Student Loan Repayment Income Driven
Income-driven repayment plans are a way to manage your federal student loan debt. If you have a high amount of student loan debt, an IDR plan might be a good option for you. Each IDR plan has its own requirements and eligibility criteria, so it’s important to review the details carefully before applying.
- Income-driven plans are based on your income and family size.
- You have several options, so you can choose the best plan for your situation.
- You can change plans at any time if it makes sense to do so with your new circumstances.
- You can apply online or in person at an office near you.
REPAYE stands for Revised Pay As You Earn, and it’s an income-driven plan. It’s one of four income-driven repayment plans available to student loan borrowers, along with Income-Based Repayment (IBR), Pay As You Earn (PAYE) and Income Contingent Repayment (ICR).
While REPAYE is not the best option for borrowers with low debt balances, it can be a good choice if you have high amounts of student debt. According to FinAid.org: “If you have a large amount of federal student loans, REPAYE might be your best option because it has the lowest monthly payment amounts among all income-driven repayment plans.”
Pay As You Earn is a repayment plan that is based on your income, family size, and the amount you owe. If you have a partial financial hardship (as determined by the Department of Education) when applying for this plan, then your monthly payment will be 10% or less of your discretionary income. Pay As You Earn offers lower monthly payments than other Income-Driven Repayment plans, so it can be helpful if you’re struggling to afford payments.
You must have a partial financial hardship to qualify for the Pay As You Earn Repayment Plan.
IBR and ICR
For many students, the Income-Based Repayment and Income-Contingent Repayment plans are similar to the Pay As You Earn program. These options are available to both undergraduate and graduate students and consolidate an entire debt into one monthly payment, making it easier to manage your finances. However, there are several differences between these programs that could make one more advantageous than another for you.
IBR is only available for undergraduate loans; therefore, if you have any graduate loans from your time in school or after graduation, ICR will apply instead of IBR. Similarly, Direct Loans (which would include Parent PLUS Loans) cannot be consolidated under IBR but can be consolidated under ICR.
What is your repayment term?
Here is a list of the standard student loan repayment terms:
- 10 years
- 20 years
- 30 years
- 40 years
IDR plans are based on your income
- Income-based repayment plans are based on your income and family size.
- You pay a percentage of your monthly income that is determined by the government, which is taken out of your paycheck before deductions like taxes.
- You may choose to change this amount (but not increase it) at any time during repayment.
- If you’re unemployed or have trouble making payments due to unemployment, economic hardship, or other factors such as military service or disability, you can apply for a deferment or forbearance until your situation improves.
Remember, your monthly payments may be higher than they would have been under the standard plan. But if you’re finding it hard to make payments on your student loans, an income-driven repayment plan could help.