WHAT ARE INCOME-DRIVEN REPAYMENT PLANS?
Income-driven repayment plans or IBR are designed to make your student loan debt more manageable by reducing your monthly payment amount. If you need to make lower monthly payments, one of the three following income-driven plans may be right for you:
Income-Based Repayment Plan (IBR Plan)
Pay As You Earn Repayment Plan (Pay As You Earn Plan)
Income-Contingent Repayment Plan (ICR Plan)
What is a Qualifying Repayment Plan?
To maximize forgiveness under the PSLF Program, you should repay your loans on one of the income-driven repayment plans (Income-Based Repayment (IBR) Plan, Pay As You Earn Repayment Plan, or the Income-Contingent Repayment (ICR) Plan), which qualify for PSLF.
Other PSLF-qualifying repayment plans are the 10-Year Standard Repayment Plan or any other repayment plan where your monthly payment amount equals or exceeds what you would pay under a 10-Year Standard Repayment Plan.
Under the IBR, Pay As You Earn, and ICR plans, your monthly payment amount will likely be lower than under any of the other PSLF-qualifying repayment plans and your repayment period will likely be longer. Because of the longer repayment period, additional interest that will accrue on your loan, and the smaller monthly payment amount, you will be left with a higher loan balance that could be forgiven.
Who is Eligible For These Plans?
IBR and Pay As You Earn Plans
Each of these plans has an eligibility requirement you must meet to qualify for the plan. In order for you to qualify, the payment that you would be required to make under the IBR or Pay As You Earn plan (based on your income and family size) must be less than what you would pay under the Standard Repayment Plan with a 10-year repayment period.
If your calculated IBR or Pay As You Earn plan payment amount (based on your income and family size) is more than what you would have to pay under the 10-year Standard Repayment Plan, you would not benefit from having your monthly payment amount based on your income, so you do not qualify.
Generally, you will meet this requirement if your federal student loan debt is higher than your annual discretionary income or represents a significant portion of your annual income.
This plan does not have an initial income eligibility requirement. Any borrower with eligible federal student loans may make payments under this plan. Under the ICR Plan, your payment is always based on your income and family size but will usually be higher than payments under the IBR and Pay As You Earn plans, and in some cases could be higher than the amount you would pay under the 10-year Standard Repayment Plan.
What Types of Loans are Eligible?
The following loans may be eligible for income-based repayment programs:
Direct Subsidized Loans
Direct Unsubsidized Loans
Direct PLUS Loans made to graduate or professional students
Direct PLUS Loans made to parents
Direct Consolidation Loans that did not repay any PLUS loans made to parents
Direct Consolidation Loans that repaid PLUS loans made to parents
Subsidized Federal Stafford Loans (from the FFEL Program)
Unsubsidized Federal Stafford Loans (from the FFEL Program)
Federal Perkins Loans
*Your loan may need to be consolidated to a new Direct Consolidation Loan in order to be eligible to qualify for an income-based program. For example, only Direct Loans may be repaid under the Pay As You Earn and ICR plans.
Will I Always Pay the Same Amount Each Month Under an
Income-Driven Repayment Plan?
When you begin making payments under an income-driven repayment plan, your monthly payment will be based on your income and family size. You must provide your loan servicer with updated income and family size information each year. Your required monthly payment amount may increase or decrease if your income or family size changes from year to year.
If your payment amount under IBR or Pay As You Earn ever increases to an amount that is greater than the amount you would pay under the 10-year Standard Repayment Plan, the following occurs:
Your repayment plan will stay the same (IBR or Pay As You Earn), but your payment will no longer be based on your income.
Your payment will be changed to the amount you would have paid under the 10-year Standard Repayment Plan, based on the loan amount you owed when you first began repayment under the IBR or Pay As You Earn plan.
Your monthly payment will never be more than the 10-year Standard Repayment Plan amount, even if your income increases.
If your income or family size changes so that your calculated monthly payment would once again be less than the 10-year Standard Repayment Plan amount, you will again qualify to make payments based on your income.
Under the ICR Plan, your payment is always based on your income, even if your income increases to the point that your payment is higher than the amount you would have to pay under the 10-year Standard Repayment Plan.
What if I'm in Default?
Even if you have loans in default, we can help you consolidate your loans and get you enrolled in an income-based repayment program to reduce your monthly payments. Don't wait to take action. If your loans are in default, it is crucial to get your loan back in good standing before garnishment or additional actions are taken. By enrolling in these programs, your loans will be in good standing preventing such actions.