Options to Reduce Federal Loan Payments
If you have difficulty making ends meet while making your student loan payments, there are several options available.
Keep in mind, anytime you lower your payments and extend the repayment period, you pay more interest. In some cases, forgiven loan balances may be subject to federal and/or state income taxes. Review all your options carefully and discuss with your loan servicer.
Use the Federal Student Loan Repayment Calculator to see what repayment plan will fit your needs best. You can use your FSA ID for estimates based on your loan information in the NSLDS.
- Income Based
- Pay As You Earn
- Income Contingent
- Income Sensitive
Income Based Repayment is a way to make your federal student loan payments more manageable. IBR uses a sliding scale based on your income and family size. Generally, 10 percent of your discretionary income if you're a new borrower on or after July 1, 2014, but never more than the 10-year Standard Repayment Plan amount. Generally, 15 percent of your discretionary income if you're not a new borrower on or after July 1, 2014, but never more than the 10-year Standard Repayment Plan amount. For the IBR Plan, you're considered a new borrower on or after July 1, 2014, if you had no outstanding balance on a William D. Ford Federal Direct Loan (Direct Loan) Program loan or Federal Family Education Loan (FFEL) Program loan when you received a Direct Loan on or after July 1, 2014. (Because no new FFEL Program loans have been made since June 30, 2010, only Direct Loan borrowers can qualify as new borrowers on or after July 1, 2014.) Any remaining debt will be forgiven after 25 years of on-time IBR payments.
All Stafford, PLUS, and Consolidation Loans made under either the Direct Loan or FFEL Program are eligible for repayment under IBR, except loans that are currently in default, parent PLUS Loans, or Consolidation Loans that repaid parent PLUS Loans. The loans can be new or old, and for any type of education (undergraduate, graduate, professional, job training).
You may enter IBR if your federal student loan debt is high relative to your income and family size. While your loan servicer will perform the calculation to determine your eligibility, you can use the U.S. Department of Education’s Federal Student Loan Repayment Calculator to estimate whether you would likely qualify for the IBR plan.
The Pay As You Earn Repayment Plan helps keep your monthly student loan payments affordable, and usually has the lowest monthly payment amount of the repayment plans that are based on your income and family size. Payments are generally 10 percent of your discretionary income, but never more that the 10 year Standard Repayment Plan amount. If you need to make lower monthly payments, this plan may be for you. This repayment plan has a lower payment cap than the Income Based Repayment Plan and provides forgiveness after 20 years of on-time, Pay As You Earn payments.
You must be a new borrower as of Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. You are a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program loan as of Oct. 1, 2007, or had no outstanding balance on a Direct Loan or FFEL Program loan when you received a new loan on or after Oct. 1, 2007. Use the Federal Student Loan Repayment Calculator to see if this plan is right for you.