The Income-Driven Repayment Plan For Student Loan Debt.
Article By : Patrick Mansfield | U.S. Consumer Finance
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:
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.
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.
Federal Perkins Plus loans.
The payment amount for a PAYE plan is based on your: