Federal Loan Repayment Plans
Income based repayment plans (IBR) are designed to make federal loan (Direct and FFEL) monthly payments affordable for a borrower. The payment is based on a percentage of the borrower’s discretionary income. That percentage is different depending on the loan and origination date. Some of the accrued interest may be taken care of under a subsidized loan, but some may be the borrower’s responsibility. Under this plan, if the borrower is not new as of July 1, 2014, any remaining federal loan balance will be forgiven after 25 years. If the borrower is new after July 1, 2014, then the repayment timeframe is 20 years. In order to qualify for IBR the monthly payment must be less than what you would pay under a standard repayment agreement with a ten year repayment period. If the borrower is part of the public interest loan forgiveness program, the balance of the federal loans will be forgiven after 10 years.
Income Contingent Repayment (ICR) plans do not have any initial income eligibility requirements. A borrower’s payment will always be based on income and family size but will normally be higher than an IBR plan. ICR is only available for Direct Loans. Under this plan, the borrower is responsible for all interest that accrues.
Standard repayment plans are ideal in that they generally offer the shortest repayment time and the least amount of interest paid due to the shortened time period. The payments are typically higher than what a borrower would pay under IBR and ICR plans. Standard repayment plans are the default choice for lenders if a borrower does not opt for a different options. The payment is at least $50 per month and your loans will be paid off in 10 years. There is also an extended repayment option which can stretch payments from 10 years to 25 years.
The lawyers at Steve Harvey Law advise clients on student loan matters, including federal and private student loans, rehabilitation, consolidation, cancellation, public interest debt forgiveness, default, delinquency, and repayment options. They can help you understand your options, deal directly with your lenders, defend you in legal proceedings, and assert claims on your behalf. Contact us to discuss how we can help.