Blog Archives

Income Based Repayment Plan – What It Is & How To Qualify

March 25, 2012

Income Based Repayment Plan

Income Based Repayment Plan

The income based repayment plan is one of the best things to ever happen in the student loan world, offering individuals with student loan debt a chance to essential pay a monthly payment that is dicated by how much you earn. Before we jump into all of what it consists of, it should be known that IBR can only be used on federal student loans like Stafford, Perkins, PLUS and FFEL Loans among others and isn’t currently available for private student loans. The student loans monthly payment is usually around 15 % of what your monthly income equates to, which those who do not make anything and or unemployed can have payments as low as $5. Being that the standard repayment period for federal student loans is 10 years and the extended repayment being 12 years, this income based repayment plan can offer one the opportunity to extended their repayment period by a significant amount of time, as long as it takes to pay back their student loans off of 15 % of what they earn.

Now the entire income based repayment program lasts a maximum of 25 years, which if one has failed to pay off their student loans during that time through the income based repayment plan, then the debt left will be wiped away but the individual will be charged for it in the form of taxible income. So to give you a feel for what this means, say you have $5000 of debt left after your repayment term has concluded, then you will be taxed as if you made that $5000 and have to pay it.

Now the income based repayment plan was created for various reasons but the main reasons where to assist people in avoiding student loan bankruptcy and student loan default as well as to assist those who have just started their search for a job but can’t find one, resulting in one not being able to afford their monthly payments for a very good reason.

It should also be known that if ones income based repayment plan payment eaquates to less than what would cover just the interest alone, then the governement would actually pay it each month.

Qualifying For The Income Based Repayment Plan

Qualification for IBR is ultimately based off of what you earn each month as well as other aspects, one of the main ones being how big your family is. These are the two major factors that are considered when you submit your application for income based repayment program. The higher ones debt and the lower ones income or one of the two, the higher the chances are of that individual getting becoming eligible. If in fact the income based repayment amount equates to more than what they are currently paying, then one will just continue to repay their loans with their original payment.

Any one with federal student loan debt can apply for the income based repayment program which if their application is denied then their repayment plan will revert back to the standard repayment program .

 

 

Income Contingent Repayment Overview

September 13, 2011

Income Contingent Repayment

Income contigent repayment on student loans is a payment option for federal loans via the US Department of Education specifically for Direct Student loans as well as direct loans that have been consolidated. The income contingent repayment option was created to make the lives of students working in both jobs with low income as well as public services jobs a lot easier. This is done by taking into account both the size of your income as well as the size of your family and factoring in a affordable payment total that will cater around these two parts of your life, and can be adjusted annually if these two categories happen to change.. More information is discussed below.

Income Contingent Repayment

Income Contingent Repayment Major Information

  • The maximum repayment period of the income contingent repayment option is 25 years, in which if a person stays faithful to paying each month, and there happens to still be debt at the end of the 25 years, their debt will be wiped away and become considered as taxable income. So if there is 10,000 left on your debt, you will be taxed as if you earned 10 grand that year.
  • Loans must not be in default to take advantage of income contingent repayment.
  • If you choose to work a public service job under the income contingent repayment option, you will have your loan debt cancelled after 10 years on time payments while working the public service job.
  • Payments can be as low as 5 dollars per month.
  • You are not locked into the 25 year repayment plan. If you are able to pay more down the line, you are able to do so without being hit with a penalty, which will help you get out of debt a lot faster.
  • Although the process of figuring out what your monthly payments will be is complex, the montly payments usually equal to about 20 percent of your montly income, or the amount it would cost to ultimately pay back your student loan debt in 12 years.
  • If you are unable to pay your interest payments, the total is added to the principal amount of the loan each year, which is capitalized. But the good thing about this is that there is what is called a interest cap at 10 percent of what the original total of your debt was, meaning that once your reach the 10 percent mark, unpaid interest continues to be added, but isn’t compouned.
  • The interest rate on income contigent repayment is based off the average of average interest rates that you are using on income contigent repayment and are placed at a fixed rate that will never change throughout the life of your repayment.

Income Contigent Repayment Conclusion

This is a main overview about income contigent repayment on student loans. If you are interested in using income contigent repayment on your loan debt, you can inquire about it directly through your lender who will be able to get you started. If for any reason they do not allow you to use IBR for your loans, you can contact what is called FSA Ombudsman who is dedicated to helping students work out any type of dispute related to their student loan and are part of the US Department Of Education. Contact information for them is  1 877 557 2575.

 

Income Based Repayment Program

September 12, 2011

Income Based Repayment Program

The Income Based Repayment Program (IBR) is a fairly new concept for federal loan payment, and is an awesome addition to to traditional repayment program options. A basic definition of the Income Based Repayment Program is your monthly payment is based off a percentage of your monthly income, usually being around 15 to up to 20 percent, and can be used no matter what age your loan is as well as what type of education it was for.

This option of repayment doesn’t have any income requirements so you can use it for any income you earn. It can also be catered around your family size as well. The below information will provide you of an overview about qualifying loans as well as all the major details Income Based Repayment Program with the pros and cons.

income based repayment program

 

Income Based Repayment Program Eligibility

There are certain federal loan programs that are eligible for Income Based Repayment, and some are not. Here are the qualifying loan options that one cna use for IBR as well as the ones that do not qualify:

Qualifying Loans

  • Federal Stafford Loans.
  • PLUS Loans as well as loans in cosolidation if they are part of the Direct Student Loan Program as well as the FFEL Student Loan Program.

Non Qualifying Loans

  • Defaulted student loans.
  • Parent PLUS Loans as well as consolidated Parent PLUS Loans.

As far as personal qualifcations go for the Income Based Repayment Program, your payments start out higher if you have no kids and get lower if you have one or more children, getting lower for each child you have. These payments are changed if income and family size change. Here is an example of how this works:

  • 50,000 income level – 1 child – $421, 2 children – $349, 3 children – $278, 4 children – $206, 5 children – $134, 6 children - $63 and 7 children – $0.

Income Based Repayment Program Pros & Cons

Pros

  • You can start out with little or no payments, which can be great when you first get out of college and are looking for a job, and as your pay advances so can your payments, making your repayment period get shorter.
  • If after 25 years you still have debt on your student loans, you may be able to qualify for cancellation of whatever sum is left.
  • If you have Stafford Subsidized Loans (income based loans) and your Income Based Repayment Program total amount you pay doesn’t equal your interest payments, the government will pay for whatever builds up in the form of interest on your loans for up to a three year period from when you first began IBR.
  • You can also use student loan forgiveness with public service jobs where you work for 10 years and make 120 on time payments in which at the end of this period, whatever is left on your loan debt will be wiped away on certain loans. This option is available for Direct Loans as well as consolidating FFEL Loans.

Cons

  • You have to up date you information each year, proving what your income as well as family size is and any changes that have came up during the last year in either category. Not providing this information each year will result in your repayment automatically being placed in a standard repayment which is where you have to pay a monthly fee that will fully pay off your loan debt in 10 years.
  • Being that Income Based Repayement Program usually comes with a lot lower payments, this will extend the repayment period which will result in more interest payments.

Using Income Based Repayment Program

If you are interested in taking advantage of the Income Based Repayment Program, you will have to contact the servicer of your loans who take into account your information and altimately determine what payment amount you are eligible for.