+ 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:

  1. Revised Pay As You Earn Repayment Plan (REPAYE Plan)
  2. Pay As You Earn Repayment Plan (PAYE Plan)
  3. Income-Based Repayment Plan (IBR Plan)
  4. 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.

+ 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.

+ 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.

+ Is there a maximum income limit to qualify for an income-driven repayment plan?

No. There is an income eligibility requirement for the PAYE and IBR plans, but it is not based on a particular income level. Rather, it compares your income to the amount of your eligible federal student loan debt. There is no income eligibility requirement for the REPAYE or ICR plans.

+ What are the eligibility requirements to repay under an income-driven repayment plan?

The four income-driven repayment plans have different borrower eligibility requirements that are explained below. Not all borrowers are eligible for each plan. PAYE Plan and IBR Plan The PAYE Plan is available only to borrowers with eligible loans made under the Direct Loan Program. The IBR Plan is available to borrowers with eligible loans made under the Direct Loan Program or the FFEL Program.

Under the PAYE and IBR plans, your required payment amount is generally a percentage of your discretionary income. To initially qualify for either plan—and to continue to make payments based on your income—your income must be low compared to your eligible federal student loan debt.

To determine your eligibility, your loan servicer will do the following:

 Determine your monthly payment amount under the PAYE Plan or the IBR Plan, based on your income and family size.

 Determine your monthly payment amount under the 10-year Standard Repayment Plan for your eligible federal student loans, using either the amount you owed when you first entered repayment on your loans, or the amount you owe at the time you request the PAYE or IBR plan, whichever is higher.

 Compare your 10-year Standard Repayment Plan monthly payment amount with the monthly amount you would pay under the PAYE or IBR plan based on your income and family size.

If the PAYE or IBR plan monthly payment amount is less than the 10-year Standard Repayment Plan monthly payment amount, you would meet the initial eligibility requirement.

If the amount you would pay under the PAYE or IBR plan is the same as or more than the amount you would pay under the 10-year Standard Repayment Plan, you would not benefit from having your monthly payment based on your income and therefore would not qualify for those plans.

If you meet the eligibility requirement described above, you’re considered to have a “partial financial hardship.” If you have a partial financial hardship, you qualify to make payments based on income. If you don’t have a partial financial hardship, you don’t qualify to make payments based on income.

Example

 You are single and you owed a total of $40,000 in eligible student loans when your loans first entered repayment; as a result of capitalized interest (interest that has been added to your loan principal balance) you now owe $45,000 on those loans.

 Your monthly repayment amount under the 10-year Standard Repayment Plan would be $552, based on $45,000 in loan debt at an interest rate of 8.25%.

 If your PAYE or IBR Plan payment amount is less than $552, you would be eligible to repay your loans under the PAYE Plan (if you meet the other eligibility requirements for this plan) or the IBR Plan.

REPAYE Plan and ICR Plan

The REPAYE and ICR plans do not have an initial eligibility requirement like the PAYE and IBR plans. Any borrower with an eligible Direct Loan may choose to repay under the REPAYE Plan or ICR Plan.

+ Who qualifies for the PAYE Plan?

Your eligibility depends on when you took out federal student loans. You are eligible if

 you are a new borrower on or after October 1, 2007, and

 you received a disbursement of a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan for students on or after October 1, 2011, or you received a Direct Consolidation Loan based on an application that was received on or after October 1, 2011 (see Note below). Note: You can’t consolidate your loans to meet the “new borrower” requirement for the PAYE Plan (see Example 2 below).

The following examples explain who does or does not qualify for the PAYE Plan:

Example 1 You qualify because you were a new borrower and received a Direct Loan disbursement within the specified time frame.

 You received Subsidized Federal Stafford Loans (loans made under the FFEL Program) in September 2008 and September 2009 and a Direct Subsidized Loan in September 2010.

 When you received the loan in September 2008, you had no outstanding balance on any other Direct Loans or FFEL Program loans.

 You then received the first disbursement of another Direct Subsidized Loan in September 2011, and you received the second disbursement of that loan in January 2012.

Because you had no outstanding balance on a Direct Loan or FFEL Program loan at the time you received a FFEL Program loan after October 1, 2007 (that is, at the time you received the Subsidized Federal Stafford Loan in September 2008), and you received a disbursement of a Direct Loan after October 1, 2011, you qualify.

Alternative: You also would qualify if, instead of receiving the Direct Subsidized Loan in September 2011, you applied for a Direct Consolidation Loan on or after October 1, 2011, and consolidated the two Subsidized Federal Stafford Loans you received in September 2008 and September 2009 and the Direct Subsidized Loan you received in September 2010.

Example 2

You do not qualify because you are not a “new borrower.”

 You received Subsidized Federal Stafford Loans in September 2006 and September 2007.

 In January 2012 you returned to school and received a Direct Subsidized Loan. At the time you received this loan, you still had an outstanding balance on the Subsidized Federal Stafford Loans you received in 2006 and 2007.

Because you had an outstanding balance on FFEL Program loans at the time you received a Direct Loan after October 1, 2007, you do not qualify even though you received a disbursement of a Direct Loan after October 1, 2011.

Alternative: If you had repaid the two Subsidized Federal Stafford Loans in full before you received the Direct Subsidized Loan in January 2012, you would have qualified.

However, you could not qualify if you consolidated the two Subsidized Federal Stafford Loans after October 1, 2011, because you cannot become eligible for the PAYE Plan by consolidating loans that made you ineligible under the first part of the eligibility requirement (new borrower).

Note that if you’re not eligible for the PAYE Plan, you could repay your eligible Direct Loan Program loans under the REPAYE Plan, which provides some of the same benefits as the PAYE Plan.

+ Who qualifies as a new borrower for the IBR Plan?

You are a new borrower for the IBR Plan if you had no outstanding balance on any other Direct Loan or FFEL Program loan when you received a Direct Loan on or after July 1, 2014.

Because no new loans have been made under the FFEL Program since June 30, 2010, only Direct Loan borrowers can qualify as new borrowers for the IBR Plan.

+ How can I find out if I qualify for an income-driven repayment plan and what myestimated monthly payment amount would be?

Any borrower with an eligible loan type may choose to repay under the REPAYE Plan or the ICR Plan, but only your loan servicer can make an official determination of your eligibility and your monthly payment amounts for the PAYE or IBR plans.

To view estimates of your eligibility and monthly payment amounts under various repayment plans (including the income-driven plans), use the U.S. Department of Education’s online Repayment Estimator at StudentAid.gov/repayment-estimator. You can easily import your actual loan data into the Repayment Estimator or manually enter your loan amounts.

+ If I have private education loans, are they counted as part of my student loan debt when my servicer determines my eligibility for the PAYE Plan or the IBR Plan?

No. Private education loans are not counted. Only nondefaulted Direct Loans and FFEL Program loans that are eligible for repayment under the PAYE Plan or the IBR Plan are counted as part of your student loan debt for purposes of determining your eligibility. This includes private consolidation loans that repaid federal student loans. Eligible federal student loans that were consolidated into a private consolidation loan are no longer federal loans and are not considered when determining your eligibility for the PAYE and IBR plans. Note: You lose many of the benefits and consumer protections of federal loans when you consolidate them into a private loan. Find out more about the differences between federal and private student loans at StudentAid.gov/federal-vs-private.

+ If my loan is in default, can I repay it under an income-driven repayment plan?3

No. Defaulted loans are not eligible for repayment under any of the income-driven repayment plans. However, you may be able to remove your loan from default by making a specified number of monthly payments in an amount that is determined using a formula similar to the IBR formula and is based on your income. This is called “loan rehabilitation.” Once you have rehabilitated your defaulted loan, you could then repay the loan under an income-driven plan.

As an alternative to loan rehabilitation, you may be able to consolidate your defaulted loans into a Direct Consolidation Loan if you agree to repay the consolidation loan under an income-driven repayment plan. Contact your loan servicer for more information about loan rehabilitation and consolidation.

+ How is the monthly payment amount determined under the income-driven repayment plans?

Under the REPAYE Plan, your monthly payment amount is always based on your income and family size. Depending on your income, your monthly payment amount under the REPAYE Plan may be higher than what you would be required to pay under the 10-year Standard Repayment Plan.

Under the PAYE Plan and the IBR Plan, your monthly payment amount is based on your income and family size when you first begin repayment under the plan. However, if your income increases to the point that your calculated monthly payment amount would be more than what you would have to pay under the 10-year Standard Repayment Plan, your monthly payment will be adjusted and will no longer be based on your income. Instead, your required monthly payment will be the amount you would pay under the 10- year Standard Repayment Plan, based on the loan amount you owed when you first entered the PAYE or IBR plan. This ensures that you will never have a monthly payment that is greater than the amount you would have to pay under the 10-year Standard Repayment Plan.

Under the ICR Plan, your monthly payment will be the lesser of an amount that is calculated based on your income and loan debt, or an amount calculated based only on income. Depending on your income, your monthly payment amount under the ICR Plan may be higher than what you would be required to pay under the 10-year Standard Repayment Plan.

+ How is the monthly payment amount calculated under the REPAYE, PAYE and IBR plans?

Under these plans, your required monthly payment is generally a percentage of your discretionary income. For all three plans, your discretionary income is the difference between your AGI and 150 percent of the U.S. Department of Health and Human Services (HHS) Poverty Guideline amount for your family size and state. Under the REPAYE Plan, your required monthly payment amount is 10 percent of your discretionary income at all times. Under the PAYE Plan and the IBR Plan, your required monthly payment is a percentage of your discretionary income during any period when you qualify to make payments based on income. The percentage differs depending on the plan.

 Under the PAYE Plan, your monthly payment is 10 percent of your discretionary income.

 For the IBR Plan, your monthly payment amount is 10 percent of your discretionary income if you’re a new borrower on or after July 1, 2014. If you’re not a new borrower, your monthly payment amount under the IBR Plan is 15 percent of your discretionary income.

Example

 You are single and your family size is one. You live in one of the 48 contiguous states or the District of Columbia. Your AGI is $40,000.

 You have $45,000 in eligible federal student loan debt.

 150 percent of the 2016 HHS Poverty Guideline amount for a family of one in the 48 contiguous states and the District of Columbia is $17,820. The difference between your AGI and 150 percent of the Poverty Guideline amount is $22,180. This is your discretionary income.

 If you’re repaying under the REPAYE Plan, the PAYE Plan, or (if you’re a new borrower) the IBR Plan, the calculation works like this: o 10 percent of your discretionary income is $2,218. o Dividing this amount by 12 results in a monthly payment of $184.83.

 If you are repaying under the IBR Plan and you’re not a new borrower, the calculation works like this:

o 15 percent of your discretionary income is $3,327.

o Dividing this amount by 12 results in a monthly payment of $277.25.

The REPAYE, PAYE, and IBR plan payment amounts shown in the example above compare with a monthly payment amount of $500 under a 10-year Standard Repayment Plan (based on a loan debt amount of $45,000 at an interest rate of 6%).

If the REPAYE, PAYE, or IBR Plan amount calculated as described above is less than $5, your required monthly payment amount is zero. If the calculated payment amount is more than $5 but less than $10, your required monthly payment is $10.

+ How is the monthly payment amount calculated under the ICR Plan?

Under the ICR Plan, your required monthly payment will be the lesser of

 20 percent of your discretionary income, or

 the amount you would pay under a Standard Repayment Plan with a 12-year repayment period, multiplied by a percentage that is based on your income (this is called an “income percentage factor”).

For the ICR Plan, your discretionary income is the difference between your AGI and 100 percent of the HHS Poverty Guideline amount for your family size and state. This differs from the standard used for the REPAYE, PAYE, and IBR plans, where discretionary income is based on 150 percent of the Poverty Guideline amount.

Example

 You are single and your family size is one. You live in one of the 48 contiguous states or the District of Columbia. Your AGI is $40,000.

 You have $45,000 in Direct Unsubsidized Loan debt.

 The 2016 HHS Poverty Guideline amount for a family of one in the 48 contiguous states and the District of Columbia is $11,880.

 The difference between your AGI and the Poverty Guideline amount is $28,120. This is your discretionary income.

 20 percent of your discretionary income is $5,624. Dividing this amount by 12 results in a monthly payment amount of $468.67.

 Based on $45,000 in Direct Unsubsidized Loan debt at an interest rate of 6%, the monthly amount you would pay under a Standard Repayment Plan with a 12-year repayment period, multiplied by the income percentage factor for 2016 that corresponds to your AGI, is $375.06.

 Since the payment amount that takes into account both income and loan debt ($379) is less than the monthly payment amount that is equal to 20 percent of your discretionary income ($468.67), your monthly payment under the ICR Plan would be $375.06.

The ICR Plan payment amount shown in the example above compares with a monthly payment amount of $500 under a 10-year Standard Repayment Plan (based on a loan debt amount of $45,000 at an interest rate of 6%). If your calculated ICR payment amount is greater than $0 but less than $5, your required monthly payment amount is $5.

+ Will I always pay the same amount each month under an income-driven repayment plan?

No. Under all of the income-driven repayment plans, your required monthly payment amount may increase or decrease if your income or family size changes from year to year.

Each year you must “recertify” your income and family size. This means that you must provide your loan servicer with updated income and family size information so that your servicer can recalculate your payment.

You must do this even if there has been no change in your income or family size. Your payment amount will be effective for the 12-month period after it is calculated. Your loan servicer will send you a reminder notice when it’s time for you to recertify.

To recertify, you must submit another income-driven repayment plan application. On the application, you’ll be asked to select the reason you’re submitting the application. Respond that you are submitting documentation of your income for the annual recalculation of your payment amount.

Although you’re required to recertify your income and family size only once each year, if your income or family size changes significantly before your annual certification date (for example, due to loss of employment), you can submit updated information and ask your servicer to recalculate your payment amount at any time.

To do this, submit a new application for an income-driven repayment plan.

When asked to select the reason for submitting the application, respond that you are submitting documentation early because you want your servicer to recalculate your payment immediately.

+ If I choose an income-driven repayment plan, how much time do I have to repay my loans?1

 For the REPAYE Plan:

 If all of the loans you’re repaying under the REPAYE Plan were received for undergraduate study (including any consolidation loan that repaid only loans received for undergraduate study), the repayment period is 20 years.

 If any of the loans you’re repaying under the REPAYE Plan were received for graduate or professional study (including any consolidation loan that repaid a loan received for graduate or professional study), the repayment period is 25 years.

 For the PAYE Plan, the repayment period is 20 years.

 For the IBR Plan:

 If you’re a new borrower, the repayment period is 20 years.

 If you’re not a new borrower, the repayment period is 25 years.

 For the ICR Plan, the repayment period is 25 years.

Under each plan, any loan amount remaining after 20 or 25 years (as applicable) of qualifying repayment will be forgiven.

There is a significant difference between the repayment period for an income-driven repayment plan and the repayment period for the Standard, Graduated, or Extended repayment plans.

Under the Standard, Graduated, or Extended repayment plans, the repayment period is the period of time over which you must repay your loan in full. Your monthly payment is set at an amount (based on your loan balance and interest rate) that will ensure your loan is fully repaid within the maximum repayment period for the plan you have chosen.

In contrast, the repayment period under an income-driven repayment plan is the maximum period of time over which you must make payments, but you might not repay your loan in full by the end of the repayment period. Your monthly payment amount under an income-driven repayment plan is generally based on your income and family size, and may increase or decrease over the course of the repayment period if your income or family size changes.

As a result, the total amount of your payments might not be enough to fully repay your loans after 20 or 25 years of qualifying repayment. Any loan balance that remains will be forgiven.

However, keep in mind that under current law the IRS considers loan amounts forgiven under an income-driven repayment plan to be taxable income.

+ If I repay my loans under an income-driven repayment plan, am I guaranteed to receive forgiveness of at least some of my federal student loan debt?

No. Your monthly payment may increase or decrease over time based on changes in your income and family size, as explained in other items in this Q&A document. Depending on your individual circumstances, you may end up repaying your loan in full by the end of the repayment period.

+ If my required monthly payment amount under an income-driven repayment plan is zero, does that still count as qualifying repayment??

Yes. Any month when your required payment is zero will count as qualifying repayment.

+ .How will I know when I’m eligible to receive forgiveness of any remaining loan balance?

Your loan servicer will track your qualifying monthly payments and years of repayment and will notify you when you are getting close to the point when you would qualify for forgiveness of any remaining loan balance.

+ How do I apply for an income-driven repayment plan?

You can apply online at StudentLoans.gov or request a paper Income-Driven Repayment Plan Request from your loan servicer. The Income-Driven Repayment Plan Request is a single application that covers all the income-driven repayment plans. You can request a specific income-driven plan, or (the recommended approach) you can request that your loan servicer determine which plans you are eligible for and then place you on the plan that will provide the lowest monthly payment amount. If you have more than one servicer for the loans that you want to repay under an income-driven plan, you must submit a separate Income-Driven Repayment Plan Request to each servicer. If you are unsure who your loan servicer is, you can find this information at StudentAid.gov/login 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).

+ How do I provide the income and family size information that my loan servicer needs todetermine my eligibility for an income-driven repayment plan and my monthly payment?

This depends on whether you submit the Income-Driven Repayment Plan Request electronically or complete the paper form.

 If you apply electronically, you have the option to provide your AGI electronically by using the IRS Data Retrieval Tool on StudentLoans.gov, which allows you to transfer income information from your federal tax return. This option is available if

 you filed a federal income tax return in the past two years, and

 your current income isn’t significantly different from the income reported on your most recent federal income tax return.

 If you complete the paper Income-Driven Repayment Plan Request, you can attach a copy of your federal income tax return or an IRS tax return transcript (your loan servicer needs only the page that shows your AGI).

With either the electronic or paper option, you will be required to certify your family size on the application.

+ Once I’ve been placed on an income-driven repayment plan, do I have to reapply for the plan each year?

You don’t have to reapply for the plan, but each year you must “recertify” your income and family size by providing your loan servicer with updated information that will be used to recalculate your monthly payment amount. You must do this even if there has been no change in your income or family size. To recertify, you must submit a new Income-Driven Repayment Plan Request. You’ll be asked to select the reason for submitting the application. Respond that you are submitting documentation of your income for the annual recalculation of your payment amount. Generally, you’ll recertify income and family size around the same time of the year that you first began repayment under the income-driven plan that you selected. Your loan servicer will send you a reminder notice when it’s time for you to recertify.

+ What will happen if I don’t recertify my income and family size by the annual deadline?

It’s important for you to recertify your income and family size by the specified annual deadline. If you don’t recertify your income by the deadline, the consequences vary depending on the plan.

 Under the REPAYE Plan, if you don’t recertify your income by the annual deadline, you’ll be removed from the REPAYE Plan and placed on an alternative repayment plan. Under this alternative repayment plan, your required monthly payment is not based on your income. Instead, your payment will be the amount necessary to repay your loan in full by the earlier of 10 years from the date you begin repaying under the alternative repayment plan, or the ending date of your 20- or 25-year REPAYE Plan repayment period. You may choose to leave the alternative repayment plan and repay under any other repayment plan for which you are eligible.

 Under the PAYE Plan, the IBR Plan, or the ICR Plan, if you don’t recertify your income by the annual deadline, you’ll remain on the same income-driven repayment plan, but your monthly payment will no longer be based on your income. Instead, your required monthly payment amount will be the amount you would pay under a Standard Repayment Plan with a 10-year repayment period, based on the loan amount you owed when you initially entered the income-driven repayment plan. You can return to making payments based on income if you provide your servicer with updated income information, and if your updated income still qualifies you to make payments based on income.

In addition to the consequences described above, if you don’t recertify your income by the annual deadline under the REPAYE, PAYE, and IBR plans, any unpaid interest will be capitalized (added to the principal balance of your loans). This will increase the total cost of your loans over time, because you will then pay interest on the increased loan principal balance.

Under all of the income-driven repayment plans, if you don’t recertify your family size each year, you’ll remain on the same repayment plan, but your servicer will assume that you have a family size of one. If your actual family size is larger, but your servicer assumes a family size of one because you didn’t recertify your family size, this could result in an increased monthly payment amount or (for the PAYE and IBR plans) loss of eligibility to make payments based on income.

+ How long will it take my loan servicer to process my Income-Driven Repayment Plan Request?

The time varies, depending on whether you apply electronically or submit a paper Income-Driven Repayment Plan Request. It may take a few weeks, since the servicer will need to obtain documentation of your income and family size. If you are currently repaying your loans under a different repayment plan, your loan servicer may apply a forbearance to your student loan account while processing your request for an income-driven repayment plan.

+ Can I apply for an income-driven repayment plan while I’m in a deferment or forbearance?

Yes. If you wish to begin making payments under an income-driven plan before your deferment or forbearance is over, ask your loan servicer to end the deferment or forbearance early. You can do this on the income-driven repayment application.

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