Income-Based Repayments For Student Loans

The Income-Based Repayment option for student loans is a federal government program that could save qualified borrowers money and help lower their monthly student loan payments. The Income-Based Repayment option caps monthly student loan payments for those who qualify at an affordable level based on the borrowers income and family size, and may also forgive any student loan debt and interest that remains after 25 years. If you have federal student loans, and have trouble making your student loan payments, you can ask the government to limit your payment amount to 15% of your total income, in effort to help combat your student loan debt. Qualifications for Income Base Student Loan Payments:

1. If your income is less than one half times the poverty level you will not have to pay anything on your student loans.

2. Others who qualify for the program and their income is NOT less than one half times the poverty level, their payment will be 15% of the difference between the budget allowance and their income.

3. If you are in a public service job, and if after 10 years of paying on your student loans through the income based program, if your student loans are not yet paid off the rest of your debt will be erased (if you qualify). Those who are not in public service jobs but stay current on the income base payments for 25 years (and the student loans are still not paid off); you will have your debt forgiven as well (if you qualify).

4. You will need to keep records of ALL of your student loan payments so that at the end of the 10 year period or 25 year period, you can apply for the forgiveness portion of the student loan program.

Keep the following in mind when considering Income Base Student Loan Payments:

1. If you qualify for Income Base Student Loan Payments but your payments don’t cover the interest portion of your loan, your debt will continue to increase until you reach the forgiveness period.

2. There is a chance that you will have to pay taxes on the forgiven loan amount if you are not in a public service job.

3. If you have defaulted on your student loans, the program will not lower your payments, and if you have go into loan default, you will not qualify for the program at all.

4. Income Base Student Loan Payments does NOT cover private student loans, alternative or signature loans, or parent loans at all.

5. If your income is high enough that your student loans are less than 15% of your income, regardless of what other debt you may have, you won’t qualify for Income Base Student Loan Payments.

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