If you are in financial difficulty due to student loan debt there are Income Based Repayment options available to assist you. Income Based Repayment and Income Contingent Repayment plans both have the same goal of relieving financial difficulty, but use different criteria to determine the level of assistance that will be provided.
The Income Based Repayment or IBR Plan determines a monthly payment structure based on the applicant’s earned income and family size. The actual amount owed is not considered except how it figures into the total financial difficulty, which must be demonstrated in order to be approved for an Income Based Repayment plan. All Direct Consolidation, PLUS and Stafford loans made under the Direct Loan or Federal Family Education Loan or FFEL Programs are included.
Difficulty is decided by looking at the applicant’s total monthly payment on all eligible loans, not the total amount owed. This payment is then checked against that person’s discretionary income, i.e. income remaining after bills are paid such as auto and house payments, rent, food and utilities. If the applicant does qualify, then future payments will be set at an amount not to exceed 10 percent of his or her discretionary income. This was previously set at 15 percent, but was lowered to ten by President Obama in an Executive signed in October of 2012 for all students who took out their loans prior to the end of 2012.
With Income Based Repayment, there is no minimum payment but the monthly amount can change each year depending on the applicant’s family size and income. Even so, a person approved for an Income Based Repayment is still responsible for the interest that accrues over the lifetime of the loan. By lifetime, that means 25 years. If the loan is not repaid after that point, and 300 payments that meet the criteria have been paid, the loan is closed and any remaining amount is forgiven or discharged. This amount is still considered taxable income and that tax will have to be paid on the year that it is discharged. In order to begin the application process for Income Based Repayment, you can call (866) 921-8053 to get assistance.
Income Contingent Repayment or ICR Plans, have a slightly different set of requirements. These plans are designed to assist those students and graduates who have decided to pursue a lower income career in public service. Family size, income and the total amount owed (not monthly payment) are the factors considered. As with Income Based Repayment Plans; the monthly payment is recalculated on an annual basis based on family size and income. The maximum lifetime of the Income Contingent Repayment loans is also 25 years. If there is any amount left of that original loan after that time, it is discharged just like the Income Based Repayment. The discharged amount is still taxable income and that tax will need to be paid the year it is due. Once your current loans are consolidated into the Student Loan Forgiveness Act, then you can choose into which repayment plan you would like to enroll into.
The number to call and begin the qualification paperwork is 1-866-921-8053. No matter what the situation may be, there is assistance for anyone needing help with student loans. The primary repayment plans used for this process are the Income Based Repayment (IBR) and the Income Contingent Repayment (ICR) Plans. Each one uses the applicant’s income and family size to determine needed help. The Income Contingent Repayment plan also includes the total amount of qualifying loan debt an applicant has accrued. The end goal for both programs is to provide needed relief for families that find themselves overextended in an already rough economy.