"Income-Driven Repayment Plans: Questions and Answers"

Income-Driven Repayment Plans: Questions and Answers is a 26-page legal document that was released by the U.S. Department of Education on February 1, 2016 and used nation-wide.

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Income-Driven Repayment Plans: Questions and
Answers
Contents
Introduction...........................................................................................................................................................1
General Information .............................................................................................................................................2
Eligible Borrowers ................................................................................................................................................7
Eligible Loans .......................................................................................................................................................9
Monthly Payment Amount ................................................................................................................................. 11
Repayment Period & Loan Forgiveness ........................................................................................................... 15
Married Borrowers ............................................................................................................................................. 18
Application Process ........................................................................................................................................... 20
Miscellaneous ................................................................................................................................................... 24
Introduction
The following questions and answers (Q&A) provide information about the income-driven repayment plans
that are available to most federal student loan borrowers. Throughout the Q&A, we use the following terms:
AGI refers to adjusted gross income, as reported on your federal income tax return.
Direct Loan Program refers to the William D. Ford Federal Direct Loan Program. This program
includes Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct
Consolidation Loans. Direct Subsidized Loans and Direct Unsubsidized Loans are sometimes called
“Stafford Loans.”
FFEL Program refers to the Federal Family Education Loan Program. This program includes
Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans, Federal PLUS Loans, and
Federal Consolidation Loans. No new loans have been made under this program since July 1, 2010.
Loan servicer refers to the organization that collects your loan payments and completes other
transactions related to your federal student loans. Your loan servicer may or may not be the same
organization as your loan holder (the organization that “owns” your loans). If you are unsure who your
loan servicer is, you can find this information at StudentAid.gov/log-in, or you can call the Federal
Student Aid Information Center (FSAIC) at 1-800-4-FED-AID (1-800-433-3243); (TTY: 1-800-730-
8913).
New borrower refers to an individual who has no outstanding balance on a Direct Loan or FFEL
Program loan when he or she receives a Direct Loan or FFEL Program loan on or after a specified
date.
Parent PLUS Loan refers to a Direct PLUS Loan or Federal PLUS Loan made to a parent borrower
to help pay for the cost of a dependent undergraduate student’s education.
Student PLUS Loan refers to a Direct PLUS Loan or Federal PLUS Loan made to a graduate or
professional student.
Federal Student Aid |
StudentAid.gov
Page 1 of 26
Income-Driven Repayment Plans: Questions and
Answers
Contents
Introduction...........................................................................................................................................................1
General Information .............................................................................................................................................2
Eligible Borrowers ................................................................................................................................................7
Eligible Loans .......................................................................................................................................................9
Monthly Payment Amount ................................................................................................................................. 11
Repayment Period & Loan Forgiveness ........................................................................................................... 15
Married Borrowers ............................................................................................................................................. 18
Application Process ........................................................................................................................................... 20
Miscellaneous ................................................................................................................................................... 24
Introduction
The following questions and answers (Q&A) provide information about the income-driven repayment plans
that are available to most federal student loan borrowers. Throughout the Q&A, we use the following terms:
AGI refers to adjusted gross income, as reported on your federal income tax return.
Direct Loan Program refers to the William D. Ford Federal Direct Loan Program. This program
includes Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct
Consolidation Loans. Direct Subsidized Loans and Direct Unsubsidized Loans are sometimes called
“Stafford Loans.”
FFEL Program refers to the Federal Family Education Loan Program. This program includes
Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans, Federal PLUS Loans, and
Federal Consolidation Loans. No new loans have been made under this program since July 1, 2010.
Loan servicer refers to the organization that collects your loan payments and completes other
transactions related to your federal student loans. Your loan servicer may or may not be the same
organization as your loan holder (the organization that “owns” your loans). If you are unsure who your
loan servicer is, you can find this information at StudentAid.gov/log-in, or you can call the Federal
Student Aid Information Center (FSAIC) at 1-800-4-FED-AID (1-800-433-3243); (TTY: 1-800-730-
8913).
New borrower refers to an individual who has no outstanding balance on a Direct Loan or FFEL
Program loan when he or she receives a Direct Loan or FFEL Program loan on or after a specified
date.
Parent PLUS Loan refers to a Direct PLUS Loan or Federal PLUS Loan made to a parent borrower
to help pay for the cost of a dependent undergraduate student’s education.
Student PLUS Loan refers to a Direct PLUS Loan or Federal PLUS Loan made to a graduate or
professional student.
Federal Student Aid |
StudentAid.gov
Page 1 of 26
General Information
1. What is an income-driven repayment plan?
An income-driven repayment plan is a type of repayment plan for federal student loans that can help
make your monthly loan payments more affordable by basing them on your income and family size,
instead of on how much you owe. There are four income-driven repayment 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)
The REPAYE Plan, the PAYE Plan, and the ICR Plan are available only to borrowers with loans made
under the Direct Loan Program. The IBR Plan is available to borrowers with loans made under the Direct
Loan Program or the FFEL Program.
Note: These plans have different terms and conditions, and not all borrowers or all loan types qualify for
all of the income-driven plans.
2. Other than providing a more affordable payment, do income-driven plans offer
additional benefits?
Income-driven plans offer the following benefits:
If you repay your loan under any of the income-driven plans and if you still have a loan balance after
20 or 25 years of qualifying repayment, the remaining balance will be forgiven (this time period varies
depending on the plan and other factors).
Payments you make on your Direct Loans under any income-driven plan count toward the 120
payments that are required for the Public Service Loan Forgiveness Program (PSLF). See
StudentAid.gov/publicservice
for more information about PSLF.
The REPAYE, PAYE, and IBR plans offer an interest benefit if your monthly payment doesn’t cover
the full amount of interest that accrues on your loans each month. Under all three plans, the
government will pay the difference between your monthly payment amount and the remaining interest
that accrues on your subsidized loans for up to three consecutive years from the date you begin
repaying the loans under the plan. Under the REPAYE Plan, the government will pay half of the
difference on your subsidized loans after this three-year period, and will pay half of the difference on
your unsubsidized loans during all periods.
3. Paying less each month under an income-driven repayment plan seems like a good
thing. Are there any disadvantages?
Whenever you make lower payments or extend your repayment period, you will likely pay more interest
over time—sometimes significantly more—than you would pay under a 10-year Standard Repayment
Plan. Also, under current Internal Revenue Service (IRS) rules, you may be required to pay income tax on
any amount that is forgiven. Carefully consider whether an income-driven plan is the best plan for you
based on your individual circumstances.
Federal Student Aid |
StudentAid.gov
Page 2 of 26
4. What are the differences between the income-driven plans?
The chart below compares the major features of the income-driven plans. The terms and conditions
summarized in the chart are discussed in detail in separate sections of this document. See
Eligible
Borrowers,
Eligible
Loans,
Monthly Payment
Amount, and
Repayment Period & Loan Forgiveness
in
this document.
Feature
REPAYE Plan
PAYE Plan
IBR Plan
ICR Plan
Eligible
Direct Loan
Direct Loan
Direct Loan and FFEL
Direct Loan
Borrowers
borrowers
borrowers
borrowers
borrowers
Note: This plan is
Note: Some terms
limited to new
and conditions differ
borrowers on or
depending on when
after October 1,
you received your
2007, who
federal student loans.
received a Direct
Loan disbursement
on or after October
1, 2011.
Eligible Loans
All Direct Loan types
All Direct Loan
All Direct Loan and
All Direct Loan types
except Parent PLUS
types except
FFEL Program loan
except Parent PLUS
Loans and
Parent PLUS
types except Parent
Loans.
consolidation loans
Loans and
PLUS Loans and
Consolidation loans
that repaid Parent
consolidation loans
consolidation loans
made after July 1,
PLUS Loans
that repaid Parent
that repaid Parent
2006, that repaid
PLUS Loans
PLUS Loans
Parent PLUS Loans
may be repaid under
ICR
Income
None
Your income must
Your income must be
None
Requirement
be low compared
low compared to your
to Enter Plan
to your eligible
eligible federal student
federal student
loan debt
loan debt
Requirement
Annually
Annually
Annually
Annually
to Recertify
Income and
Family Size
Monthly
Generally 10 percent
Generally 10
Generally
The lesser of
Payment
of your discretionary
percent of your
10 percent of
20 percent
income
discretionary
your discretionary
of your
income
income (if you're a
discretionary
new borrower on
income or
or after July 1,
what you
2014), or
would pay on a
15 percent of
repayment plan
your discretionary
with a fixed
income (if you're
payment over
not a new
the course of 12
Federal Student Aid |
StudentAid.gov
Page 3 of 26
Feature
REPAYE Plan
PAYE Plan
IBR Plan
ICR Plan
borrower)
years, adjusted
according to
your income
Cap on
None (may be higher
Never more than
Never more than what
None (may be
Payment
than the 10-year
what you would
you would have paid
higher than the 10-
Amount
Standard Repayment
have paid under
under the Standard
year Standard
Plan amount)
the Standard
Repayment Plan with
Repayment Plan
Repayment Plan
a 10-year repayment
amount)
with a 10-year
period, based on what
repayment period,
you owed when you
based on what you
entered the IBR Plan
owed when you
entered the PAYE
Plan
Married
Payment is generally
Payment is based
Payment is based on
Payment is based
Borrowers
based on the
on the combined
the combined income
on the combined
combined income
income and loan
and loan debt of you
income and loan
and loan debt of you
debt of you and
and your spouse only
debt of you and your
and your spouse,
your spouse only if
if you file a joint
spouse only if you
regardless of
you file a joint
federal income tax
file a joint federal
whether you file a
federal income tax
return
income tax return, or
joint or separate
return
if you and your
Only your income is
federal income tax
spouse choose to
Only your income
considered if you file a
return
jointly repay under
is considered if you
separate return from
the plan
file a separate
your spouse
If you file a separate
return and you are
return from your
Only your income is
separated from your
spouse
considered if you file
spouse or are unable
a separate return
to reasonably access
from your spouse
your spouse's
and do not choose
income, only your
the joint repayment
income and loan
option
debt is used
Repayment
Any outstanding
Any outstanding
Any outstanding
Any outstanding
Period & Loan
balance is forgiven
balance is forgiven
balance is forgiven
balance is forgiven
Forgiveness
after
after 20 years of
after
after 25 years of
qualifying
qualifying
20 years of
20 years of
repayment
repayment
qualifying
qualifying
repayment if all
repayment (if
loans you're
you're a new
repaying under
borrower on or
the plan were
after July 1, 2014),
received for
or
undergraduate
25 years of
study, or
qualifying
25 years of
repayment (if
qualifying
you're not a new
Federal Student Aid |
StudentAid.gov
Page 4 of 26
Feature
REPAYE Plan
PAYE Plan
IBR Plan
ICR Plan
repayment if any
borrower)
loans you’re
repaying under
the plan were
received for
graduate or
professional
study
Interest
If your monthly
If your monthly
If your monthly
No interest benefit; if
payment doesn’t
Benefit
payment doesn't
payment doesn't cover
your monthly
cover the full amount
cover the full
the full amount of
payment doesn't
of interest that
amount of interest
interest that accrues
cover the full
accrues, the
that accrues on
on your subsidized
amount of interest
government pays
your subsidized
loans, the government
that accrues on your
loans, the
pays the difference for
loans, you're still
the full
government pays
the first three years
responsible for
amount of the
the difference for
paying the interest
difference on
the first three years
your subsidized
loans for the first
three years, and
half of the
difference after
the first three
years, and
half of the
difference on
your
unsubsidized
loans during all
periods
Interest
If your monthly
If your monthly
If your monthly
If your monthly
Capitalization
payment is less than
payment is less
payment is less than
payment is less than
When
the amount of
than the amount of
the amount of interest
the amount of
Payment
interest that accrues,
interest that
that accrues, any
interest that
Doesn’t Cover
any unpaid interest is
accrues, any
unpaid interest is
accrues, any unpaid
All Interest
capitalized (added to
unpaid interest is
capitalized (added to
interest is
your loan principal
capitalized (added
your loan principal
capitalized (added
balance) if
to your loan
balance) if
to your loan
principal balance) if
principal balance)
you are
you no longer
annually
removed from
you no
qualify to make
the plan for
longer qualify
payments based
When your monthly
payment is less than
failing to recertify
to make
on income or
the amount of
your income by
payments that
you leave the
interest that
the annual
are based on
plan
accrues, the amount
deadline, or
your income or
There is no limit on
of unpaid interest
you
you leave
the amount of unpaid
that is capitalized
voluntarily leave
the plan
interest that may be
Federal Student Aid |
StudentAid.gov
Page 5 of 26
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