If you make payments for 20 years, then you may qualify for forgiveness through this option. But the payment will never exceed the standard repayment plan amount. Pay As You Earn (PAYE plan) will allow you to make payments equal to 10% of your discretionary income. After making payments for 20 years, you will receive loan forgiveness. If you were issued your first loan after July 1, 2014, then your payments will be limited to 10% of your discretionary income. After making payments for 25 years, you will be eligible for loan forgiveness.
If you were issued your first federal student loan before July 1, 2014, then your payments will be limited to 15% of your discretionary income. However, your payment will never exceed the 10-year standard repayment amount. With the income based repayment plan (IBR plan), you’ll make payments each month for 10% or 15% of your discretionary income. Since these repayment plans are based on your discretionary income, your monthly payment should become more manageable.Ĭurrently, there are four income-driven repayment plan options. You can calculate your discretionary income by finding the difference between your adjusted gross income(AGI) and 150% of the annual poverty income in your state for a family of your size. With that, you can continue to make student loan payments at a more affordable percentage of your income.Įach of these income driven repayment options is based on your discretionary income. Since many borrowers struggle to keep up with their student loan payments, the federal government has several income driven repayment plans.Īs the name suggests, the payment you’ll make is based on your income. If you have a high student loan balance, it can be difficult to make large monthly payments as you start your career. When you take out federal student loans through the Department of Education, the standard repayment schedule is ten years.īut that timeline might not be an affordable option depending on your loan balance and current income. What types of income driven repayment plans are available? Generally, a private lender won't offer this choice. Federal student loan borrowers may choose this option if it works for their budget. Your federal student loan payments can be easier to handle this way because your monthly payment amounts could be lower. Your plan is determined by your specific situation. It's a way to pay back your student loans in an affordable manner, based on your income and other factors like how many people are in your family. You've heard of income driven repayment plans.
Maybe you're a new borrower, and you're considering various student loan repayment plan options. Income driven repayment plan - what is it? Let’s take a closer look at this student loan repayment option. However, it is not the right choice for everyone. If you have a lower income with a relatively high student loan payment, then an income driven repayment plan could offer the reprieve that your budget needs. Although you will still have to make monthly student loan payments, this repayment option will take your income into account. An income driven repayment plan can help to alleviate some of the financial stress of repaying the remaining balance of your student loans.
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