Income Based Repayment Plan

Student Counseling Services

Income Based Repayments

Many student loan borrowers are going to have to restructure their repayment plans this year. The Department of Education offers many different loan repayment options to help make payments more manageable. If this includes you, one of the most popular repayment programs to apply for is Income-Based Repayment.

Benefits of Income-Based Repayment

First, your payment is based on what you earn. What you owe is not considered except to determine the extent of the financial hardship. The new monthly payment amount will not be higher than 10 percent of your discretionary income if were a new borrower on or after July 1st, 2014. If you had loans prior to this date, then 15% of your discretionary income is used to calculate your payment. This is the amount of income you earn over 150% of the federal poverty line for your family size. This payment will not be higher than what you were paying under the standard 10-year repayment plan. In many cases, borrowers in the Income Based Repayment Program actually “pay” zero Dollars if their discretionary income isn’t high enough to meet the minimum amount. This is great for those who exit college with a huge loan balance and are hit with payments they cannot afford while looking for work, for example.

Qualifying Loan Types

Eligibility for Income Based Repayment depends on which loans you have taken out for your education, and when they were taken out. The following Federal Student Loans from the Direct Loan and Federal Family Education Loan (FFEL) Programs are the ones that qualify for application:

  • Direct PLUS Loans (Graduate and Professional Students).
  • Direct Consolidation Loans without PLUS Loans that were made directly to parents and not just as cosigners.
  • Direct Subsidized Loans.
  • Direct Unsubsidized Loans.
  • FFEL PLUS Loans (Graduate and Professional Students).
  • FFEL Consolidation Loans without PLUS Loans that were made directly to parents and not just as cosigners.

If you do not have one of these loan types, you may still be eligible for the IBR by consolidating your federal student loans into the Direct Loan program.

Interest Forgiveness

Second, there is the interest deduction or forgiveness benefit. If your new monthly payment isn’t large enough to pay the accruing interest on the subsidized portion of your direct loan, the Federal government will pay it for you for a period of up to but no more than three consecutive years once you begin your Income Based Repayment program. This is one of the many forgiveness aspects that Federal Student Loans offer.

Forgiveness At the End Of Term

Fourth is the 20-year forgiveness for new borrowers that took their loans out after July 1st 2014, or 25 years if the loans were taken before that date. The lifetime of an Income Based Repayment Loan is considered to be no more than 25 years. If over the lifetime of this loan, you make 300 qualified payments and the loan is still not completely paid off, any remaining loan amount will be forgiven and legally discharged. However, this discharged amount is considered taxable and must be paid for the year it was forgiven; i.e. a loan discharged in 2013 must be paid with other 2013 Income Taxes due in 2014.

Public Sector 120 Months Forgiveness

Finally, there is the student loan forgiveness for public service employees. If you make 120 on time, full monthly payments under an Income-Based Repayment program while employed full time with a public service organization, you may apply to have the remaining balance of your loan or loans forgiven and legally discharged. This could save up to another 15 years of payments.

Annual Recalculation of Payment

Interested applicants need to keep in mind that although there is no minimum payment with an Income Based Repayment Loan, the amount is recalculated every year. In addition to the criteria listed in the first benefit, family size and changes to income (including a spouse) will alter the required amount. This annual recalculation in the monthly payment depends on when the loan program was started. Income increases, a new spouse, having a child or getting laid off will definitely change your monthly payment either up or down. The good news is that if your income rises dramatically, you can change your repayment plan into a standard repayment at any time you choose.

Get Started Today!

While the Income Based Repayment Program is not an easy one to apply and qualify for, it certainly beats defaulting on your responsibilities and having that black mark on your credit report for many years to come. The benefits under this Income-Based Repayment program are extensive and designed specifically to help individuals and families in financial need while ensuring that the Federal Student Loan Program stays healthy and available for future students.


Financial Planning

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There are a ton of monthly repayment options available for student loans. If you are having trouble keeping up with payments we can help lower your monthly amount that is due.

"I called Student Counseling Services for help with my student loans and wish I had done this sooner. The consultation went well and I found out that because my college was a for profit college I could get most of my $20K in student loans forgiven. They handled all of the paperwork and now I owe less than $4k and my monthly payments are down by more then half.

Daniel Clark

"As a single mother and teacher I could barely keep up with my student loan payments. I haven't missed a payment in 15 years and was tired of barely getting by. I called this company to get an evaluation of my situation and see if they could do anything. Surprisingly I qualified for student loan forgiveness. They handled the documents and filing. About a month after my consultation most of my student loans were forgiven."

Lisa Davis

"I was paying almost $1,000 a month in student loan payments which was more then my rent. I finally had enough and found out through a frat brother about Student Counseling Services. I did some research and scheduled a consultation. The customer service was very friendly and easy to get all of the needed information to. I now pay around $180 a month. HIGHLY RECOMMEND!"

Paul Howard


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