INCOME DRIVEN REPAYMENT PROGRAM

student-loan-1If you have a Parent Plus loan that was taken out under your name for a child you will only qualify for an Income Contingent Repayment plan. The only differences on anIncome Contingent Repayment Plan from an Income Based Repayment plan are that your spouse’s income will be taken into consideration regardless if you file separately or jointly and your payment will generally equal 20 percent of your discretionary income or what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income. Other than those differences all of the following would also be true on an Income Contingent Plan. The Income Based Repayment plan is designed to make your student loan payments more affordable. The payment is generally equal to 10 percent of your discretionary income but never more than the 10year Standard Repayment plan amount. The largest benefit for someone who is paying toward an Income Based Repayment plan is that it offers you a 300 month capped repayment term. This means anything that is not paid within 300 months is completely discharged and forgiven. For new borrowers on or after July 1st, 2014 anything that is not paid within 240 months will be discharged and forgiven. If you are doing any plan where the payment is based on your income you will be required to recertify your loan annually based on your previous year’s tax filing.

Many people qualify for a $0.00 payment. Should their financial situation stay the same year after year for the duration of the capped repayment term they would be able to get out of their loan balance without paying a penny more toward their balance. Whether you ultimately have a balance left to be forgiven at the end of your repayment period depends on a number of factors, such as how quickly your income rises and how large your income is relative to your debt. Because of these factors, you may fully repay your loan prior to the end of your repayment period. You always want to make as much money as possible. The fact is if you have more income you will be able to afford a little more toward your payments. You do not want to pay more if you can afford more while on a payment based on your income. You want to pay the least amount that is required within this term to have as much as you can discharged and forgiven once the capped repayment term is completed. In order to receive Public Service Loan Forgiveness you would have to be on an Income Based, Income Contingent or Pay As You Earn repayment plan. You may qualify for forgiveness of any remaining loan balance after you have made 10 years of qualifying payment, instead of 20 or 25 years.

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GRADUATED REPAYMENT PROGRAM

Graduated Repayment plans start out with low monthly payments and increase every two years. They are made for a period of between 10 and 30 years for Direct Consolidation Loans. They will never be less than the amount of interest that accrues between your payments and won’t be more than three times greater than any other payment. The Graduated Repayment plan monthly payment is not calculated based on your income but rather your interest rates and loan amount. People would normally choose to go with a Graduated Repayment plan if they have a respectable amount of income and are unable to afford the Income Based or Income Contingent Repayment plan payments regularly and are needing the lowest payment available for the time being. This would allow them temporary relief that would assure their loan amounts are not accumulating interests, save them from having to use their limited forbearance time and give them the option to pay more if they can afford to at no penalty.

DISABILITY DISCHARGE

A total and permanent disability discharge relieves you from having to repay Federal Student loan balances on the basis of your total and permanent disability. Before your federal student loan can be discharged, you must provide information to show that you are totally and permanently disabled. You can show that you are totally and permanently disabled in one of the following three ways:

1If you are a veteran, you can submit documentation from the U.S. Department of Veterans Affairs showing that the VA has determined that you are unemployable due to a service connected disability.
2If you are receiving Social Security Disability Insurance or Supplemental Security Income benefits, you can submit a Social Security Administration notice of award for SSDI or SSI benefits stating that your next scheduled disability review will be within five to seven years from the date of your most recent SSA disability determination.
3You can submit certification from a physician that you are totally and permanently disabled. Your physician must certify that you are unable to engage in any substantial gainful activity by reason of medically determinable physical or mental impairment that.
  • a. Can be expected to result in death,
  • b. Has lasted for a continuous period of not less than 60 months, or
  • c. Can be expected to last for a continuous period of not less than 60 months.

All collection activity on your Federal student loans will stop automatically and you will need to complete a 36 month probationary period. During the 36 month probationary period you will need to prove you will not be able to work or go back to school. If you complete this successfully your loans will be automatically discharged upon completion of the 36 month probationary period.