Which Income Driven Repayment Plan Is Best

Under the standard program you make fixed monthly payments that cover your interest costs and loan balance over 10 years.

Which income driven repayment plan is best. The best income driven repayment plan is typically the repayment plan with the lowest monthly payment. Rather than choose your own income driven repayment plan you can let your student loan servicer enroll you in the plan you qualify for. The language around student loans gets confusing fast but some of the most perplexing terms have to do with income driven repayment plans. However those payments might not be affordable.

Income based repayment ibr income contingent repayment icr with an idr plan your monthly payment will depend on which plan you use and your discretionary income. Icr is most often recommended for parent plus borrowers since it s the only. Some of the other plans go up to 25. Pay as you earn paye.

Lastly there s income contingent repayment. Changes in income and marital status can affect the total cost of the loans as can plans to enroll in graduate school. The popularity of income driven repayment plans has left us with a number of plans to choose from. But if your loans are older you ll probably gravitate toward one of the other income driven plans instead.

But with four different options figuring out which has the lowest monthly payments can be challenging. Unlike standard plans which break up the loan repayment over 120 months income based plans extend payments to 20 or even 25 years reducing your monthly payment and freeing up money in your budget. Income driven repayment or idr is an umbrella term for four federal student loan repayment options. The department of education ed determines you discretionary income by comparing your adjusted gross income agi to a percentage of the poverty line based on your family size.

And possibly little direction on which one is best. So if you re a relatively new borrower paye could be the best income driven repayment plan for you as it lowers your monthly payment to 10 and caps your repayment term at 20 years. For many borrowers the best income driven repayment plan is the one with the lowest monthly loan payments. Income driven repayment plans cap your monthly payments at a certain percentage of your discretionary income.

The income contingent repayment plan is the only plan that a borrower with this loan type can opt for. Under icr your payments will be set at 20 of your discretionary income but like repaye there is no limit to how much the monthly payments can increase. The best income driven repayment plan depends on your unique financial situation circumstances and goals. This is the oldest of the income driven plans started in 1994.

Pros and cons of income based repayment plans compared to what.