September 27, 2022

Unitranche

Supportive Business Potential

Income-based repayment plan: Are student loans forgiven after 10 or 25 years?

The Income-driven repayment helps student borrowers that have higher debt than income. It is intended to be affordable based on your income and family size.

According to Federal Student Aid, you can get help to organize your student loans payment.

Most federal student loans are eligible for at least one income-driven repayment plan.

Fromer students who need to make lower monthly payments or if your outstanding federal student loan debt represents a significant portion of your annual income, one of the following income-driven plans may be right for you.

What are the Income-based repayment plans?

The Income-Driven Repayment Plan generates your payment amount under an income-driven repayment plan as a percentage of your discretionary income.

The percentage is different depending on your income and family size, you may have no monthly payment at all.

However, they have four structured plans.

– Revised Pay As You Earn Repayment Plan (REPAYE Plan)

– Pay As You Earn Repayment Plan (PAYE Plan)

– Income-Based Repayment Plan (IBR Plan)

– Income-Contingent Repayment Plan (ICR Plan)

How is my monthly payment amount calculated under an income-driven repayment plan?

The percentage is different depending on the plan. Your payment amount under an income-driven repayment plan is a percentage of your discretionary income.

Depending on your income and family size, you may have no monthly payment at all.

REPAYE Plan: Generally 10 percent of your discretionary income.

PAYE Plan: Generally 10 percent of your discretionary income, but never more than the 10-year Standard Repayment Plan amount.

– IBR Plan: Generally 10 percent of your discretionary income if you’re a new borrower on or after July 1, 2014, never more than the 10-year Standard Repayment Plan amount.

Nevertheless, if you are not a new borrower you pay 15 percent of your discretionary income for less than the 10-year Standard Repayment Plan amount.

– ICR Plan: 20 percent of your discretionary income or what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income.

For how long would I be paying?

– REPAYE Plan: 20 to 25 years

– PAYE Plan 20 years

– IBR Plan: 20 to 25 years

– ICR Plan: 25 years

Are student loans forgiven?

Under all four plans, any remaining loan balance is forgiven if your federal student loans aren’t fully repaid at the end of the repayment period.

Whether you will have a balance left to be forgiven at the end of your repayment period depends on a number of factors, such as how quickly your income rises and how large your income is relative to your debt.

If you’re making payments under an income-driven repayment plan and also working toward loan forgiveness under the Public Service Loan Forgiveness (PSLF) Program, you may qualify for forgiveness of any remaining loan balance after you’ve made 10 years of qualifying payments, instead of 20 or 25 years.