Managing student loans payment can be quite challenging.
Despite several federal student aid options, some repayment plans still leave borrowers with financial difficulty.
However, student loan payment options that take into account the borrower’s earnings do exist.
Find out which income-driven repayment plan addresses your needs best with this 5-plan breakdown.
Student Loans Payment: Your Best Options
1.Income Based Repayment Plan
The Income Based Repayment Plan requires a monthly payment that does not exceed 10% of your monthly income.
Your loans may also be forgiven after 20 to 25 years of consecutive repayments.
- Eligibility: You must demonstrate a strong financial need for this kind of assistance.
- Qualified Loans: Stafford Loans, Direct Loans, Direct PLUS Loans, FFEL Loans, FFEL PLUS Loans
- Repayment Time: 20 to 25 Years
2. Income-Contingent Repayment Plan
In contrast, the Income-Contingent Repayment plan sets your monthly payment at no more than 20% of your discretionary income.
However, your income-to-student loan debt ratio is taken into consideration.
Therefore, your monthly payment, although at 20%, may still be relatively low.
- Eligibility: You must demonstrate a strong financial need for this kind of assistance.
- Qualified Loans: Stafford Loans, Direct Loans, Direct PLUS Loans, FFEL Loans, FFEL PLUS Loans
- Repayment Time: 25 Years
3. Pay As You Earn Repayment Plan (PAYE)
As with the Income-Based Repayment Plan, the Pay As You Earn Repayment Plan requires a monthly payment of no more than 10% of your discretionary income.
Similarly, you will also never pay more than what your monthly payment would be under a Standard Repayment Plan.
- Eligibility: You must demonstrate a strong financial need for this kind of assistance.
- Qualified Loans: Direct Loans
- Repayment Time: 20 Years
4. Revised Pay As You Earn Repayment Plan (REPAYE)
If you are enrolled in the Revised Pay As You Earn Repayment plan, your monthly payment will not be more than 10% of your discretionary income.
In addition, this plan is also generally available to more borrowers.
- Eligibility: You must demonstrate a strong financial need for this kind of assistance.
- Qualified Loans: Direct Loans
- Repayment Time: 20-25 Years
5. Extended Repayment Plan
Of the non-income-driven repayment plans, the Extended Repayment Plan is the most affordable.
However, the monthly payment may be more than 10% of your income.
This is because computing your monthly dues are based on the repayment period rather than on your income.
- Eligibility: Your outstanding student loan debt must be more than $30,000.
- Qualified Loans: Stafford Loans, Direct Loans, FFEL PLUS Loans
- Repayment Time: 25 Years
Direct Loan Consolidation
A Direct Loan Consolidation is not a student loans payment option, but under most circumstances, you will need it to enroll for other repayment plans.
If you have loans which are not qualified for select repayment plans, consider consolidating them into a Direct Loan Consolidation.
Watch this video from The Bank of America for more information on student loans payment options:
It’s easy to be overwhelmed by the amount of student loan debt one has to pay.
However, with a good strategy and the right student loan aid, it’s possible to wake up one day with no more student loan payments.
Just remember, finding the right student loans payment option is the first step towards a life free of student loan debt.
(Pro Tip: Need a bird’s eye view of all the options available for student loan repayment? Download the 8-Plan Cheat Sheet. to Student Loan Repayment for free. Click here to learn more and grab your free copy.
Do you have any other advice for handling student loan payments? Let us know in the comments below.
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