Income-driven repayment plans for students
Updated on October 22, 2019
Income-driven repayment (IDR) plans are meant for federal student loan borrowers to make it easier to clear loans when their debt is too high. IDR’s are based on your family size, income, state of residence and the type of federal student loan you have.
The average repayment plan for federal student loans is ten years of equal pay. However, student debt keeps rising each year with reports of 7 million borrowers owing $50000 and more. With IDR plans, borrowers can now pay off student loan debt that is higher than their income.
Here are some IDR plans and how they work.
1. Income-based repayment plan (IBR)
IBR plans are among the most generous plans available for borrowers. It is recommended for you if your monthly loan debt surpasses your income by 10%. To utilize this program, you need to prove you can’t afford the standard ten-year plan, and you borrowed after July 1st, 2014.
Loan forgiveness for this plan is after 25 years, and you pay no more than 15% of your income.
2. Income contingent repayment plan (ICR)
ICR is only available to Parent PLUS borrowers and to qualify; you must consolidate your loans. It is a good option for you if you struggle to meet the standard monthly loan repayments, but can pay more than 10% of your income each month.
Loan forgiveness is also after 25 years and payments are at 20% of your income.
3. PAYE (Pay As You Earn)
PAYE is for borrowers that took out a loan after October, 1st, 2007 and another one after October, 1st, 2011. Its monthly loan payments are capped at 10% of your discretionary income. You have to prove you can’t make the standard ten-year repayment plan to qualify.
4. REPAYE (Revised Pay As You Earn)
REPAYE is the right option for borrowers that don’t qualify for other IBR plans as it has fewer eligibility requirements. However, its terms are not as generous as the rest, and if you are married, REPAYE takes into account earning from both spouses.
Student Loanify helps students with their federal student loan applications and repayment plans. Contact us today to know which type of student loans you have.