I'm having trouble paying my student loans. Do I have any options?
If you or someone you know is having difficulty paying back student loans, consider investigating the government's three income-driven repayment plans. These plans--available for federal student loans, not private loans--are designed to make student loan debt more manageable by reducing your monthly payment.
The first and newest program is called Pay As You Earn (PAYE). Under PAYE, borrowers pay 10% of their discretionary income toward their federal student loans each month, and all remaining debt is generally forgiven after 20 years of timely payments. Your monthly loan payment is based on your income, family size, and state of residence. It is readjusted each year based on these criteria.
The second plan is called Income-Based Repayment (IBR), which is similar to Pay As You Earn. Under IBR, borrowers pay 15% of their discretionary income toward their loans each month, and all remaining debt is generally forgiven after 25 years of payments. (For new borrowers who take out loans after July 1, 2014, the IBR terms are the same as PAYE.)
Both PAYE and IBR have
eligibility requirement before you can enter the plan. The payment that you would
required to make under PAYE or IBR (a technical calculation based on your income and family size) must be less than what you would pay under the
government's standard repayment plan, which is a fixed amount over a 10-year term.
The third plan is called Income-Contingent Repayment (ICR). The ICR plan does not have an initial eligibility requirement, so any borrower with eligible loans can make payments under this plan. Under ICR, your payment is equal to the lesser of
20% of your discretionary income or
what you would pay under a repayment plan with a fixed payment over a 12-year repayment term. The repayment period is 25 years.
Under all three plans, loans are forgiven after 10 years for those in certain public-service jobs.
The U.S. Department of Education offers a Repayment Estimator calculator on its website www.studentaid.ed.gov that you can use to see whether you qualify for certain plans, and to compare monthly payments and total lifetime costs under different plans.