Standard Repayment - A standard repayment plan is what you get if you do not make a different choice. You have a minimum of five years, but not more than ten years to repay with a standard plan.

FFEL borrowers are automatically assigned this plan if they do not select a different option within 45 days of being notified by the lender to choose a repayment plan. Standard plans have the highest monthly payments. The monthly amount may vary if there is a variable interest rate.

Graduated Repayment - Under a graduated repayment plan, payments start out low and increase during the course of the repayment period. The payments usually increase every two years. For FFEL Loans and Direct Loans that entered repayment on or after July 1, 2006, the loan still must be paid over a period of 10 years. However, if your loan balance is high enough, you can make graduated payments as part of an extended repayment plan. Graduated plans tend to work best for borrowers who are just starting out and are likely to see relatively quick increases in earnings over time.

Extended Repayment - Extended repayment plans are available if you have total outstanding principal and interest exceeding $30,000. In these cases, you may repay on a fixed or graduated payment schedule for a period not to exceed 25 years.

Extended plan monthly payments will be less than under the standard repayment plan. However, you will also pay more interest over the life of the loan because the repayment period is longer.


Income Contingent Repayment Plan - Monthly payments under an ICRP do not need to cover monthly accruing interest. Monthly payments can be very low, even zero for borrowers with household incomes below the poverty level. Payments go up as income increases. The required payment can be no greater than 20% of any earnings above the poverty level.

If you apply for an ICRP, you must agree to let the government see your recent tax return information. The government requires you to sign a consent form. If you are married, your spouse must also sign the consent form.

The ICRP is available only in the Direct Loan Program, including the Direct Loan consolidation program. If you are married, your joint income will be counted in figuring out the ICR repayment amount regardless of whether you file taxes jointly or separately.  Only your income should be counted if you are separated from your spouse.  Parent PLUS loans are not eligible to be repaid under ICR (or IBR).  However, parent PLUS borrowers can consolidate the PLUS loans and then choose ICR for the new Direct Consolidation loan. If you continue making ICRP payments for 25 years, any debt that remains is canceled. This canceled amount will be taxed as income.

Income-Based Repayment Plan - As of July 1, 2009, there is a new income-based repayment plan available for FFEL and Direct Loan borrowers. IBR  helps borrowers keep their loan payments affordable with payment caps based on their income and family size. IBR is available in both the FFEL and Direct Loan programs. You can repay all federal student loans using IBR, except for parent PLUS loans. Borrowers with grad PLUS loans may also use IBR.  This information sheet also explains what to expect if you apply for IBR.

To qualify for IBR, you will have to show that you have enough debt relative to income. IBR then uses a sliding scale to determine how much you can afford to pay each month. If you earn below 150% of the poverty level for your family size, your payment will be 0. If you earn more than 150% of the poverty level, your loan payment will be capped at 15% of whatever you earn above that amount. Except for the highest earners, this amount will usually be less than 10% of total income.

After the initial calculation, your payment may be adjusted each year based on changes in income and family size.  Your payment will never be more than the standard 10 year payment amount unless you choose to leave the IBR program.

If you are married and both you and your spouse have student loans, as of July 1, 2010, the IBR formula will consider you and your spouse’s joint federal student loan debt as well as your joint income if you file taxes jointly.   If you are married, but file income taxes separately, only your income will be counted in determining the IBR repayment amount.  However, you may lose certain tax benefits by filing separately.

If you continue making IBR payments for 25 years, any debt that remains is canceled.  This canceled amount will be taxed as income.  This may change if Congress passes a proposal to ensure that this written off amount is not taxable.  You may not have to pay taxes even if the forgiven amount is considered taxable income.  For example, you may be able to claim insolvency status using I.R.S. Form 982.

For more info on IBR click here
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