Student Loan Repayment Options

This page is created to explain how the all of the federal student loan repayment plan. And help you on when it may be smart to pick one Student Loan Repayment plan over another. Each has their advantages. We believe it’s smart to know and study all method to decide which decision you believe will help you the most in the brief and long-term. The six repayment plans are the Pay As You Earn, Revised Pay As You Earn, Income Based, Standard Student Loan Repayment. Lastly the Graduated Student Loan Repayment plan. Four of the methods are income driven and are estimated based upon your discretionary income.

Revised Pay As You Earn (REPAYE)

The REPAYE plan is the latest of all the income-driven student loan repayment programs.  It was formed in December of 2015 as an addition of the previously current Pay As You Earn plan(PAYE).  The REPAYE plan was designed to exclude some limitations that were in the PAYE plan, as well as adding extra advantages.  The REPAYE plan gives loan forgiveness after 20 years of qualifying payments for undergraduate loans, and 25 years for graduate loans and caps your monthly payment at 10% of your discretionary income.

Benefits of REPAYE

  • Payments qualify for Public Service Loan Forgiveness
  • Capped payment at 10% of discretionary income
  • Interest Forgiveness for the first three years, and half of the accruing interest after year 3
  • Complete loan forgiveness after 20-25 years

Qualifying Loan Types

  • Stafford
  • Graduate Plus Loans
  • Federal Direct Loans

Warning: There is glaring contrary to the REPAYE plan, which regards to married couples.  Earlier income-driven plans would view just the borrower’s income if married but filing taxes individually from their spouse. Your spouse’s salary will be counted when measuring your REPAYE payment.  This can mean a remarkably higher amount than other plans which do not have this clause. For more specific information on the Revised Pay As You Earn plan, click this link.

Private Student Loan Consolidation

Private student loan consolidation is available through various banks we work with to combine all your student loans into one new loan. Private student loan consolidation requires a good credit score and will often have better rates than the federal student loan.

Pay As You Earn (PAYE)

The Pay As You Earn President Obama established the program on December 1st, 2012.  It was extremely popular and became the idea why people first began to associate student loan forgiveness with President Obama.  The PAYE plan was formed to work and improve against the earlier being Income Based Payment plan. The PAYE plan decreases the term required for forgiveness from 25 years in the IBR to 20 years in PAYE and caps your maximum payment at 10% of your discretionary income.

There are date limitations applying for PAYE. Your payment in the PAYE must be smaller than what your standard 10-year payment. In addition to meeting the payment requirement, to qualify for the PAYE Plan. You must have got a disbursement of a Direct Loan on or after Oct. 1, 2011. Must also be a new borrower as from Oct. 1, 2007.  For more specific information on the Pay As You Earn plan, click this link.

Income-Based Student Loan Repayment

The Income Based Student Loan Repayment program is one of the earlier income was driven repayment plans. Which now has fewer benefits than the PAYE and REPAYE plans.  That being said, it’s still an excellent payment plan with great benefits for the borrower. One of them is forgiveness on the first 3 years of any unpaid interest of the time you enroll in the Income-Based Student Loan Repayment program for the subsidized part of your loan.

For the people with very small, or no income, this works out to be a great kind of “instant forgiveness” on their loans because otherwise, this interest would be due.  Such as, someone with an interest rate of 6.8%  and a loan amount of $40,000 would have $8,160 of interest forgiven in their first 3 years from when their Income-Based Repayment starts.  This is assuming you pass for a zero payment. It is possible you are not fully paying off the monthly fee, and getting forgiveness on the difference if your payment is not zero.

 

Another different benefit of the Income-Based Student Loan Repayment is that it offers. The lowest payment for borrowers in financial hardship.  The amount of your payment can never pass 15% of your modified gross income over the poverty line for your family size.  If you are married and file together, your spouse’s student loan indebtedness can be taken into account that can extra reduce your payment.  You can take advantage of an Income-Based Student Loan Repayment if:

  • You pass for a payment of zero or payment of shorter than the monthly interest payment on the loan. This will enable for that interest to be forgiven on the first three years
  • You are having financial difficulty and would like some breathing room
  • You do not see a important increase in your income in the future and see yourself continuously qualifying for a zero payment at which situation your student loan would be entirely forgiven at the finish of the term.

Income-Based Student Loan Repayment calculation is AGI – (Poverty Line x 150%) = Y (Y x .15) / 12 = IBR PAYMENT If you want to see what your income-based repayment could be. Click here for extra information about the Income-Based Student Loan Repayment Plan.

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Standard Student Loan Repayment

The payment on your loan is counted like any regular loan payment, based on the quantity of the loan and plus the term of the loan. The term is always based on the quantity of the loan, in which case you can benefit from the chart below. Depending on your salary and family size, the standard student loan repayment plan can be a good choice for you:

  • You do not pass for an income-based repayment plan due to your bigger income.
  • Your loan amount is small where you may giving a minimal number over a short time rather than increasing it for an additional X number of years.
  • You currently have less than 30 years left on the term and need to pay off the loan as soon as possible.

If you are getting regular and full payments on them the standard student loan repayment plan lets you take care of your loans on time. You will pay fewer interest on a regular repayment plan than you will under the graduated. Usually, borrowers that do not pass for either of the Income-Based student loan repayment plans do not see an advantage of consolidating their loans into a Standard student loan repayment plan when their recent payment can be almost the equal. This normally is mistaken as one of the significant benefits of this consolidation is the versatility with the repayment plans.

If you come under the difficulty in the future,  you can call us here at Student Loan Resolved. We can make you connected with a service provider who can assist change you to an Income-Driven Repayment plan. What this does for you let you have then a payment based on your income, which may stop you from falling into failure on your loans. In many examples, your salary can roll to zero on your loans. This is not a deferment status, which basically delays your term.

 

You would have a zero payment for how long your hardship continues. The term remains to move forward. This is where the forgiveness aspect presents a significant role. At the time your term is done your loan is fully forgiven. This is a huge benefit to the program that is usually overlooked by our clients until we tell them this advantage.

Graduated Repayment Plan

The graduate repayment program is related to the standard repayment plan in its count, but the most significant difference is that you are only paying interest on the loan for the first few years under the graduated plan.  For this matter, the graduated plan, in the start, is always smaller than the standard repayment plan.  You begin only paying interest on the loan and after every two years, your payment increases.  The term of the loan is identified as the standard and is based on your loan amount.  You may want to take the graduated plan if:

  • You assume your current job to have reasonable and hope to pay the increase in the payment every couple years without it putting the undue difficulty on yourself and your family and regular pay raises.
  • You may not even qualify for them, or your income is high enough where the Income Based reprograms do not matter for you
  • You want to have a little lower payment right now, understanding that your fees willincrease every two years till your the loan is paid off.

One of the disadvantages of the Graduated Repayment Plan is that the complete amount you will pay on loan will be higher than a regular repayment.  This is due to you are only paying off the interest for the first two years, and into years 3-4 you may not be paying off the principal as fast as you would be in a regular amortization schedule.  So, you are left giving more through the life of the loan with the benefit being lower payments to begin.,Student Debt Resolve can adjust your repayment plan when you can not make the payments because of loss of income or a job loss. So you do not undergo the hardship of making payments you cannot provide.  Throughout this time, your term would remain with a significantly lower payment, and at the end of the term, the loan would be fully forgiven. Graduated repayment calculation is: PMT = (Loan Amount * Interest Rate) / 12

Income Contingent Repayment

The Income Contingent Repayment program does a couple of income based parts to manage what your payment will be through your Student Loan Repayment.  The Income Contingent Repayment plan accounts your payment two different methods and then gives you the lower of the two payments.  The first calculation is your Adjusted Gross Income(AGI) over the poverty line for your family size, multiplied by 20% for a yearly payment (divide by twelve for a monthly payment).

  • Payment = ((AGI – Poverty Line) x 20%) / 12

The other calculation does use your loan value, and a constant multiplier determined by the federal government and an income factor determined by the federal government too.  Then these are used to determine your payment for the second one. Whichever of the formulas gives you the lower payment is used, and the other is neglected. You may profit from an Income Contingent Repayment Plan if

  • You do not think to have a higher income in the future and would like to be eligible for student loan forgiveness. Under this repayment, it is not assumed that at the end of the term will be paid off, so loan forgiveness is possible.
  • You have a hard time from financial hardship and need relief

Conclusion

Picking the best repayment plan for your student loan repayment can be a daunting task. Each has particular advantages created to support you and your individual financial situation. By selecting either the income contingent repayment plans, income-based standard or graduated you can help to assure you get out of debt more fast or reasonably than before. With any more questions about these plans, you can contact us: 1-800-820-8128.

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