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The news is good if you were a student borrower. Chances are you're on the Standard 10-Year Repayment program. You have a fixed interest rate and fixed payments until you've retired your debt. In the event you're having a problem repaying your student loans under this program, you do have the same options as those available to Parent PLUS borrowers.
This can be a very good option for young people just out of school that are struggling to start their careers. The way it works is that your payments start low but then gradually increase every two years. The idea is that by the time you reach year seven or eight you will be in a much better financial position and more able to meet the higher payments.
This program does just what its name implies. It extends your repayment schedule from 10 years to as many as 30. If you owe a ton of student debts and are not afraid to take on a 30-year obligation, this could be a good alternative. While it would take you much longer to pay off the loan your monthly payments would be much less than with Standard 10-Year Repayment.
There are also the three income-driven repayment programs mentioned above that cap your monthly payments at either 20%, 15% or 10% of your discretionary income. Pay As You Earn is the one that caps monthly payments at 10% of your household income that exceeds 150% of the federal poverty guideline based on the size of your family. If you were to select this plan, your payments would change yearly, as they would be adjusted based on any changes – either positive or negative – to your household income. You would have up to 20 years to repay the loan and after those years any remaining debt would be forgiven but taxed.
Here’ by s an example of how this works:
Monthly Adjusted Gross Income: $4,280
(minus) 150% of Poverty Line: $1,480
Discretionary Income = $2,800
(multiplied by) (3) x.10%
Monthly PAYE Payment $280
So as you can see if you were to qualify for Pay As You Earn you would have a very reasonable monthly payment.
The second Income-driven Repayment plan is Income-based Repayment. It is very similar to Pay As You Earn except it generally caps your monthly payment at 15% of your discretionary income but would never be more than the 10-Year Standard Repayment plan amount.
Finally, there is Income-contingent Repayment. It has basically no eligibility requirements but caps your payment at 20% of your discretionary income or what you would pay on a plan that had a fixed payment over the course of 12 years and adjusted based on your income.