Student Loan Repayment Guide for New Grads

You've got the degree. Now you've got the student loan bill. The average 2026 graduate carries about $35,000 in federal student loan debt, and the repayment system is more complex than it should be. This guide walks you through every option so you can pick the strategy that makes the most financial sense for your situation.

What Should You Do During Your Student Loan Grace Period?

Most federal student loans have a 6-month grace period after graduation (or dropping below half-time enrollment) before payments begin. During this time:

• No payments are required on Direct Subsidized, Unsubsidized, and Grad PLUS loans
• Interest accrues on Unsubsidized and PLUS loans during the grace period (it does not accrue on Subsidized loans)
• Use this time wisely: Set up your repayment plan, build an emergency fund, and start budgeting for your new payment

If you can afford to make payments during the grace period, paying the interest that accrues on unsubsidized loans prevents it from capitalizing (being added to your principal balance). Even $50-$100/month during the grace period saves you money long-term.

Calculate your expected monthly payment with our student loan calculator.

What Are the Federal Student Loan Repayment Plans?

You have several choices for repaying federal student loans:

Standard Repayment (10-Year)

The default plan. Fixed monthly payments over 10 years. This is the fastest standard plan and the cheapest in total interest paid. On $35,000 at 5.5% interest, you'll pay about $380/month and roughly $10,600 in total interest.

Graduated Repayment

Payments start lower and increase every two years over a 10-year period. Good if you expect rising income, but you'll pay more total interest than the standard plan.

Extended Repayment

Stretches payments over up to 25 years (available if you owe more than $30,000 in Direct Loans). Lower monthly payment but significantly more total interest.

Income-Driven Repayment (IDR) Plans

These plans base your payment on income and family size. After 20-25 years of qualifying payments, any remaining balance is forgiven (though the forgiven amount may be taxable). Current IDR options include:

• SAVE Plan: The newest IDR plan. Payments are 5% of discretionary income for undergraduate loans, 10% for graduate. Note: This plan has faced legal challenges -- check the current status at studentaid.gov.
• PAYE (Pay As You Earn): 10% of discretionary income, 20-year forgiveness
• IBR (Income-Based Repayment): 10% for new borrowers, 15% for older borrowers, 20-25 year forgiveness
• ICR (Income-Contingent Repayment): 20% of discretionary income or a 12-year fixed payment adjusted for income, 25-year forgiveness

Build a budget around your loan payment with our budget calculator.

Public Service Loan Forgiveness (PSLF)

If you work full-time for a qualifying employer (government agencies, 501(c)(3) nonprofits, certain other public service organizations), PSLF forgives your remaining federal loan balance after 120 qualifying monthly payments (10 years). The forgiven amount is tax-free.

Key requirements:

• Must be on an IDR plan or the Standard 10-Year plan (IDR is usually better since it results in lower payments and a larger forgiven amount)
• Must make payments while employed full-time by a qualifying employer
• Only Direct Loans qualify (consolidate FFEL or Perkins loans into a Direct Consolidation Loan first)
• Submit the Employment Certification Form annually to track progress

Refinancing: When It Makes Sense

Refinancing replaces your federal loans with a private loan, ideally at a lower interest rate. This can save thousands, but you lose federal benefits:

• Good candidates for refinancing: High income, good credit (720+), no plans for PSLF or IDR forgiveness, and loans with interest rates above 5-6%
• Bad candidates: Anyone pursuing PSLF, anyone who might need IDR flexibility, unstable income
• Potential savings: Refinancing $35,000 from 6.5% to 4.5% on a 10-year term saves about $4,000 in interest

Strategies to Pay Off Loans Faster

• Pay more than the minimum: Even $50 extra/month on $35,000 at 5.5% saves $2,400 in interest and shaves 18 months off a 10-year loan
• Make biweekly payments: Pay half your monthly amount every two weeks. You'll make 26 half-payments (13 full payments) per year instead of 12.
• Target the highest-rate loan first: If you have multiple loans, focus extra payments on the highest interest rate (avalanche method)
• Apply windfalls: Tax refunds, bonuses, and raises toward your loans accelerate payoff dramatically
• Automate payments: Most servicers offer a 0.25% interest rate discount for autopay

Build a comprehensive debt payoff strategy with our debt payoff calculator.

The Bottom Line

There's no single best repayment strategy. The standard 10-year plan is cheapest in total interest. IDR plans provide flexibility if income is uncertain. PSLF offers complete forgiveness for public service workers. Refinancing works best for high earners with good credit.

Start by running your loan details through our student loan calculator to see your monthly payment under different plans, then build a realistic budget with the budget calculator to make sure you can hit your target payment consistently.