Income-Dependent Repayment Plans For Student Loans
Four out of 10 adult students under the age of 31 have student loan debt, and millions more. Paying off college debt can be challenging, financially difficult, and confusing. If you are facing financial difficulties now or are thinking about going back to school, you know you need to find a way to reduce student loan payments while getting your education. Finding a way to lower monthly payments can make all the difference for you when you are finished with your degree. Getting a free consultation with a repayment specialist can give you the information you need to find out how you can start to reduce your student debt. Here’s what you can expect to learn.
Student loan repayment begins with the first day of graduation. For most graduates, this is a years-long process. You begin to figure out how much debt you have incurred, how much you earn, and how much you are eligible for. From there, you work with a loan repayment specialist to determine what type of plan you qualify for. You may qualify for a federal debt relief, private debt forgiveness, or both.
The federal government offers six programs to reduce student loan payments. The six programs are: First Loans Consolidation, Direct Loan Consolidation, Interest-Based Repayment (IBR), Hardship deferment, subsidized and unsubsidized federal student loans, and Specified Periodic Service (SPS) or extended period service (ESCS). Each of these six programs has their own specific requirements to take into consideration. The specific requirements for each program will be found on the FAFSA website.
For borrowers who qualify for federal government programs to reduce student loan payments, they have some options available. The six government programs all have different requirements, which can make qualifying for one or more difficult. One of the largest reductions in debt is found with subsidized and unsubsidized public service loan forgiveness. Eligibility for this type of forgiveness depends on a borrower’s income and family size.
Two other programs, Federal subsidized and unsubsidized Stafford Loan forgiveness, also reduce student loan payments for low-income borrowers. But unlike subsidized and unsubsidized Stafford Loans, income-driven repayment plans require borrowers to work at a minimum amount to repay their loans. In general, the more income needed to repay a loan, the less money a borrower will qualify for in income-driven repayment plans.
Many graduate students seek federal student loans to pay for their education. To do so, however, they must first work two years at a public service or non-profit organization with federal funding. At the end of their academic career, many graduate students find that they need more than a six-figure income to repay their loans. To reduce student loan payments in this situation, graduate students can use one of the income-driven repayment plans. These repayment programs reduce payment amounts based on a borrower’s income.
Government programs to reduce student loan payments for eligible borrowers do not always reduce monthly payments to zero. However, many of these programs offer deferment periods, which will give students the opportunity to repay their loans after five to ten years. After five years, many eligible borrowers will no longer be required to repay their loans. By paying off one’s debts early, borrowers can keep a large portion of their initial payments and use the extra money to further their education or live expenses.
Students who are eligible for income-driven repayment plans through federal government loans may also apply for deferment privileges. Federal loan deferments give eligible borrowers the opportunity to reduce their monthly payments by paying extra on their loans after they graduate. In order to qualify for a federal deferment, a borrower must meet certain requirements, such as demonstrating poor eligibility for subsidized and unsubsidized student loans. To find out if you qualify for deferment status, you may contact your loan office and talk to a representative about your options.