Carrying your fair share of federal student loan debt? Rest assured, you’re far from alone.

There were a whopping 43.5 million federal student loan borrowers in the U.S. in the fourth quarter of 2022,¹ up from 38.3 million a decade ago. Individually, the average borrower owes $37,787.²

Shouldering that weight of student debt can make life challenging, particularly for folks who are already struggling to afford basic needs like rent and food. (Many people are in this boat: 31% of U.S. households receiving unemployment insurance say they’re having a “very difficult” time paying for essential household expenses.³)

However, if you’re having trouble keeping up with your federal student loan payments, there are potential solutions.

Let’s explore these programs to help you determine which is the right option. One note: Check to see if your federal student loans are actually serviced by the government, rather than a private servicer, as federal programs are only available for federal student loans serviced by the government.

Federal student loan consolidation

What is student loan restructuring?

Most federal student loans are eligible for consolidation. “Consolidation” is a fancy word that simply means you combine multiple loans into one loan.

This new loan has a fixed interest rate based on the weighted average of the interest rates of the loans being consolidated. And the new loan is called a Direct Consolidation Loan, or “DCL.”

What is the DCL program?

The DCL program is designed for federal student loan borrowers that wish to bundle their federal student loans into one single loan.⁴

The primary benefit of a DCL is that you’re only responsible for making one monthly payment instead of many.⁴

While eligibility requirements can vary depending on your circumstances, generally you’re eligible to consolidate after you graduate, leave school, or drop below half-time enrollment. Your loans must be in repayment or in the grace period in order to qualify for the DCL program.4 (You can learn more about eligibility requirements here.)

Good to know: There are no fees to apply for a DCL.⁵

What are the pros and cons of a DCL?

The main benefit of consolidating federal loans is that you now only have one payment to keep up with (and less chance of missing a payment!). But like many financial decisions, there may be drawbacks.

Consolidation often extends the period of time that you have to repay your debt, so you will likely make more payments and pay more in interest.⁴ Additionally, consolidation may cause you to lose certain benefits—such as interest rate discounts, principal rebates, or some loan cancellation benefits.⁴ Getting a DCL can also potentially raise your interest rate by a bit, since the rate of the loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1%.⁶

And, if you’re paying your current loans under an income-driven repayment plan, or if you’ve made qualifying payments toward Public Service Loan Forgiveness (PSLF), consolidating will cause you to lose credit for any payments that you’ve made thus far.⁴ On the other hand, if you have a Parent PLUS, FFEL, or Federal Perkins loan, consolidating it into a DCL may also allow you to take advantage of select income-driven repayment programs, which in turn, may allow you to be eligible for Public Service Loan Forgiveness.⁷

The limited PSLF waiver ended Oct. 31, 2022. Click here for more info.

Federal student loan repayment plans⁸

To make your payments more affordable, repayment plans can give you more time to repay your loans or can be based on your income. There are a number of different federal student loan repayment plans and understanding the tradeoffs of various options can be quite complex. Below is a summary overview of the various programs, but before making a decision, make sure to visit studentaid.gov to carefully consider pros and cons of each option and whether the various plans properly address your unique situation.

• Standard Repayment Plan: The payments under this plan are fixed in the amount that ensures you pay off the loan in 10 years. While this is usually the quickest way out of debt compared to other federal repayment plans, there are some consequences of selecting this option, especially if you are in public service and could qualify for forgiveness.
  
• Graduated Repayment Plan: This also takes 10 years to pay off your loans. The main difference is that your payments are lower at first and increase over time until the loan is paid off. This might give your more room in your budget as you start your career, but you will pay more over the life of the loan compared to the Standard Repayment Plan.
• Extended Repayment Plan: You’ll pay off your loan over 25 years, lowering your monthly payment. This could help you manage other expenses, but like the Graduated Repayment plan, you’ll pay more over time.
• Repayment plans based on your income: There are a number of different repayment plans in this category with confusing names (Pay As You Earn, Revised Pay As You Earn, Income Based, Income Sensitive, and Income Contingent Repayment Plan). If your level of student debt is high compared to your monthly income, and payments under the standard repayment plan take up a significant portion of your budget, one of these plans might be a good option for you.

The payments under these plans will not be higher than the standard repayment plan, and are typically calculated as a percentage of your income and other factors such as your family size. There is no guarantee that you will get out of student loan debt in 10 years, and it could take much longer. You also might pay much more over the lifetime of the loan.

However, an important fact is that these plans (except Income Sensitive) are a qualifying repayment plan for Public Service Loan Forgiveness.⁹

The Biden administration’s repayment plan, part of the new student loan debt relief program, could make it more affordable to pay back student loans. It caps payments at 5% of discretionary income (rather than the usual 10%), raises the amount of income that won’t count toward discretionary income, and lowers the payment term to 10 years instead of 20 for borrowers with $12,000 or less of debt. What’s more, the interest will not grow as long as monthly payments are made. Get updates and more info here. 

Federal student loan forgiveness

What is federal loan forgiveness?

Federal loan forgiveness is when the government offers to forgive part, or all, of your Federal Direct Loans. If your federal loans have been forgiven, you’ll no longer be responsible for repaying them. 

How do I qualify for federal loan forgiveness?

The Supreme Court issued a decision blocking the Biden Administration from moving forward with their one-time student debt relief plan.

Please visit StudentAid.gov/debtrelief to learn more about the actions announced following the decision and what this means for you moving forward.

There are other federal student loan forgiveness programs also available. Here are brief summaries to get you started:

1. Public Service Loan Forgiveness (PSLF): If you work full-time for a U.S. federal, state, local, or tribunal government or not-for-profit organization, PSLF will forgive the remaining balance on your Direct Loans after you’ve made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. Those payments don't have to be consecutive.¹⁰ The limited PSLF waiver ended Oct. 31, 2022. Click here for more info.
2. Teacher Loan Forgiveness: Direct and Federal Family Education Loans (FFELs) are eligible for up to $17,500 of forgiveness if you teach full-time for five complete and consecutive years at a low-income elementary school, secondary school, or educational service agency, meet other qualifications, and the loan(s) for which you are seeking forgiveness must have been made before the end of your five academic years of qualifying teaching service. You must not have had an outstanding balance on Direct or FFEL loans as of October 1, 1998, or on the date that you obtained a Direct or FFEL loan after October 1, 1998.¹⁰

Help is out there

Your student loan servicer is the company that manages and collects payments on your student loans. This company can answer any additional questions you may have about your federal student loans.

The U.S. Department of Education (DOE) automatically assigned you a federal loan servicer. If you don’t know who your servicer is, you can find it by visiting My Federal Student Aid.

For more information, check out our Student Loan Forgiveness Calculator to explore some of your key options for managing your student loans, including student loan refinancing.

¹ U.S. Department of Education. “Federal Student Aid Portfolio Summary.” Accessed December 2022

² EducationData.org. “Student Loan Debt Statistics.” Accessed December 2022

³ U.S. Census Bureau. “Household Pulse Survey.” Accessed December 2022

⁴ Studentaid.gov. “Student Loan Consolidation.” Accessed December 2022

⁵ Studentaid.gov. “Direct Consolidation Loan Application.” Accessed December 2022

⁶ Studentaid.gov. “What is the interest rate on a consolidation loan?” Accessed December 2022

⁷ Studentaid.gov. “Income-Driven Repayment Plans.” Accessed December 2022

⁸ Studentaid.gov. “Repayment Plans.” Accessed December 2022

⁹ Studentaid.gov “Public Service Loan Forgiveness.” Accessed December 2022

¹⁰ Studentaid.gov “Teacher Loan Forgiveness.” Accessed December 2022