Student Loan Payments

student loan payments TYPES OF STUDENT LOAN CONSOLIDATION PAYMENTS

Standard Payments

The standard payment plan offers a fixed amount each month until your loans are paid in full. Your monthly student loan payments will be at least $50.00 and you will have between 10 and 30 years to repay your loans. Your monthly payment may be higher in a standard payment plan than it would be under other plans because your loans are repaid in the shortest amount of time.

Graduated Payments

The graduated payment plan begins with low student loan payments and increases the amount of those payments every two years. The length of your payment period is 10 years. If you expect your income to increase steadily over time, this plan may work for you. Your monthly payment cannot be less than the amount of interest that accrues between payments. Additionally, no payment under this plan will be more than 3 times greater than any other payment in your payment schedule.

Income Based Repayment Plan

The income based repayment plan is a new plan offered for the major types of federal student loans made. The monthly student loan payments under this plan are capped at an amount that is affordable based on your income and number in your family. You are considered eligible for this plan if the amount you would pay under this plan is less than the monthly payment amount in a 10 year standard payment plan. If you repay under this plan for 20 years and meet other criteria, you may be eligible to have the remaining balance of the loans cancelled. If you work in a public service job and have reduced loan payments through this plan, the remaining balance of the student loans may be cancelled after 10 years.

Income Contingent Repayment Plan

The income contingent repayment plan or ICR offers you the opportunity to pay back your loans without incurring a financial hardship. Every year in the ICR, your monthly student loan payment is calculated on the basis of your AGI (adjusted gross income) and your spouse’s AGI if married, family size and total of your Direct Loans. In the ICR, you pay the lesser of the payment you would make if you repaid your loan in 12 years multiplied by an income percentage factor that varied with your annual income or 20% of your monthly discretionary income. If your payments don’t cover the interest that has accrued on your loans, the unpaid amount is capitalized once each year. Capitalization, however, does not exceed 10% of the original amount you owed when you entered the repayment plan. Interest accrues but does not get added to the loan principal in this case. If you have not finished paying your loans in 20 years in the ICR, the unpaid portion is discharged. The IRS does hold you liable for taxes on the discharged amount. Graduate and professional student Direct PLUS loan borrowers are eligible for the ICR. Parent Direct PLUS loan borrowers are not eligible for the ICR.

Pay As You Earn Repayment Program

This is a repayment program for federal student loans that brings your calculated monthly payment in line with your current income and family size. It is geared to assist student debtors and their families with an affordable monthly payment on their student loans.

Revised Pay As You Earn Repayment Plan

This payment option is an improvement to the Pay As You Earn Plan extending protections to all students with Direct Loans without regard to when the loans actually originated.  Student loan payments are generally capped at 10% of the student’s monthly discretionary income.  This plan will forgive student debt after 20 years for undergraduate school borrowers and 25 years for graduate school borrowers.


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