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The Income-Driven Repayment Plan For Student Loan Debt.

Article By : Patrick Mansfield | U.S. Consumer Finance
Income Drivent Repayement Plan

Income-Driven Plans for Repaying Your Student Loan.

If you have a high student loans debt to income ratio, an income-driven student loan repayment plan may help you. Based on the borrower's income, the Pay-as-You-Earn Repayment Plan, Income-Contingent Repayment Plan, and Income-Based Repayment Plan are three plans that can make student loan payments affordable. Out of the three aforementioned plans, the Pay-as-You-Earn plan typically has the lowest monthly payments. The charts shown below will allow you to compare the monthly payments among the three repayment plans. 

Income-Based Repayment Plan 

If you have a Direct Loan or FFELP loan, you may qualify for an income-based repayment, or IBR, plan. Those who have Parent PLUS Loans or a consolidation loan that consists of a Parent PLUS Loan along with other loans are not eligible for an IBR plan. Payments are calculated according to: 
  • Total debt.
  • Family size.
  • Adjusted gross income.
Per the loan terms, your loan balance can be forgiven after making 20-25 years of qualifying payments. Our calculator can help you decide if you should choose an IBR plan. 

Income-Contingent Repayment Plan

An income-contingent repayment or ICR, the plan is only available to those who have a Direct Loan. Borrowers ineligible for an ICR plan are those who have Parent PLUS Loans or a consolidation loan that consists of a Parent PLUS Loan with a repayment date occurring before 2006. The amount of the ICR monthly payments is based upon your:
  • Direct loan balance, minus Parent PLUS Loans.
  • Family size.
  • Adjusted gross income.

After making qualifying payments for 25 years, your loan may be forgiven. Use this ICR calculator to determine your monthly payment amount.

Pay-as-You-Earn Repayment Plan

With a Pay-as-You-Earn or PAYE, the repayment plan is available to borrowers who have a minimum of one Direct Loan disbursed on October 1, 2011, or any time thereafter. If you had a student loan disbursed before October 1, 2007, with an active balance by the aforementioned date, you do not qualify for a PAYE. Other types of student loans that are ineligible under a PAYE plan are:

Loans with a disbursement date before October 1, 2007.
Direct consolidation loans that paid off Federal Parent PLUS Loans or Direct Loans.
  • Federal Parent PLUS Loans.
  • FFELP loans.
  • Federal Perkins Plus loans.
  • Private loans.
The payment amount for a PAYE plan is based on your:
  • Federal student loan balance.
  • Family size.
  • Adjusted gross income.
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