INCOME-DRIVEN REPAYMENT PLANS
An income-driven repayment plan can help you manage your federal student loan payments by linking the amount you pay each month to your income and giving you more time to repay your loans.
If you qualify, you will be able to lower your monthly payments on your eligible federal student loans based on a percentage of your income, using a federal formula. Once enrolled, you may also stretch out making payments for as long as 20 to 25 years, and in certain cases may be eligible for loan forgiveness of any remaining balance (some public service professions may qualify after 10 years.)
Income-driven repayment can help eligible customers manage their payments on:
- Federal Stafford or Direct Loans (subsidized or unsubsidized)
- Federal Grad PLUS loans
- Most federal consolidation loans
Income-driven repayment plan options are available for those who borrowed in either the Federal Family Education Loan Program (FFELP) or Direct Loan programs.
Loans that are generally not eligible for income-driven repayment include:
- Federal Parent PLUS loans
- Federal consolidation loans that include Parent PLUS loans
- Federal Perkins loans
- Private loans
Income-driven repayment can be a valuable option for those with high debt relative to their incomes but also can end up costing more because payments extend over a longer term. The good news is that you can make extra payments to pay off earlier or change to another repayment plan. Consider your repayment options carefully and compare your total anticipated costs to make an informed decision about the payment plan that's best for you.
How to learn more and apply for an income-driven plan
To learn more, the Department of Education website offers additional details, including an Income-Based Repayment calculator, and a Pay As You Earn calculator to assess initial eligibility.
Visit the Repayment Estimator at StudentLoans.gov and sign in with your Federal Student Aid PIN to see information customized just for you. The Repayment Estimator shows how much you will pay monthly and overall based on your loan information in the National Student Loan Data System (NSLDS). Forgot your PIN? No problem, visit PIN.ed.gov.
Please note that the application process to change your repayment plan may take time. In the meantime, if you anticipate difficulty in making any scheduled payments please call us at 800-722-1300 for assistance.
Be sure you know the details
If you're considering paying your federal loans under an income-driven repayment program, be sure to review the program details. Your loan servicer can help you understand the implications for you based on your specific loans.
Be aware that:
- Changes in the law and the year your federal loan was issued may affect your repayment plan. For example, the Pay As You Earn repayment plan is only for recent borrowers.
||Percentage of your discretionary income you can expect to pay
||Maximum length of time you can expect to pay after enrolling in the program
|Loans for new borrowers on or after July 1, 2014
|Pay as You Earn – for customers who have taken out new federal loans on or after October 1, 2011 and had no federal loans on or before October 1, 2007
- Eligibility for an income-driven repayment plan is based on a formula set by the federal government based on the current poverty level that considers household income, state of residence, household size, and either the current balance of eligible federal loans or the balance of eligible federal loans at the start of repayment.
- Each customer must annually update their income information and resulting payment amount based on IRS tax data. Payments may rise with income but won't rise above a customer's standard repayment amount determined at the start of the plan.
- If your loans were subsidized (that is, need based) and your payment is lower than the interest that accrues each month, the government will pay the difference for a three-year period. If your loans are unsubsidized, you'll be expected to pay the interest.
- Customers who qualify for loan forgiveness after the required number of payments – that is, 20 to 25 years — may need to pay taxes on the amount that is forgiven. It's a good idea to consult with a tax advisor to plan for this eventuality.
Customers with Direct Loans employed full-time in public service professions may have the remaining balance of their loan forgiven after making 120 qualifying payments.
- 120 payments must be full, on-time, scheduled, monthly payments.
- Only payments made after October 1, 2007 qualify.
- Payments must be made under a qualifying repayment plan.
- Payments must be made while working full-time at a qualifying public service organization.
Loans forgiven under the Public Service Loan Forgiveness program are not taxable.
- Married borrowers typically can include their spouse's eligible federal loans in the formula, depending on tax filing status.
- There are two other income-related programs: Income-Sensitive Repayment (FFELP borrowers only) and Income-Contingent Repayment (Direct Loan borrowers only). Please talk to your servicer to learn if ISR or ICR are better for you.