It’s no secret that many Americans are on edge about the upcoming end of the student loan pause. With 1 in 7 Americans still holding a student loan and a potential recession around the corner, many are looking for ways to afford loan payments. Loan borrowers, meet Income-Driven Repayment Plans.
Income-driven repayment plans offer relief to student loan holders that struggle to make ends meet. There are many types of ICR Plans, and some can only be accessed by people with specific financial situations.
The four major types of income-driven repayment plans are:
Common Features
There are many benefits to enrolling in an income-driven repayment plan. They are a great way of saving money, allow more flexibility, and can help you deal with the unexpected.
The best benefits of any income-driven repayment plans:
Having student loan monthly payments calculated based on discretionary income means that you’ll be able to afford payments without the extra pressure that normal student loan rates put on financial situations.
This reduces the stress and anxiety triggered by not knowing if one can afford to survive.
Any of the income-driven repayment plans forgives remaining balances loan holders may have after 20 to 25 years of paying student loans.
REPAYE Plan forgives student loans after 20 years if all loans under the plan were taken out for undergraduate studies, and 25 years if they are for graduate or professional studies.
IBR Plan forgives the borrowers’ remaining balance in 20 years if they are a new borrower on or after July 2014, and 25 years if not.
PAYE Plan forgives them in 20 years and ICR Plan in 25, regardless of the kind of debt they have or what kind of borrower they are.
Borrowers with low incomes can be eligible for a loan with $0 payments.
For the IBR, PAYE, and REPAYE plans, if the borrower's adjusted gross income is less than 150% of the poverty line - 100% of the poverty line for the ICR - the monthly loan payment is $0, and still contributes to loan forgiveness.
Borrowers can rest assured that their credit scores will not be harmed by income-driven repayment plans. If borrowers make the required monthly loan payment, it will be reported to credit bureaus as current on their debts, even if their payment is zero.
Income-driven repayment plans are more than just a great way to adjust your student loan monthly payments to a figure closer to what you can afford.
In a day and age where every penny counts, IDR plans are a great way to ensure financial stability in anyone’s repayment journey.