Income-Based Repayment Plan Eligibility
Uninsured private loans, Parent PLUS loans, loans that are in default, consolidation loans that repaid Parent PLUS loans, and Perkins loans are not eligible.
Income-driven repayment disadvantages
Since you'll be repaying your loan for longer, more interest will accrue on your loans. That means you might pay more under these plans in the long run — even if you qualify for forgiveness. It's likely you'll pay off your loan before forgiveness kicks in.
Your servicer will notify you when your request has been processed. Processing typically takes about 30 days from the date you submit the request. Please note we're experiencing processing delays based on volume. Find out who your loan servicer is.
How can I check? You will know if you are enrolled in an IDR plan if you simply log into the Department of Education website at www.studentaid.gov. You will need to have or create a FSA ID to access your account.
More affordable payment: An income-driven repayment plan can lower your monthly payments by a sizable amount. Low-income borrowers could have payments as low as $0. Potential for forgiveness: If you still have a balance at the end of your new repayment term, it'll be forgiven.
Yes, you can be denied access to income-driven repayment plans. The reason? Not having a partial financial hardship. This is a requirement for certain plans, such as Income-Based Repayment (IBR) and Pay As You Earn (PAYE) plans.
Advantages and disadvantages of IDR plan changes
Income thresholds: With SAVE, your monthly loan payment could be zero under certain conditions, such as if you are a single borrower earning $32,800 or less or a family of four earning $67,500 or less (higher amounts in Alaska and Hawaii).
Other borrowers might have to consolidate federal student loans to qualify for IDR. Your income might be too high to qualify: If 10% of your discretionary income is higher than your monthly payment on a standard repayment plan, then you won't be able to benefit from the Income-Based Repayment or PAYE plans.
Switching to an income-driven repayment plan won't directly affect your credit score. But, a lowered monthly payment will lower your debt-to-income ratio. That can be good for your credit.
An income-driven repayment (IDR) plan bases your monthly student loan payment amount on your income and family size. For some people, payments on an IDR plan can be as low as $0 per month.
Under all of the income-driven repayment (IDR) plans, your required monthly payment amount may increase or decrease if your income or family size changes from one year to the next or if you switch repayment plan.
Qualifications for Income-Driven Repayment Plans
SAVE: Any borrower with qualifying student loans is eligible for this IDR plan. PAYE and IBR: The estimated payment you make for either of these plans has to be less than what you would pay on the standard repayment plan within a 10-year period.
Apart from double consolidation, federal borrowers shouldn't be denied income-driven repayment when applying for the new SAVE plan because it doesn't have an income cap. The only real exception to this is if you have Federal Family Education Loan (FFEL) Program loans.
Under the IBR Plan, interest not covered by your monthly payment that you're responsible for paying will continue to accumulate and will be capitalized (added to your loan principal balance) if you no longer qualify to make payments based on income, or if you leave the IBR plan.
Alternatively, you can provide documentation, such as your most recent tax return. If you didn't file taxes, other acceptable income information can include pay stubs or a letter from your employer.
Any borrower with ED-held loans that have accumulated time in repayment of at least 20 or 25 years will see automatic forgiveness, even if the loans are not currently on an IDR plan. Borrowers with FFELP loans held by commercial lenders or Perkins loans not held by ED can benefit if they consolidate into Direct Loans.
Income-based repayment caps monthly payments at 15% of your monthly discretionary income, where discretionary income is the difference between adjusted gross income (AGI) and 150% of the federal poverty line that corresponds to your family size and the state in which you reside.
In general forbearance, interest does not accrue, but time spent in forbearance doesn't count toward PSLF or IDR forgiveness. Under normal circumstances, processing IDR applications after they're received takes about four weeks.
Lenders may look at your employment history, credit score, debt-to-income ratio, and enrollment status at your school. One of the most common reasons why a student might not qualify for a private student loan is because they don't meet their lender's FICO® Credit Score criteria.
Acceptable forms of income documentation include: Paystub or wage statement. W2 form. Tax filings.
Cons of income-driven repayment plans
Recertification: You need to recertify your income and family size every year; your payment can go up or down if your situation has changed. Possible tax impact: You may need to pay income tax on any amount that's forgiven.
If you decide that an IDR plan is no longer right for you, you may be able to switch to a different plan. Use the Department of Education's Loan Simulator Tool to see what plans you are eligible to switch to and what your payment would be under each plan to decide what is right for you.
Overall, the Pay As You Earn (PAYE) plan comes out as the winner against Income-Based Repayment: PAYE lowers your monthly payments to 10% of your discretionary income. PAYE offers loan forgiveness after 20 years, no matter when you borrowed your loans.