Helping you out of your financial hardship !
PAYE (Pay As You Earn)
Pay As You Earn (PAYE) was introduced to help you handle your student loan debt this has been active since 2012.
Your prospective monthly payments must be smaller than your standard payments to qualify for the PAYE plan, which is calculated at 10% of your discretionary income. The PAYE plan offers student loan forgiveness after 20 years of repayment.
To qualify for PAYE, there are specific requirements you must meet:
- You must have not have taken out a federal student loan before Oct. 1, 2007.
- You must prove that you need assistance in repaying your student loans and have received disbursement of a Direct Loan after Oct. 1, 2011.
SAVE (Saving on A Valuable Education)
The Saving on a Valuable Education (SAVE) Plan is the newest income-driven repayment (IDR) plan. Like other IDR plans, the SAVE Plan calculates your monthly payment amount based on your income and family size. In addition, the SAVE Plan has unique benefits that will lower payments for many borrowers.
The SAVE Plan replaced the Revised Pay As You Earn (REPAYE) Plan. Borrowers who were on the REPAYE Plan automatically get the benefits of the SAVE Plan.
The SAVE Plan is an IDR plan, so it bases your monthly payment on your income and family size.
The SAVE Plan lowers payments for almost all borrowers compared to other IDR plans because your payments are based on a smaller portion of your adjusted gross income (AGI).
The SAVE Plan has an interest benefit: If you make your full monthly payment, but it is not enough to cover the accrued monthly interest, the government covers the rest of the interest that accrued that month. This means that the SAVE Plan prevents your balance from growing due to unpaid interest.
The SAVE Plan gives borrowers who originally borrowed $12,000 or less forgiveness after as few as 10 years.
More elements of SAVE will go into effect in summer 2024 and will lower payments even more for borrowers with undergraduate loans.
Income-Contingent Repayment
If you’ve applied for the other plans but were rejected, the Income-Contingent Repayment (ICR) Plan may be your next best option for reducing your monthly student loan payment. It’s the only IDR plan, for example, for which Parent PLUS Loans are eligible — though you will have to consolidate these loans first.
Monthly payments are set as the lesser of either 20% of your discretionary income, or monthly payments when the loan is amortized over 12 years.
ICR also offers student loan forgiveness after 25 years
Should you switch to income-driven repayment ?
There are some major benefits to enrolling in an IDR plan. But IBR and other IDR plans have some potential drawbacks as well.
Here are the central pros and cons you should be aware of as you consider enrolling in an IDR plan.
Pros of income-driven repayment plans
An income-driven repayment (IDR) plan is a repayment plan for people with federal loans created to make your monthly loan payments more affordable. Income-driven repayment plans don’t cover private loans.
Income-driven plans base your monthly payments on how much money you make. The best part is that if you don’t have a job, or if your income is low enough, you can bring your payments down to as low as $0.