Federal Student Loan Repayment Plans
If have a federal student loan and you are interested in reducing your monthly payment to a more manageable amount, Leiderman Shelomith Alexander + Somodevilla, PLLC (“LSAS Law”) can help you explore the different repayment plans available to you and select the most beneficial repayment plan given your individual circumstances. Some of the different repayment plans available include:
Standard, Graduated and Extended Repayment Plans
These repayment plans are not based on your income. The Standard Repayment Plan is the default payment plan selected by your servicer, unless you indicate otherwise. Payments are a fixed amount for up to 10 years. The Graduated Repayment Plan is similar, but payments are lower at first and then increase, usually every 2 years. The Extended Repayment Plan is up to 25 years, and payments may be fixed or graduated. However, none of these repayment plans are based on your income, and while you may save on interest with some of these plans, the monthly payments may be unmanageable.
Income-Driven Repayment Plans
If your monthly payments under the above plans are not manageable, you may want to consider an Income-Driven Repayment Plan. These plans are designed to make your student loan debt more manageable by reducing your monthly payment amount. Generally, the payment amount is a percentage of your discretionary income, and the percentage is different depending on the plan. Some borrowers are not eligible for all plans, and some plans are better than others, depending on your individual circumstances.
These Income-Driven Repayment Plans include:
The REPAYE Plan (Revised Pay As You Earn) is the newest of the Income-Driven Repayment Plans, having started in October 2015. The REPAYE Plan allows borrowers to cap their monthly student loan payments at 10 percent of their monthly discretionary income. However, this plan could result in higher payments than the Standard Repayment Plan if your income significantly increases. Fortunately, you then have the ability to take advantage of another Income-Driven Repayment Plan.
The PAYE Plan (Pay As You Earn) caps monthly student loan payments at 10 percent of the borrowers’ monthly discretionary income, and the payment is never more than the Standard Repayment Plan amount. However, this plan is available only to a limited number of borrowers, depending on when you borrowed your federal student loans.
The IBR Plan (Income-Based Repayment) is the most popular Income-Driven Repayment Plan. It is available to the greatest amount of federal student loan borrowers and has benefits that are not available to some of the other plans. The IBR Plan caps borrowers’ payments at 15 percent of their monthly discretionary income (10 percent for newer borrowers).
The ICR Plan (Income-Contingent Repayment) typically results in a higher monthly payment than the REPAYE, PAYE and IBR Plans. However, for borrowers with Parent PLUS loans, this is generally the only Income-Driven Repayment Plan available, if those loans are consolidated.
Let us help you determine which repayment plans you qualify for and help you choose the one that is most beneficial to you.
Please keep in mind that every matter is different. If you have questions about your student loan debt and you would like to schedule a no-cost consultation to discuss your options, please contact our office by completing the form on this website or by calling us at 954-920-5355.