Loans in default: To qualify for income-driven repayment your loans must be in good standing.Consolidation loans: If you had Perkins loans (which were discontinued in 2018), Federal Family Education (FFEL) loans (discontinued in 2010) or any other discontinued loans, you can consolidate these loans with other federal loans to qualify for income-driven repayment.
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Direct Grad PLUS loans: Loans specifically designated for students pursuing graduate and professional degrees.Direct subsidized and unsubsidized (Stafford) loans: These standard federal student loans are held by most borrowers today.Income-driven repayment plans are only available for federal student loans, but not all loan types are eligible. It’s important to note that you will end up paying longer than you would on the standard repayment plan. On the other hand, your loan is spread out over a period of 20 – 25 years and your payments will change from year to year as your income rises or falls. This can be especially helpful for young adults with high levels of debt and lower incomes. You pay the same amount each month and the interest is folded into your monthly payments.īecause an income-driven repayment plan is based on your earnings rather than the amount owed, the amount you pay each month is generally lower because it isn’t affected by your interest rate or the amount you owe. How is this different from a standard repayment plan?įor federal student loans, the standard repayment plan is 10 years (120 months). So, instead of making monthly loan payments based on what you owe, you make payments based on what you earn. What Is an Income-Driven Repayment Plan: Pay As You Earn Instead Of Pay What You OweĪn income-driven repayment plan for federal student loans lets you tie your student loan payments to your income. Unfortunately, if you have any private student loans, this payment plan isn’t available. And in this case, there is an option for you to pay less each month based on your household income. The good news? If you’re like more than 40 million other Americans, your student loan debt is owned by the U.S. As a recent graduate, you’ve got a lot on your plate: building a career, living on your own, figuring out what you want to do with the expensive education you’ve just completed – and managing your student loan debt.
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