Currently, there is a feasible repayment option for everyone, regardless of your current income. Sometimes it can be hard to get a job right after school, but the worst thing you can possibly do is cut off contact with your loan provider once you graduate. Most people have the option to apply for a $0 a month repayment plan if unemployed. Remaining in close contact with your provider will keep your loans out of default even if you cannot make an immediate payment.
The Standard Repayment Plan
When you complete exit counseling upon graduation, or drop below full time, you will be prompted to choose a repayment plan. If you do not take initiative and choose one that fits your income, the Standard Plan will be applied to your account. If you accidentally let this happen, you may choose another repayment plan by filling out an application for the one of your choice. The Standard Plan is the default repayment plan for all Direct and FFEL loans. In this plan your payments are fixed, meaning that they stay the same. The payments must be at least $50 a month and will last from 10-30 years.
The Graduated Repayment Plan
This plan works a little differently between loans that are consolidated and loans that are not. For loans that are not consolidated, your monthly payments will start low and gradually increase every two years, and those payments will be made for up to 10 years. The monthly payment is not allowed to be less than the amount of interest accruing, and it is not allowed to be greater than three times any other loan payment that you have. Loans paid under the Graduated Repayment Plan that have been consolidated work a little differently. Your payments will still start out low and raise every two years, but the repayment period will be up to 30 years, depending on the total amount of debt. Like unconsolidated loans, your payment is never to be less than the amount of interest accruing between each payment, and it is never to be more than three times any other payment.
The Extended Repayment Plan
To qualify for this plan you cannot have any outstanding balances on any loans. This plan allows the borrower an extended repayment period of up to 25 years. To qualify you must also be more than $30,000 in debt from one loan. To clarify, if you have $5,000 of debt from the FFEL program and $35,000 from the Direct program, only the Direct Loan over $30,000 will qualify for the plan.
Income-driven Repayment Plan
If your loan payments are too high compared to your income, one of the Income-driven Repayment Plans may be right for you. It is a fact that most students qualify to pay back their loans under at least one of the income-driven repayment plans. These plans were designed for working families or struggling singles in an attempt to make payments more affordable based on the size of your family and your household’s overall income.
In the news recently and up for reform are the REPAYE and PAYE Plans commonly known as the Pay as You Earn Repayment Plans. Trump is proposing to combine the two repayment plans, among other changes in interest rates and length of repayment times. Under the regulations in place now, both income driven programs require payments to equal 10% of your discretionary income. The difference is that the PAYE program has a 20 year repayment period while the REPAYE loan gives an extra 5 years to graduates for a 25 year limit. Meaning that after 25 years, you no longer have to make payments.
Other Income-driven Repayment Plans
IBR stands for Income-Based Repayment. Under this plan your payments will be 10% of your discretionary income and the payment period is 10-15 years.
ICR stands for Income-Contingent Repayment Plan. In this plan payments must always be lesser than 20% of your discretionary income, or, adjusted to your income, you would pay the amount equivalent to what you would pay on a fixed payment plan over a 12 year period. The ICR is currently the only income driven option for parents who have borrowed a PLUS loan for their children. They must first consolidate to qualify.
Income-Sensitive Repayment Plan
Your monthly payments under this plan decrease and increase based on reports of your annual income. Payments are to be made for a period of 10 years maximum.
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