Federal Student Loans and Repayment
Guide last updated: April 17, 2026. Hazard class: financial. Civic education by a Concerned Parent.
The short version
Federal student loans come in several types with different repayment options, income-driven plans, and forgiveness programs. Servicers and repayment rules change frequently — verify current options at studentaid.gov. Private student loans have fewer protections. Default on federal loans triggers serious consequences but is fixable through rehabilitation or consolidation.
Types of federal student loans
- Direct Subsidized — undergraduate with financial need; government pays interest in school
- Direct Unsubsidized — undergraduate or graduate; interest accrues from disbursement
- Direct PLUS — parents of undergraduates or graduate students; credit check required
- Direct Consolidation — combines multiple federal loans into one
- Perkins (old) — discontinued 2017; existing loans continue under old terms
- FFEL (old) — guaranteed by the government but held by private lenders; discontinued 2010
"Federal" loans originated through the government; "private" student loans originated through banks or private lenders are not covered by federal rules like income-driven repayment or forgiveness.
Income-driven repayment (IDR) plans
Available IDR plans as of early 2026 (subject to regulatory change):
- SAVE (Saving on a Valuable Education) — successor to REPAYE; status has been affected by litigation
- PAYE (Pay As You Earn)
- IBR (Income-Based Repayment)
- ICR (Income-Contingent Repayment)
Each plan calculates monthly payment based on discretionary income and family size, with forgiveness after 20-25 years of payments (10 years for Public Service Loan Forgiveness). The specific terms of each plan change; check current figures.
Public Service Loan Forgiveness (PSLF)
Forgives remaining federal direct loan balance after:
- 120 qualifying monthly payments (10 years)
- While working full-time for a qualifying public service employer (government agency or 501(c)(3) nonprofit)
- On a qualifying repayment plan (most IDR plans)
Certification at studentaid.gov/pslf. File annually and whenever you change jobs.
Teacher Loan Forgiveness
Up to $17,500 forgiven after 5 consecutive years of full-time teaching at a qualifying low-income school. Requires specific subject areas (math, science, special education) for the higher amount.
Total and Permanent Disability (TPD) discharge
Borrowers who are totally and permanently disabled can discharge federal student loans. Qualifying evidence:
- SSA disability determination with 5-7 year re-examination
- VA determination of service-connected disability at 100%
- Physician certification using the TPD form
Death discharge
Federal student loans are discharged upon the borrower's death. No longer considered an estate asset.
Default and consequences
Federal student loan default occurs at 270 days delinquent. Consequences include:
- Entire loan balance becomes immediately due
- Up to 15% wage garnishment (without court order)
- Tax refund offset
- Social Security benefit offset
- Credit report impact
- Loss of future federal financial aid eligibility
- Collection costs added to balance
Getting out of default
Rehabilitation
9 consecutive reasonable and affordable monthly payments (based on income) removes the default from your credit report. Use this first — it cures default one time only.
Consolidation
Consolidate defaulted loans into a new Direct Consolidation Loan. Default status remains on credit report, but new loan is not in default. Usable multiple times.
Pay in full
Rarely feasible for most borrowers. Some settlement for less than full balance is occasionally available.
Fresh Start (limited-time programs)
During certain periods (post-COVID, for instance), the Department of Education has offered programs to bring defaulted borrowers back into good standing without rehabilitation payments. Check current availability.
Private student loans
Private student loans are not eligible for federal IDR, PSLF, or TPD discharge. Options:
- Refinancing with private lenders (may lower interest rate for some borrowers — but warning: refinancing federal loans into private ones loses all federal protections)
- Deferment or forbearance (lender-specific)
- Hardship discharge in bankruptcy (recent rule changes have made this somewhat easier)
Do not refinance federal loans into private ones without careful consideration — you lose IDR, PSLF, disability discharge, and death discharge permanently.
Bankruptcy
Student loans were historically treated as nondischargeable in bankruptcy. Recent DOJ guidance (2022) and growing caselaw have made hardship discharge of student loans more accessible, particularly for older borrowers and those with permanent disability. An experienced bankruptcy attorney should analyze hardship discharge for persistent inability to repay.
Scams and predatory practices
Federal student loan "debt relief" scams are pervasive. Any company charging upfront fees to do what you can do for free (enroll in IDR, consolidate, rehabilitate) is unnecessary at best and fraudulent at worst. Only work with:
- Your loan servicer (free)
- studentaid.gov directly (free)
- Nonprofit legal aid organizations (free)
- Nonprofit credit counseling (low cost, specific certified agencies)
Free help
- studentaid.gov — authoritative federal information
- Student Loan Ombudsman (Department of Education) — for disputes with servicers that haven't been resolved
- Illinois Attorney General — Student Loan Helpline
- Legal Aid Chicago — Consumer — 312-341-1070
- National Consumer Law Center's Student Loan Borrower Assistance Project — studentloanborrowerassistance.org