Income Driven Repayment Options

Income-Driven Repayment Plans (IDR) are designed to help borrowers with affordable monthly payments by capping them at a percentage of their income and family size. Eligibility for each type of plan depends on the type of loan and when the loan was taken. Here are the different IDR’s being offered: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR).

Your monthly payments are calculated initially and becomes the basis of the program that you may qualify for. Then, every year you’d have to update your income and family size so as to stay in your chosen IDR. If you have defaulted loans, you would have to get the account out of default and back to current good standing before you can apply for any IDR.

Payments under IDR can go as low as $0 per month, which is why the terms of payments are longer (240 to 300 months). You may have the flexibility of paying more so that the principal may go down faster. Just inform your servicer where to apply the extra payment to your principal. Being under IDR is a lot better than being on default and having the government garnish your taxes or wages.

Established as the Obama Student Loan Forgiveness and implemented in October 2015.

Payments and Terms: Caps monthly payments at 10% of the borrower’s discretionary income, for a term of 20 to 25 years depending on the type of loan

Loan Forgiveness: If there’s a remaining balance on the loan after the term has been completed, then the remaining amount would be 100% forgiven.

Annual Recerfication: In order to remain in the program, the Department of Education requires that borrowers would re-certify their enrollment into the program annually. That means giving updated information to the government about the borrower’s family size and income–even if there is no change at all. Failure to do so would mean being removed from the repayment plan the borrower has enrolled in.

Eligible Loans: All Direct Loan Borrowers, regardless of when the loan was applied for–except borrowers of Parent Plus Loans.

The “Pay As You Earn” Repayment Plan became available on December 21, 2012. In general, it is more favorable for borrowers than REPAYE, but only Direct Loan borrowers that took out loans during certain time periods qualify.

Payments and Terms: This program was the basis for REPAYE and it also caps monthly payments at 10% of the borrower’s discretionary income for a term of 20 years.

Loan Forgiveness: Similar to REPAYE, forgiveness will be granted towards the remaining balance after the term has been completed.

Annual Recerfication: Just like REPAYE, annual recertification is required. Failure to do so would mean being removed from Pay As You Earn and possibly revert to the original repayment plan that the borrower was in before.

Eligible Loans: Only some Direct Loan Borrowers, who had their loans applied for in July 2014.

Payments and Terms: Monthly payments under this plan are capped at 15% (or 10% for new borrowers) of the borrower’s discretionary income. Repayments may be from 10 to 20 years, shorter periods if in time, monthly income may have increased over the course of the program.

Loan Forgiveness: Forgiveness may be granted towards the remaining balance after the term is completed.

Annual Recerfication: Just like REPAYE and PAYE, annual recertification is required.

Eligible Loans: Those who have FFEL Programs and Direct Loans can apply for this IDR.

Payments and Terms: Monthly payments under this plan are estimated at less than 20% of the borrower’s discretionary income. Repayments may be from 10 to 25 years.

Loan Forgiveness: If the borrower has been paying ICR for 25 years, the remaining balance is canceled or forgiven.

Annual Recerfication: Annual recertification is also required for this repayment plan.

Eligible Loans: Borrowers who have Direct Loans Program or Direct Consolidation Program can qualify for this plan. Those who have Parent Plus Loans, they would need to have those loans consolidated first before applying for ICR.

If you would like to apply for an IDR, you may do so online with studentaid.gov or the Federal Student Aid website. You just need to login using your FSA ID. If you don’t have an FSA ID yet, you can create one from the same website. Once you have an FSA ID, the Department of Education will retrieve and verify your Federal student loan information.

You may also find out the repayment plan that can offer you the lowest monthly payment possible. Just go to the website’s loan calculator: https://studentaid.gov/loan-simulator/.

Regarding annual recertification, usually the process goes like this:

• Every year, borrowers are expected to submit updated documentation to the Department of Education about their income and family size. If there are no changes in income and family size, the borrower would still need to submit documentation that there’s no change.
• Recertification date is the date when the borrower officially started with the repayment plan (i.e. anniversary date).
• Required documents for recertification should be submitted no more than thirty-five (35) days before the anniversary date. FSA will send notification about the borrower’s upcoming recertification within those days. If you applied the IDR through your loan servicer, your servicer would be the one to help you handle your documents.
• Borrowers will be notified of their upcoming recertification as well as the consequences of failing to recertify themselves.
• If you are experiencing difficulty or hardship financially, you may request your servicer to recalculate your monthly payments. You don’t need to wait for annual recertification in order to do this.
• If you requested to recalculate your monthly payments due to financial challenges, your annual payment period would reset.