If your monthly payment is high in comparison to your income, you might consider one of these plans. Most federal student loans are eligible for at least one Income-Driven Repayment Plan. If your income is low enough, your payment could be as low as $0 per month.
An Income-Driven Repayment Plan sets your monthly student loan payment at an amount that is intended to be affordable based on your income and family size.
There are four Income-Driven Repayment Plans:
- Revised Pay As You Earn (REPAYE) Plan
- Pay As You Earn (PAYE) Plan
- Income-Based Repayment (IBR) Plan
- Income-Contingent Repayment (ICR) Plan
Income-Driven Repayment Plans are 20 – 25 year plans depending on the plan you choose and the type of loans you have. Generally, your payment amount under an Income-Driven Repayment Plan is a percentage of your discretionary income. The percentage is different depending on the plan, but it generally ranges between 10-20 percent.
These plans also have potential interest subsidy benefits (with the exception of the ICR Plan) and loan forgiveness benefits.
It’s important to recertify your income and family size annually by the specified deadline. The consequences of not recertifying on time vary depending on the plan, but most plans will return to the Standard Repayment Plan or an Alternative Repayment Plan which is typically not affordable and unpaid interest will be capitalized (added to the principal balance of your loans).
If you miss your recertification date, you can still reapply. It is never too late to reapply and you can always reapply early if your income and/or family size changes to have your payments recalculated.
For more information on Income-Driven Repayment Plans, please contact your servicer or visit http://studentaid.gov/manage-loans/repayment/plans/income-driven. To help you determine your eligibility and estimate payment amounts under any of these plans, you can use http://studentaid.gov/loan-simulator/.