If you’re unable to make timely payments for your federal loans, the plan that you’ve started with might have to change. You can renegotiate your loan terms and sign up to one of the income-driven repayment plans available. Keep making all your payments on time until you make your decision and complete the necessary paperwork. There are several different repayment plans currently available, so we’ve listed them here. We hope you’ll find the one that works best for you.

Income-Based Repayment Plan

Income-Based Repayment Plan is available to borrowers who experience and document financial hardships. Your new monthly payment would be 10% or 15% of your income after taxes and basic living expenses, which depends on the on the time when you took your loans. Your repayment period would be extended to 20 or 25 years. Using this plan you’ll have to pay more in interest over the years, but you’ll be able to manage your monthly payments easier. The amount of money you’ll have to pay on a monthly basis is connected to your income, but it can never exceed the amount you’re currently paying with the Standard 10-year plan. You will be eligible for forgiveness after 20/25 years of regular payments, but you’ll need to pay the taxes for all debt forgiven.

Pay As Your Earn Plan

Pay As You Earn plan was introduced in 2012. It’s a bit more difficult to qualify for the PAYE. It’s available to people who have taken out a loan on or after October 1, 2007 and received a disbursement of a Direct Loan on or after October 1, 2011. Repayment period will be prolonged to 20 years and you would pay a monthly amount calculated as 10% of your income but that amount could never exceed the amount you were paying under the Standard 10-year plan. If you file taxes together with your spouse their student loan debt and income will be used to calculate your loan payment. You are also a candidate for forgiveness after 20 years of regular payments. IBR and PAYE are two of the most used repayment plans.

Revised Pay As Your Earn (REPAYE) Plan

Revised Pay As You Earn, or REPAYE program is the newest repayment program from 2015. More people are eligible for this program. It’s not required that you experience financial hardship. Once again, you lower your monthly payments to 10% of your discretionary income and the repayment period is extended to 20 for undergraduate loans and 25 years for graduate and professional student loans. This program offers forgiveness of 50% of interest on subsidized loans after three years of regular payments. Spouse’s income and the amount of their student loan debt is included in monthly payment unless proof of separation is submitted.

Income-Contingent Repayment (ICR) Plan

You are eligible for this repayment plan if you have taken Federal Direct Loans. However, this is the only repayment plan that includes Parent PLUS loans. This program is based on current monthly income and family size and the monthly amount you pay will be either 20% of your discretionary income or the amount you’d pay on a plan with fixed payments over 12 years, adjusted to your income, whichever is less. Repayment period will be extended to another 25 years. This theoretically means that you can have the highest monthly payments on this plan, so you need to make sure it pays off to choose it.

Final Thoughts

Once you choose the repayment plan you want to participate in you should fill out a Income-Driven Repayment Plan Request and provide all relevant information. You’ll have to reapply for it once a year to continue having the lowest monthly payments. The exact amount you’ll have to pay depends on the size of your family and your income, the total amount you owe and the state you live in. It’s necessary you submit all the relevant documents for renewal in a timely manner.

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