There are four types of income-driven repayment plans for federal student loan debt. Each is designed to take you income into account when calculating your monthly payment, capping the payment at 10-20% of your discretionary income. They also forgive any remaining balance after your loan term, which is usually 20 or 25 years.
Read More: How Is Discretionary Income Calculated?v
The Four Income-Driven Repayment Plans:
- Income Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (RePAYE)
- Income-Contingent Repayment (ICR)
Each has its own requirements and one option may be better suited for different types of borrowers. If you are comfortable and familiar with the application process, you can contact your loan servicer to process the change in your repayment plan.
Read More: Who Is My Loan Servicer?
If you plan to apply for Public Service Loan Forgiveness, you must be enrolled in an Income-Driven Repayment Plan for your payments to qualify.
However, if you are unsure which plan is best for you and would prefer your application be submitted by an unbiased third party, contact The Student Loan Advisory Group to review all of your federal student loan debt options.
Differences Between Income-Driven Repayment Plans
|PLAN NAME||BEST FOR:|
|Income Based Repayment (IBR)||· Don’t qualify for PAYE|
· Have FFELP student loans
|Pay As You Earn (PAYE)||· Married with 2 incomes|
· Have graduate loans
· Low income potential
|Revised Pay As You Earn (RePAYE)||· Unmarried|
· No graduate loans
· High income potential
|Income-Contingent Repayment (ICR)||· Have Parent PLUS loans|
· Looking to reduce payments slightly
Income-Driven Repayment Plan Disadvantages
There is a catch for smaller monthly payments:
- You’ll likely pay more in interest
- You will have to pay taxes on the amount that is forgiven
- You have to recertify every year (income and family size)
How To Apply For An Income Driven Repayment Plan
To enroll into an income-driven payment plan you can apply online at the Federal Student Aid website or submitting a paper application to your loan servicer. If you are unsure about how to complete the process or are concerned about submitting the proper documents, you can contact The Student Loan Advisory Group to discuss our services for enrolling borrowers into the appropriate income-driven repayment plan. We’ll also help you to evaluate all of your options to ensure these types of plans are your best option.
In addition to your application, you will likely one or more of need the following documents to submit:
- Most recent Federal Tax Return
- Employer Income Verification letter
- Information regarding your family size
Still Can’t Afford Payments On An Income Driven Repayment Plan?
More than just your income is considered for qualifying for an income-driven repayment plan, such as your family size, type of loans, and whether you have to include your spouse’s income. These factors may affect how much you can truly afford each month in payments; resulting in an income-driven student loan payment not being ideal for your situation. So, what are your other options?
- You can enroll in a graduated repayment plan
- You can change to an extended graduated repayment plan
- Ask for a student loan deferment
- Request a forbearance on your student loans
- You can refinance your student loans