Student Loans: Income-Based Repayment Plans Versus Refinancing
Student Loan Refinancing
You can lower your monthly student loan payments. How you should do it depends on your circumstances.
Student loan debt is becoming an increasingly large challenge facing millions of Americans. In the U.S., 45 million borrowers owe nearly $1.6 trillion in student loan debt.1 Managing student loan debt can make it more difficult to keep up with bills, save for retirement, or even keep up with basic needs like food and housing. Rising costs to cover other essentials such as groceries and healthcare make it even harder.
Finding relief may be more important than ever. If you are looking to lower your monthly student loan payments, you may consider income-based repayment plans or refinancing. Each has its own set of benefits and drawbacks. Understanding the differences can help you determine which option would work best for your situation.
Student Loan Refinancing Could Save You Thousands
Choose from a range of refinancing options and receive a special rate discount. Medical resident and fellow programs are available.
Income-Based Repayment Plans
These plans are designed to make monthly payments more affordable by considering your income and family size. If your income decreases, these plans provide options to temporarily lower or pause payments. There are three available plans with varying terms: income-based repayment (I.B.R), income-contingent repayment (I.C.R.) and pay-as-you-earn (PAYE).
It’s important to keep in mind that I.C.R. and PAYE plans are scheduled to be discontinued by July 1, 2028.3 However, if refinancing isn’t an option for you, an I.C.R. or PAYE plan may lower your monthly payments for the time being. Lower payment means extending your repayment term, which can result in a longer time to pay off your loans and potentially more interest accrual over time. These plans are only available for federal loans, so if you have any private loans, refinancing may be the better option.
Student Loan Refinancing
Refinancing offers a choice of repayment terms. Depending on your financial goals, you may want to lower your monthly payment now or save more long-term by paying off your debt faster. Regardless, refinancing allows you to qualify for a lower interest rate, so you will overall owe less. You can refinance both federal and private loans or even a combination of the two. It’s important to note that once you refinance, you will no longer be eligible for federal benefits such as income-based repayment plans. Those with poor credit may not qualify for student loan refinancing and even if you do, the terms may be less favorable. You may want to apply with a cosigner for more favorable terms.
Choosing between income-based repayment plans or refinancing depends on your current financial situation and goals. If you are interested in lowering your interest rate, see if you are eligible for student loan refinancing.
1 Quarterly Report on Household Debt and Credit: 2025:Q2. Federal Reserve Bank of New York. www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2025Q2 , August 2025.
2 On the Edge of a “Default Cliff”: New Survey Shows Student Loan Borrowers Are Struggling to Keep Up. The Institute for College Access & Success. ticas.org/affordability-2/2025-student-debt-survey-blog, December 5, 2025.
3 If You’re Struggling With Student Loans, Here’s What to Know for 2026. NY Times. www.nytimes.com/2026/01/02/business/student-loan-debt-save-plan.html, January 2, 2026.
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