Income-Based Options for Student Loan Borrowers

by DeLadurantey Law Office, LLC on September 18, 2014

28moneyAs of July 1, 2014, several changes regarding student loan rules have become effective. One of those changes impacts income-based options for repaying student loans. Many people believed President Obama’s executive order signed weeks ago would only affect Pay As You Earn borrowers with older loans, but the changes can be taken advantage of by new borrowers as well.

A borrower’s monthly payment under the income-driven repayment plans is determined by a formula that calculates a percentage of your discretionary income that must be paid toward your student loans. This percentage differs depending on the type of repayment plan you have selected and when you took out your federal loans. Below is general guidance on how your payment amount is determined:

  • Income-based repayment plan. If you are not a new borrower on or after July 1, 2014, usually 15% of your discretionary income must be used to repay your loans. If you are a new borrower on or after July 1st, your repayment amount is generally 10% of your discretionary income. Whether you are a new borrower or not, your monthly payment can never exceed the 10-year Standard Repayment plan amount.
  • Pay As You Earn Plan (PAYE). The PAYE plan generally requires 10% of your discretionary income to be used to pay your student loan debt, but your payment can never exceed the 10-year Standard Repayment Plan amount.
  • Income Contingent Repayment (ICR) Plan. Your payment is the lesser of 20% 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.

Additionally, borrowers using the PAYE plan may have any remaining balance on their student loan forgiven after 20 years (instead of 25 years).

If you are interested in learning more about the available repayment options for federal student loan borrowers, please call us today.

If you are considering filing for bankruptcy protection or you need assistance with your student loans, call DeLadurantey Law Office, LLC, at (414) 377-0518. We believe that each client should receive the individual attention necessary to reach their financial goals. Recognizing the needs of working clients, we maintain a flexible schedule and offer evening appointments. Initial consultations are always free, and phone inquiries are always welcomed. Find us on the Internet and on Facebook.


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