Student Loan Borrowers: These 7 Federal Programs Could Help Pay Off Your Loans


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Approximately 61% of college graduates have student loan debt, according to data from the National Center for Education Statistics, and most of that money owed (more than 90%) is in the form of federal student loans. In other words, if you have student debt, you are not alone.

Federal student loan programs are funded by the federal government, and while virtually no one likes being in debt, there’s an upside here. These programs can not only help you pay for college but also repay what you owe in different ways, to suit your particular situation.

In this guide, you’ll learn about the types of federal student loans available and the tactics federal student loan borrowers can use to eliminate their debt. There’s likely to be a plan that helps you balance your budget and enjoy life while paying off what you owe.

Types of Federal Student Loans

The types of federal student loans include the following. The federal student loan program includes the Direct Loan program, and the Direct Subsidized, Unsubsidized, PLUS, and Consolidated loans exist under that umbrella.

  • Direct Subsidized loans: Direct Subsidized loans help undergraduate students (who are eligible and demonstrate financial need) cover the education costs. In terms of when the interest accrues, that doesn’t happen while you are in school at least half-time or during deferment.
  • Direct Unsubsidized loans: Direct Unsubsidized loans, on the other hand, help undergraduate, graduate, and professional students cover the costs of education. These loans are not need-based, but the government does not cover the interest while you’re in school.
  • Direct PLUS loans: Graduate or professional students and parents of dependent undergraduate students can get Direct PLUS loans. You do not have to demonstrate financial need to get a Direct PLUS loan, but you must undergo a credit check.
  • Direct Consolidation loans: Direct Consolidation loans let you combine your eligible federal student loans into a single loan with a single loan servicer. This helps reduce the complexity of paying on multiple loans.

How do you get a federal student loan? You file the Free Application for Federal Student Aid (FAFSA), and as long as you’re eligible for federal student aid, the financial aid will appear on your financial aid package at the school you apply for.

Federal Programs for Student Loan Borrowers

Among the federal programs for student loan borrowers are government grants and tax deductions, as well as federal student loan programs that can help with repayment. Among these are income-driven repayment plans, deferment and forbearance, and forgiveness. Here’s a closer look at some of your potential options as you pay off student loans (yes, you will make it happen).

1. Government Grants

Federal grants can also help cover college costs for students attending college or career school. You don’t have to pay back grant money unless you fail to meet the qualifications for the grant. (In this way, they aren’t repayment plans but coverage of educational costs upfront.)

For example, you may be able to take advantage of a Pell Grant or a Teacher Education Assistance for College and Higher Education (TEACH) grant.

  • Pell Grant: The Pell Grant is a need-based grant awarded by the US Department of Education to undergraduate students with high financial need. The Federal Pell Grant maximum is $7,395 for the 2023-2024 award year between July 1, 2023 and June 30, 2024.
  • TEACH Grant: The TEACH Grant offers funds to students who plan to teach full-time for at least four years in a high-need field. They must meet the service obligation after graduation. For example, they must work in a low-income elementary school, secondary school, or educational service agency.

2. Income-Driven Repayment Plans

When it comes time to pay off federal student loans, the Department of Education has the following income-driven repayment plans, which aim to keep student loan payments at a comfortable level:

  • Saving on a Valuable Education (SAVE) plan: The SAVE plan, which replaces the REPAYE plan, calculates your monthly payment amount based on your family size and income. It offers the possibility of forgiveness in as little as 10 years for some borrowers, and the payment cap is 10% of discretionary income and that may drop to 5% for some from the summer of 2024 onward.
  • Pay As You Earn (PAYE) Repayment plan: The PAYE plan means your monthly payments equal to 10% of your discretionary income, divided by 12. It will never amount to more in payments than the 10-year Standard Repayment plan amount. Expect a 20-year term.
  • Income-Based Repayment (IBR) plan: The IBR plan means your monthly payments are equal to 10% (15% if you’re an older borrower whose loans date to before July 1, 2014) of your discretionary income. Repayment terms are 20 years for new borrowers; 25 years for older borrowers.
  • Income-Contingent Repayment (ICR) plan: The ICR plan means you’ll make monthly payments — the lesser of what you would pay on a repayment plan with a fixed monthly payment over 12 years or 20% of your discretionary income, divided by 12. The term is typically 25 years.

3. Tax Deductions

Looking for good things about filing your taxes? Here’s one: When you claim the student loan tax deduction, you claim the interest you paid on your student loans, whether they are federal or private. You can deduct student loan interest up to $2,500; you don’t need to itemize to get the deduction.

To be eligible to deduct student loan interest, you must pay interest on a qualified federal or private student loan for you, your spouse, or a dependent child during the tax year. You must meet modified adjusted gross income (MAGI) requirements, which is your annual gross income minus certain deductions. You must not have a filing status of married filing separately, and someone else may not claim you as a dependent.

4. Military Service

You may remember the original G.I. Bill from history class, which allowed military service members to attend school after World War II. You can still get help paying for school if you currently serve in the military.

The branches of the United States Military offer loan payment programs that can help you pay off your federal student loans, such as the Air Force JAG program, Army College Loan, Army Reserve Loan, National Guard Loan, and Navy Student Loan repayment options.

Research how military loan repayment programs work for your respective military branch to potentially pay off a significant portion (or even all) of your student loan debt.

5. AmeriCorps

You can also consider using AmeriCorps as a vehicle for paying off your student loans. AmericCorps is an organization through which individuals can dedicate themselves to service and volunteering in the United States.

AmeriCorps volunteers can qualify for Public Service Loan Forgiveness (PSLF), meaning they can get their federal Direct student loans forgiven (“forgiveness” means you don’t have to pay back the loan and can stop repayment) after making 10 years (120 months) of qualifying payments. AmeriCorps service is considered the “employer” for PSLF.

6. Deferment and Forbearance

Deferment and forbearance are similar in that they allow federal loan borrowers to temporarily lower or stop making payments on their federal student loans for a certain period. The steps to achieve deferment and forbearance are also usually the same: Contact your loan servicer, submit a request, and provide the requested documentation.

However, the main difference is that interest does not accrue on some Direct Loans during a deferment. When your loan is in forbearance, you must pay the interest that accrues on your loans.

7. Forgiveness

Another option if you’re looking to pay off federal student loans could be forgiveness. As noted above, this term means that you don’t have to pay back some or all of your federal student loans.

As with serving in AmeriCorps, you may be able to get your federal student loans forgiven via the PSLF program if you work for a government or nonprofit organization. The PSLF program forgives the remaining balance on your Direct loans after you make 120 qualifying monthly payments under an accepted repayment plan and as long as you work full-time for an eligible employer.

You may also receive forgiveness of up to $17,500 on Direct Subsidized and Unsubsidized loans under the Teacher Loan Forgiveness (TLF) program. You may receive forgiveness if you teach full-time or complete five years in a low-income school or educational service agency and meet other qualifications. You may also receive forgiveness for consolidation loans, which occurs when you combine all your loans into one payment.

Note: Private student loan forgiveness is not available as it is with federal student loans. Still, there are avenues you can pursue if you are struggling to repay what you owe, such as discussing hardships with your private loan lender or seeking credit counseling.

The Takeaway

The majority of college graduates have student loan debt, and paying it off can be a stressful process. But there is help. If you have federal student loans and are looking for ways to pay them off as affordably as possible, you likely have plenty of options. Tapping into income-based repayment plans, considering military service or AmeriCorps, deferment, forbearance, or forgiveness can help you as you work to manage and eliminate those student loan payments.

For some people, refinancing their federal loans with a private loan may make sense and be a way to lower their payments or speed up their repayment schedule. However, it’s important to note the following:

  • If you refinance federal loans with a private loan, you forfeit access to federal protections and benefits, such as the deferment, forbearance, and forgiveness programs mentioned above.
  • If you refinance for an extended term, you may pay more interest over the life of the loan, so think carefully if this suits your overall financial picture.

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If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Personal loans: The pros & cons

Personal loans: The pros & cons

You might be fantasizing about what you could do with a few extra thousand dollars. You could renovate that old bathroom in your house that you hate … or pay off your credit cards … or take a trip.

And to get that money, you could win the lottery … or, wait a minute, how about getting a personal loan?

But you’ve heard mixed things about personal loans. Are personal loans bad? Will they make your financial situation worse or damage your credit?

The truth is: A personal loan is a big responsibility. Used smartly, it can be a wonderful tool. Used irresponsibly, it could damage your credit long-term. 

Related: Can I pay off a personal loan early?

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In the right situation, especially if rates for personal loans are low, taking out a personal loan might be wise.  It also helps if you’re using them wisely, like these reasons to apply for personal loans.

Let’s go back to that outdated, ugly bathroom you hate. Taking out a loan to remodel it could be beneficial. Why? Taking out home improvement loans allows you to not only renovate your home to be more enjoyable and beautiful but also can increase the value of your home. So, an investment now might help you sell the home for more later.

Keep in mind there are some key differences between personal loans vs. home equity loans, so look at both if you’re considering borrowing money for home improvement.

djiledesign/ istockphoto

It’s a common path: You take out a loan or two and rack up credit card debt on a few cards, and before you know it, you’re trying to cover five monthly payments all at different interest rates.

In this situation, loans to consolidate credit card debt can be immensely helpful. You roll all those payments into one at a single interest rate, which can often be less than what you’re paying on some credit cards. In the long run, you may save in interest and be able to pay down or pay off your debt faster.

designer491 / istockphoto

Ask yourself: If you had an emergency that cost several thousand dollars, do you have the money to cover that expense in your bank account right now? If you don’t, you’re not alone. Around half of Americans have less than three months’ worth of emergency savings set aside.

So how could you pay for unexpected expenses? A personal loan. Taking out the amount you need to cover the emergency, you’d pay it back over months or years. 

Now that we’ve looked at some of the reasons a personal loan could be a good thing, let’s look at when a personal loan is bad.

Are loans bad? Not in and of themselves. But how you use them really determines whether they will be detrimental to your financial situation. In these examples, a loan may do more harm than help.

If your credit is good, you might get offers in the mail for quick personal loans all the time. It’s tempting. Borrow $5,000 and you could have a great time at the mall!

But borrowing money for discretionary spending — that is, unnecessary things like spa services and unneeded clothing — can be a recipe for disaster. You may have a closet full of designer clothing … but you also now have a monthly loan bill to cover. And if you can’t afford to pay it, you run the risk of defaulting on the loan, which will then cause your credit score to plummet.

Maybe you took out a loan and you’re having trouble paying it, so you think taking another loan out to pay the first is a wise idea. Not so, because now you have two loans to juggle.

Now, this is a different situation than what we discussed above with debt consolidation loans. If you’re already paying loan debt, it may be wise to consolidate it. But if you’re looking to cover existing debt, a second loan won’t ultimately solve that problem. Instead, consider asking your lender to refinance the loan so you have lower monthly payments.

If you don’t have great credit, you might have assumed you’d never qualify for any kind of personal loan. But then you find an offer for a no-credit check loan. The lender won’t even look at your credit score and will lend you thousands!

Tempting, eh?

The problem is that these loans typically come with exorbitant interest rates. You’ll end up paying far more to borrow money with a no-credit check lender than any other, and that could make your credit situation even worse.


Just because you get a loan offer from one lender doesn’t mean it’s the best option for you. There are a number of different types of financing, and some will be more expensive than others. There are also loans with collateral and those without. And depending on your credit, you may also need to take out a secured loan (learn the differences between secured and unsecured loans). 

The key here is to do your research to find the most affordable financing possible.

Maybe you, like a lot of other Americans, have been struggling financially. You can’t quite make ends meet so you decide to borrow money to help pay your bills.

The problem is, if you can’t afford to pay your bills, how will you afford an additional loan payment each month? You may be better off tightening your belt for a while until things get better.


Your friend just told you about an amazing investment opportunity that you just couldn’t miss out on. The problem is that you don’t have the money in the bank to invest. So, you’re considering borrowing money. After all, it’s a sure thing and you’ll quickly make enough to pay back the loan. Right?

Investing is never guaranteed. It’s risky, and markets are volatile. You might take out a personal loan for $10,000, fully expecting to make $20,000 on the deal, but what happens if you don’t? How will you repay the loan? Trying to make money on this investment could put you in financial distress.


  • Provide capital for projects or emergencies
  • Paying a loan on time can improve your credit score
  • Capital can allow you to invest in your future (like with home remodel)

  • You must be able to afford to pay it back
  • Missing payments can make your credit score drop
  • Using a loan to cover personal expenses will not help you in the future

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originally appeared on 
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Student loan refinance loans offered through Lantern are private loans and do not have the debt forgiveness or repayment options that the federal loan program offers, or that may become available, including Income Based Repayment or Income Contingent Repayment or Pay as you Earn (PAYE).

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Terms, conditions, state restrictions, and minimum loan amounts apply. Before you apply for a secured loan, we encourage you to carefully consider whether this loan type is the right choice for you. If you can’t make your payments on a secured personal loan, you could end up losing the assets you provided for collateral. Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on the ability to meet underwriting requirements (including, but not limited to, a responsible credit history, sufficient income after monthly expenses, and availability of collateral) that will vary by lender.

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