify: Must have Stafford or Graduate Plus loans that were taken out ON OR AFTER Oct, 1, 2011, or have consolidaton loans that were made on or after Oct 1, 2011 OR direct loan borrowers can qualify if they have no loans made before Oct 1, 2007.

We don’t qualify for this so I didn’t research this too hard because its too depressing on what we are missing out on. If you qualify, really consider taking advantage of this!


– 10% of your income for twenty years and then it is forgiven.
– Allows you to live comfy-ish lifestyle immediately after graduation
– total balance of your loan that you end up paying will likely be less than what you would have paid under the conventional loan option (or any other option for that matter, see chart customized to our situation above)


– you  have debt hanging over your head for 20 years.
– You’ll be taxed on the remaining balance that is forgiven plus whatever your income is that year, so that will HURT


Revised Pay as You Earn or REPAYE is one of the most popular student loan forgiveness programs for federal student loans. The idea is that you pay a percentage of your discretionary income every month for 20-25 years and then whatever balance remains of your student loans is forgiven the 20th or 25th year. You are taxed on whatever balance is forgiven as if you earned that amount as income the year your loans are forgiven. REPAYE is popular because so many people qualify for it and because of the interest subsidy it offers.

receive interest subsidy during first three years of repayment
– good option if your job is not reliable or you think for some reason you may earn LESS money in the future
– only pay 10% of whatever your income is. So if you went to school and then decided to become a SAHM for example, you would pay $0 (since your income is $0).
– good option if you don’t qualify for PAYE

– Accrue WAY more interest than other repayment options
– Get taxed (as discussed above) when your loan is forgiven


The Standard Student Loan Repayment Plan is a 10 year repayment plan that fixes your payments at a monthly rate (never less than $50) for you to pay off your loans within 10 years. I call this the “mortgage” repayment plan. It’s just like making payments on a house. You make a fixed payment over time, and eventually you pay off the balance of your loan.


– smallest amount of interest accruing
– gets rid of debt hanging over your head the fastest


– living like students for another 10 years (ideally less, since ideally you’d be throwing more money at these monthly than what is due)
– takes a lot of discipline to not spend the money you are making


Refinancing your federal student loans is a strategy that a lot of federal student loan borrowers use to pay off their student loans. Borrowers typically refinance with a private lender for two main reasons: (1) they typically enjoy lower interest rates than with federal student loans and (2) they are usually in a position where they can pay off their student loans fairly quickly (in 15 years or less). So how does refinancing your student loans work? Basically, the private lender pays off your federal student loans and then you pay back the private lender at a lower interest rate than you were paying to the federal government.

So, our expenses could look something like this next year:

Yearly expenses based on $150,000 income (ps, we don’t know what exactly our income we’ll be, so this is just a random figure I chose out of the air)
Taxes: $37,500 – 49,500 (25-33% depending on how we file)
Tithing: $15,000
Housing: $9600
Food: $5000
Standard loan: $62,000 IBR: $17,976 PAYE: $15,000 REPAYE: $15,492
Car maintenance: $500
Clothes: $500
This factors in basically no discretionary income. No gifts, no vacations, no spending for pleasure. And this could change a lot because it depends quite a bit on what our actual income is. So, I can certainly see the appeal of income driven repayment where I would only have to spend $15k a year on student loans instead of well over $60k! But very unappealing when I think about getting taxed to death in 20 years or more. And also, super unappealing to STILL be making student loan payments 20+ years from now. In the end, whatever student loan repayment plan you choose is obviously up to you. What matters most is that you make an informed decision that is best for you and your family.
What do you think? What have I not considered? What are you choosing for your student loan repayment options? Help us decide– comment below!
choose the best student loan repayment plan


  1. Get after it! If I were in your shoes I would pick the 10 year repayment. Then I would go job searching with the sole goal of making the highest income possible with the cheapest cost of living (even if that means you are living in Minnesota) then I would bust but live like I'm broke and pay that thing off As quick as I could! Then being debt free I would move where I want to live and start or buy a practice. The best day of my adult life was the day we paid off our dental school loans! Best of luck!

  2. Refinance your loans with another bank to get a lower interest rate on all or at least your highest interest loan and get it done. You don't know what taxes will be like and what kind of tax bracket you will fall under in 20-25 years. Also in order to keep your principle form increasing over that 20-25 years your gonna have to pay a couple of grand so you don't have to pay taxes on over a million dollars. I like your chart a lot though. Super helpful for me, ( I'm in Danny's class FYI)

  3. Thanks!! I think thats what we are going to go for. Super encouraging knowing that you guys are done paying it off! 🙂 Congrats!!

  4. That is kind of an option but you have to commit to public service for ten years which I'm not willing to (and Danny doesnt really have that option). Miss you!!

  5. Its such a good option if it works for you! Theres not a penalty, BUT you'll have a higher balance to pay off since more interest will accrue on your principle since you'll be paying so little on it under PAYE, if that makes sense.

  6. Thanks Dane! The only thing that freaks me out a little about refinancing is that theres no changing up my options. What if Danny's hands get chopped off and he can't be a dentist anymore? Then we don't have the option of switching over to PAYE or IBR etc. But I know the interest rates can be so much better! Ah decisions. Thats a good point about not knowing what tax bracket we'll really be in in 20 years– hadn't thought of that! We are definitely leaning more towards standard repayment and just knocking it out as fast as we can

  7. Het good "own profession" disability insurance no matter what option you choose. That will ease the hands getting chopped off nightmares!

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