Paying Off Federal Student Loans in 2023

Ben Luthi

Federal student loan payments are on pause until Summer 2023, so it’s time to start thinking about your plan for paying off your debt. Paying off federal student loans can be a daunting task, but knowing all of your options can help you narrow down which approach you want to take.

First, you’ll want to establish your goals, then take a look at each method individually. Depending on the situation, you may use just one or combine multiple approaches to make the most of your strategy.

If you’re wondering how to pay off federal student loans, here’s everything you need to know.

Determine your goals for paying back government student loans

Start by thinking about what exactly you want to do with your federal student loans. Here are some of the more common goals borrowers may have.

Save money

It’s possible to achieve this goal in many different ways, but depending on your situation, it may not be feasible, at least not yet. For example, while refinancing your student loans can help you save money, that option is accessible for everyone.

If you’re not in a position right now where you can save money on your student loans, consider working toward another goal until you’re ready. Depending on your approach, you could end up saving hundreds or even thousands of dollars in interest.

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Faster payoff

This goal is specifically designed for people who can afford higher monthly payments than what they’re paying right now. It may be a lofty goal for some, but it’s worth considering, even if your situation makes it difficult right now.

With a faster payoff, you’ll not only be paying off federal student loans early — you’ll also save money on interest, freeing up that monthly cash flow for other financial goals and lifestyle needs.

Lower monthly payments

If you’re struggling to keep up with your monthly payments, this may be your top priority until your financial situation allows you to focus on other student loan goals.

Fortunately, there are several options available to lower your monthly payments. In the case of refinancing, it could even still result in less interest paid overall.

Simplify student loan payments

Student loans are disbursed once a year, so it’s possible that you’ve received loans from more than one servicer or lender. Unfortunately, this can make paying federal student loans more complicated than is necessary.

While it may not be your only goal, simplifying your payments can make your life and your student loan repayment strategy easier.

Get help with repayment

Opportunities to get help with paying back federal student loans are increasing, either through student loan forgiveness programs or through student loan repayment assistance programs.

Depending on your career path or your employer, you may be able to get help paying back some or all of your federal student debt. Just be sure to weigh all of your employment options — while getting help with your student loans is a good thing, some other career paths may offer more overall value in the long run.

Make the Grace Period Work for You

With federal student loans, you’ll have a six month grace period after graduating where no loan payments are required. However, if you find a job right after graduating, consider making payments on your loan to save on interest and pay down the principal balance of your loans.

Our favorite options for paying back federal student loans

There are a lot of different ways you can pay back government student loans. As you prepare for monthly payments to resume, consider how these top approaches can fit with your goals and your current financial situation.

Student loan refinancing

Student loan refinancing is the process of replacing one or more existing student loans with a new one through a private lender. Refinancing federal student loans could provide you with a number of benefits:

  • Lower interest rates: Depending on your creditworthiness, you may be able to secure a lower interest rate than what you’re paying right now. Even if you extend your payment term a bit, you could still potentially save hundreds or thousands of dollars on interest over the life of your new loan.
  • Reduced monthly payments: If you can get a lower interest rate, a lower monthly payment can come automatically, depending on what your new repayment term will be.
  • More flexibility with your repayment plan: With federal student loans, the standard repayment plan is 10 years, then the rest are between 20 and 30 years. If you want a bit more flexibility to shorten your federal student loan term length or get a payment that’s better tailored to your budget, student loan refinance lenders offer terms ranging from five to 25 years.
  • One monthly payment: You don’t necessarily have to refinance all of your federal student loans, but doing so would result in just one simple monthly payment going forward.

That said, there are also some drawbacks to refinancing federal student loans. Particularly, you’ll end up losing access to your federal loan benefits. This means you’ll no longer qualify for loan forgiveness programs, and you may not be eligible for certain student loan repayment assistance programs offered by government agencies.

Additionally, you won’t be able to get on an income-driven repayment plan, and private lenders typically offer less generous deferment and forbearance options.

Read our post on the pros and cons of refinancing federal student loans if you need help weighing your options.

See How Much You Can Save

Student Loan Refinance Calculator

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Student loan refinancing combines your current loans into a single loan with a new rate and term. See how much you can save by entering your loan information below, or by getting quotes from multiple lenders using Purefy’s rate comparison tool.

Step 1: Enter Current Loan Information

Loan Balance
Your remaining student loan debt to be repaid.
Interest Rate
The amount that the lender charges in interest, expressed as a percentage.
Current Monthly Payment
The total amount of your monthly student loan bill.
Add Multiple Loans to Calculate

Step 2: Enter New Loan Information

New Interest Rate
Your updated interest rate after refinancing student loans.
The length of time you have to repay your student loan debt in full.

Add Multiple Loans

Insert additional loan

Step 3: See How Much You Can Save


Lifetime Interest


New Monthly



Current Loan New Loan Savings
Rate 6.7% 4.2% 2.5%
Lifetime Interest $37,520 $22,210 $15,310
Monthly Payment $1,146 $1,018 $128

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Federal loan consolidation

If you don’t want to lose access to federal student loan benefits but want to simplify your student loan payments, a Direct Consolidation Loan can help you accomplish your goal.

Federal loan consolidation works similarly to refinancing in that you replace one or more existing loans with a new one. Some of the benefits of Direct Loan Consolidation include:

  • Potentially opt for lower monthly payments: Federal consolidation loans have repayment terms as long as 30 years, giving you the chance to reduce your monthly payments to a more manageable level, depending on your budget.
  • Gain access to certain programs: Depending on which loans you currently have, you may not be eligible for certain forgiveness programs and income-driven repayment plans. This is particularly true for Parent PLUS Loans, Federal Family Education Loan (FFEL) program loans and Perkins Loans. By consolidating, you may be able to access more benefits than you had before.
  • Choose your servicer: When you consolidate your federal loans, you can choose which loan servicer you want to work with. This can be helpful if you’ve had a bad experience with one of the servicers you currently work with.
  • Get out of default: If your federal loans are in default, you can use consolidation to remove the default status if you make three consecutive, voluntary, on-time, full monthly payments before consolidating and agree to get on an income-driven repayment plan. Just keep in mind that consolidating won’t remove the negative mark from your credit report. If you want the default removed, you’ll need to go through the rehabilitation process, which is a bit more difficult.

However, there are some disadvantages to the federal loan consolidation program, too. For example, your new interest rate will be the weighted average of all of your consolidated loans’ interest rates, rounded up to the nearest one-eighth of a percent. In other words, consolidating won’t save you money.

Also, if you have Perkins Loans, make sure you check your eligibility for Perkins Loan forgiveness before you consolidate. If you consolidate, you’ll be disqualified.

Federal student loan repayment programs

If you don’t qualify for refinancing or you want to keep your federal loans where they are, there are other repayment options that can help you reduce your monthly payments. Keep in mind that none of these will shorten your repayment below 10 years, so if you want to pay off your debt more quickly, you’ll need to choose another option.

Here’s a summary of the federal student loan repayment plans that are available beyond the standard 10-year plan.

Graduated repayment plan

Payments start out low and increase over time over 10 years. If you have a Direct Consolidation Loan, your repayment term will be within 10 to 30 years. 

Extended repayment plan

If you have more than $30,000 in student loan debt, your monthly payments may be fixed or graduated. In either case, your repayment plan will be extended to 25 years.

Revised Pay As You Earn (REPAYE) plan

This income-driven repayment plan reduces your monthly payment to 10% of your discretionary income — the difference between your annual income and 150% of the federal poverty guideline for your state of residence and family size.

It’ll also extend your repayment term to 20 years if all your loans are undergraduate loans or 25 years if you have graduate or professional study loans.

After you complete your repayment term, any remaining balance will be forgiven.

Pay As You Earn (PAYE) plan

If you’re a new borrower on or after October 1, 2007, and your loans were disbursed on or after October 1, 2011, you may qualify for the PAYE plan.

This plan reduces your monthly payment to 10% of your discretionary income (the same calculation as the REPAYE plan) and extends your repayment term to 20 years. After that time period elapses, any remaining debt will be forgiven.

Income-Based Repayment (IBR) plan

If you have high debt relative to your income, you may qualify to get on the IBR plan. With this income-driven repayment plan, your monthly payment will be reduced to 10% or 15% of your discretionary income (same calculation as PAYE and REPAYE), depending on when your first loans were disbursed.

The repayment term will be extended to 20 or 25 years, depending on when your first loans were disbursed, and any remaining balance at that time will be forgiven.

Income-Contingent Repayment (ICR) plan

This plan is available to all federal loan borrowers, but it’s unique in that it’s the only one you can get on if you have Parent PLUS Loans (and you have to consolidate your loans to qualify).

The ICR plan reduces your monthly payment to the lesser of 20% of your discretionary income — the difference between your annual income and 100% of the federal poverty guideline for your state of residence and family size — or the amount you would pay on a fixed payment plan over 12 years. If you still have a balance after 25 years, it’ll be forgiven.

Bigger monthly payments

Regardless of what payment plan you’re on or whether or not you chose to refinance or consolidate your federal student loans, a timely approach is to simply add some money to your payments every month.

Even if you can only afford a little, it can add up over time. For example, if you had $30,000 in student loans with a 6% average interest rate and a 10-year repayment plan, your monthly payment would be about $333.

If you were to add an extra $25 to your payment every month, you’d cut almost an entire year off your payment plan, and you’d save roughly $1,000 in interest.

The more you can afford to pay every month, the faster you’ll eliminate your debt and the more money you’ll save on interest charges.

Can I Apply for a Loan Forgiveness?

Depending on your career path, you may qualify for one of the few student loan forgiveness programs. More specifically, there are programs available for teachers and other public servants who work for a government agency or qualified non-profit organization. Contact your federal loan servicer to determine if you’ll need to complete an application for loan forgiveness.

Alternatively, you could qualify for student loan repayment assistance. There are government programs on both the federal and state levels for people who work in teaching, healthcare, science, public defense, the military and more.

Additionally, the number of private employers that offer student loan repayment assistance as an employee benefit is increasing. If you’re looking for a new job, consider the potential ways you can leverage your career to get help paying down your student loans.

It may not eliminate your loans altogether, but it can make them more affordable. Just keep in mind that some programs may require you to keep your federal loans, so refinancing them may cause you to lose eligibility.

Windfall payments

Whether or not you’re making additional monthly payments toward your federal student loans, you could also add other small windfalls you receive throughout the year, such as a tax refund or a performance bonus from your employer.

You don’t necessarily have to put all of the money you receive toward your student loans, but it can help to use at least some of it for the purpose of paying down your college debt.

Debt avalanche or debt snowball method

The debt avalanche method is a tried-and-true approach to paying off debts. You’ll start by paying the minimum required on all of your debts, then put additional monthly payments toward the loan with the highest interest rate.

Once that debt has been paid in full, you’ll take the amount you were putting toward that loan and add it to your minimum payment on the loan with the next-highest interest rate. You’ll continue this process until all of your loans have been paid in full.

The debt snowball method uses the same approach, but instead of targeting the loans with the highest interest rates first, you’ll focus on the accounts with the lowest balances. You won’t save as much in interest with this strategy, but it can help you gain some wins early on as you pay off lower-balance loans.

Obviously, these approaches work only if you have multiple loans, so you can’t use them if you refinance or consolidate your loans into one new one.

But if you can afford extra payments and you’re fine with keeping multiple loans and monthly payments, this can be a great way to accelerate your debt repayment and save money on interest.

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Is refinancing right for your federal student loans?

Refinancing your federal student loans can open up some opportunities to save money, pay off your debt faster and get some more flexibility than you currently have. However, there are also some downsides to getting rid of your federal loan debt.

If you think that losing access to federal student loan benefits might impact you negatively in the future, it might not be worth it to refinance your loans with a private lender, even if it can save you some money. There’s no way to reverse the process once it’s been completed, but you can always refinance at a later date when you know you won’t need federal loan benefits.

It’s also important to consider that many of the top benefits of refinancing are reserved for people with great credit and high incomes. While you can get approved with a credit score in the mid-600s and an annual income of $24,000 or more, there’s no guarantee that you’ll be able to secure a low enough interest rate to make refinancing worth it.

According to student loan statistics collected by Purefy, student loan borrowers who refinance have an average FICO score of 774 and an average annual income of $98,156. That’s not to say you need those levels to obtain a low enough interest rate to make refinancing worth it, but you’re much more likely to get the terms you’re looking for.

If you don’t qualify on your own, you can get a cosigner to help improve your chances of getting approved with favorable terms, but make sure you talk to your cosigner about their responsibility to pay if you can’t and how it might impact their credit to have the loan on their credit reports.

With all this said, it’s crucial that you take the time to think carefully about your options, including the advantages and disadvantages of each before you make a decision. While waiting to refinance may result in a higher interest rate — interest rates are set to increase in 2023 as the Federal Reserve is rumored to increase its federal funds rate, which impacts student loan interest rates — it could give you the time to make the best decision for you.

How to compare the lowest student loan refinance rates

Even if you haven’t decided that refinancing is right for you, shopping around and comparing student loan refinance interest rates can help you make an informed decision on which path to pursue with your student loan debt.

Student loan refinance lenders typically allow you to view rate quotes without submitting an official application. This prequalification process uses a soft credit check, which won’t impact your credit score. The quote won’t necessarily be what you get after a hard credit check, but it can still help you compare offers and decide which lender you want to move forward with.

Instead of going through the prequalification process with individual lenders, consider using Purefy’s rate comparison tool to get quotes from multiple lenders in one place. It’ll save you time and make it easier to compare offers side by side.

As you compare, though, make sure you’re comparing fixed rates with fixed rates and variable rates with variable rates. Variable interest rates are more appealing to lenders because they can fluctuate over time. This is why they tend to start out lower than fixed interest rates. But as market rates increase, that means you may end up paying more in interest than if you were to stick with a fixed rate.

How to choose the right student loan refinance offer

Comparing interest rates is critical to helping you narrow down your list of refinancing options, but it’s far from the only factor to consider.

If you want to get the best student loan refinance offer, look at other features, such as the repayment term and monthly payment, interest rate discounts, cosigner release options, forbearance and deferment plans, member benefits, customer satisfaction and more.

As you look at each offer holistically, it can give you a better idea of which lender can provide the best fit for you.

Once you’ve selected your lender, though, go back to comparing all of your repayment options to make sure it’s the right move for you. In addition to considering your goals, you’ll also want to consider your current financial situation and what might happen if your finances don’t turn out the way you wanted them to.

With all of this in mind, the important thing is that you thoroughly research the different approaches to determine the best way to pay back federal student loans for your financial situation and long-term goals.

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ELFI Rate Disclosure

4 ELFI Rate Disclosure:

Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 01/01/2023. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change.

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Fixed rates range from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Variable rates from 5.09% APR to 8.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

Earnest Rate Disclosure

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Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.64% APR to 9.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 4.64% APR to 9.19% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.

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5 Iowa Student Loan Rate Disclosure:

Fixed Rate Loan Terms: 5 years/60 monthly payments, 7 years/84 monthly payments, 10 years/120 monthly payments, 15 years/180 monthly payments, or 20 years/240 monthly payments. Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. This rate is expressed as an APR. Fixed APRs range from 6.94% to 11.58% APR [low to high range with 0.25% auto-debit rate reduction]. Rates are subject to change without notice. Fixed rates will not change during the term. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan including a 0.25% auto-debit rate reduction. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. All estimates are based on information provided by you and are for informational purposes only, accuracy is not guaranteed and may not reflect actual rates or savings and do not constitute an offer of credit. Your actual rate, payment and savings may be different based on credit history, actual interest rate, loan amount, and term, including your cosigner [if applicable]. If applying with a cosigner, we use the higher credit score between the borrower and the cosigner for approval purposes. All loans are subject to credit approval.

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