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Either way, your monthly payments will never be more than what you’d pay under the Standard Repayment Plan. But you will need to submit new information on your income and household every year to have your payments updated accordingly.
Your repayment period under the IBR plan is also much longer. If you’re a new borrower (on or after July 1, 2014), your repayment period is 20 years. If you’re not a new borrower, your repayment period is 25 years.
If you still have student loan debt at the end of the repayment period, the remaining balance is automatically forgiven – leaving you to just pay the tax.
Income-Contingent Repayment (ICR) Plan
The Income-Contingent Repayment plan is another income-driven repayment plan that’s similar to the IBR, but your monthly payments will be a bit higher. Consequently, this repayment plan is less popular.
Still, it could be a good fit for you if:
You’d benefit from having your monthly payments reduced slightly to better fit your current income
You’d like to have a longer repayment period that could end with your student loans being forgiven
You have federal direct loans (including parent PLUS loans)
How does the Income-Contingent Repayment plan work?
The Income-Contingent Repayment plan sets your payment at 20% of your discretionary income OR the amount you would pay on a repayment plan with a fixed payment period of 12 years. Your monthly payment will be whichever amount is lower.
With the ICR plan, you’ll also need to submit new information on your income and household every year to have your payments updated accordingly.
Your repayment period with an ICR plan is 25 years. And, just like the IBR plan, If you haven’t paid off your loan in 25 years, the remaining balance is forgiven – leaving you to just pay the tax.
Pay As You Earn (PAYE) Repayment Plan
The Pay As You Earn repayment plan is another income-driven repayment plan. And it’s very similar to the Income-Based Repayment plan but could be a better fit for you if:
You don’t qualify as a new borrower under an IBR plan
You took out your loan on or after Oct. 1, 2007, OR received a disbursement of a direct loan on or after Oct. 1, 2011 (necessary to qualify for PAYE)
You’d benefit from having your monthly payments reduced to fit your current income
You’d like to have a longer repayment period that could end with your student loans being forgiven
You have federal direct loans
How does the PAYE repayment plan work?
The PAYE repayment plan sets your monthly payment at 10% of your monthly discretionary income, regardless of whether or not you’re a new borrower. Your monthly payments will never be more than what you’d make under the Standard Repayment Plan.
With the PAYE plan, you’ll also need to submit new information on your income and household every year to have your payments updated accordingly.
Your payment period under the PAYE repayment plan is 20 years. After that, your remaining student loan balance is forgiven – leaving you to just pay the tax.
Revised Pay As You Earn (REPAYE) Repayment Plan
The Revised Pay as You Earn Repayment is an updated version of the PAYE plan. Consequently, it’s also quite similar to the IBR plan. But the REPAYE repayment plan could be a better option for you if:
You don’t qualify as a new borrower under an IBR plan
You don’t qualify for the PAYE plan based on when you took out your student loan or received a disbursement of a direct loan
You’d benefit from having your monthly payments reduced to fit your current income
You’d like to have a longer repayment period that could end with your student loans being forgiven
You have federal direct loans (not including parent PLUS loans)
How does the REPAYE repayment plan work?
The REPAYE plan sets your monthly payment at 10% of your discretionary monthly income – even if this means your payments would be higher than what you’d pay under the Standard Repayment plan.
Your repayment period under the REPAYE repayment plan is 20 years if all of your loans were for undergraduate studies. If any of your loans were for graduate studies, then your repayment period jumps to 25 years.
With the PAYE plan, you’ll also need to submit new information on your income and household every year to have your payments updated accordingly.
Either way, after the repayment period ends your remaining student loan balance is forgiven – leaving you to just pay tax.
Income-Sensitive Repayment (ISR) Repayment Plan
The Income-Sensitive Repayment plan is an income-driven repayment plan only available to you if you took out Federal Family Education Loans (FFEL), which were discontinued in 2010.
So, this plan could only be an option for you if:
You’ve taken out Federal Family Education Loans (Subsidized FFEL Stafford Loans,
Unsubsidized FFEL Stafford Loans, FFEL PLUS Loans, and/or FFEL Consolidation Loans)
You’d benefit from having your monthly payments reduced to fit your current income
You’d like to have a longer repayment period that could end with your student loans being forgiven
How does the Income-Sensitive Repayment plan work?
