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Student Loans and Income-Driven Options to Repay Them

It is no secret that an undergraduate or graduate degree can be expensive. For most students, the only way to afford to obtain either or both is to finance their education through student loans. Student loans may be private or federal. The distinction between both is that the federal loans are funded by the federal government, while private student loans are funded by non-federal entities such as banks, credit unions, state agencies or schools.[1]

While neither federal nor private student loans are likely to be discharged in bankruptcy, federal student loans may offer certain repayment options that are not available with private loans. Some of these benefits include lower interest rates, forbearance, deferment or the ability to qualify for certain income driven repayment plans. The current income driven repayment plans are as follows:

  • Revised Pay As You Earn Repayment Plan (REPAYE Plan). This program is for direct loans only and caps payments at 10% of the borrower’s discretionary income. The repayment period is between 20 to 25 years. The balance of the loan is forgiven at the end of the repayment period.
  • Pay As You Earn Repayment Plan (PAYE Plan). This program is for direct loans only and also caps payments at 10%, but it is never more than would be paid on the 10 year standard repayment plan amount. The repayment period is 20 years. The balance of the loan is forgiven at the end of the repayment period.
  • Income-Based Repayment Plan (IBR Plan). This program is for direct and Federal Family Education Loan Programs (“FFELP”) loans only and is generally 10-15% of the borrower’s discretionary income. The repayment period is between 20 to 25 years. The balance of the loan is forgiven at the end of the repayment period.
  • Income-Contingent Repayment Plan (ICR Plan). This program is generally the lesser of 20% of the borrower’s discretionary income or what the borrower would pay on a fixed repayment plan for about 12 years. The repayment period is 25 years. The balance of the loan is forgiven at the end of the repayment period.
  • Income-Sensitive Repayment Plan (ISR Plan). This program is for FFELP Loans only and is available to low-income borrower. This payments under this plan are adjusted based on the borrower’s annual income.

These income driven repayment programs are in addition to the Standard and Graduated Repayment Plans.

For student loans owed to private lenders, all is not lost. Commonly, in selling and transferring the loans, private lenders seeking to collect on a student loan debt may not have all the requisite documents to prove that they are the parties with the right to collect on the debt. Where this is the case, this is a great way for student loan borrowers to gain leverage with dealing with these lenders.

If a borrower is unsure as to the owner or servicer of a student loan, he or she may find out by visiting https://www.nslds.ed.gov/npas/index.htm.

For more information about student loans, please visit our website at: http://www.fight13.com/practice-areas/student-loan-debt/

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 1,800 homes from foreclosure, eliminated $100,000,000 in mortgage principal and consumer debt, and have collected millions of dollars on behalf of our clients due to bank, loan servicer, and debt collector violations, negligence and fraud. Contact us for a free consultation to see how we may be able to help you.


[1] https://studentaid.ed.gov/sa/types/loans/federal-vs-private