Income Driven Repayment Plan Explained

After 20 or 25 years depending on the terms of your loan of qualifying payments your remaining loan balance is eligible for forgiveness.

Income driven repayment plan explained. If you re currently unemployed can t work for some reason such as medical leave or maternity leave or earn too low of a salary to comfortably cover your payment obligations these plans can help ease the burden of student. Income contingent repayment icr the income contingent repayment or icr plan is the least favorable income driven repayment plan. I have about 80 000 in student loan debt and am currently on the income based repayment plan ibr plan. Here is john s story and the question.

Granted you can create a direct loan by consolidating ffel program loans. The biggest benefit of ibr is that ffel loans are eligible which isn t the case on any of the other income driven repayment plans. Income driven repayment plans explained. Income driven repayment plans are a group of federal student loan repayment plans designed to help borrowers who are having trouble affording their monthly payments.

In short these plans cap your monthly payment at a percentage typically between 10 and 20 of your discretionary income. Ford federal direct loan direct loan program and federal family education loan ffel programs. Income driven repayment plans can help student loan borrowers who have a lot of debt from school but don t earn enough money to reasonably afford the monthly payments. 6 for example if you have 35 000 in federal student loans with a 3 9 interest rate you d pay a total of 42 000 under the standard 10 year repayment plan.

This question comes from john who is trying to get a mortgage while being on an income based repayment ibr plan for his student loan debt. If a student loan borrower is married and the couple files a joint federal tax return then the annual income considered for the ibr plan will be a total of both married persons annual income. If you re in default you re also out of luck. Refer to this chart as hosted by the government s income based repayment plan page.

However if you go this route be aware that income based repayment for married people is a little different than for single borrowers. As the department of education explains the majority of federal student loans are eligible for income driven payment plans that limit the amount of money you have to pay towards your loans each month. While the standard repayment plan involves paying a fixed amount over 10 years to retire your debt income driven plans are an alternative option. Welcome to another reader question.

Income driven repayment idr plan request. For the revised pay as you earn repaye pay as you earn paye income based repayment ibr and income contingent repayment icr plans under the william d. They re only available for federal student loans so if you ve got private loans these plans can t help you.