Remaining loan balances are forgiven after 20 years of repayment

The PAYE Plan is available for Direct Loans 8 only (including most direct consolidation loans), and borrowers must have received a disbursement of a Direct Loan on or after . Payments under the plan are limited to 10% of the borrowers’ discretionary income. The plan caps the payment amount so it cannot be more than under a 10 – year standard repayment plan.

Discretionary income is defined as household income above 150% of the federal poverty level based on the borrower’s family size and state of residence. Household income is generally defined as the borrower’s adjusted gross income (AGI) on his or her most recent tax return. If a married borrower files a joint tax return, then household income is the couple’s joint AGI.

The FFEL loans that are not eligible for the plan are parent PLUS Loans and Consolidation loans that include at least one parent PLUS Loan.

The original IBR Plan became available in . The Health Care and Education Reconciliation Act of 2010 9 revised the plan for new borrowers on or after . The original IBR Plan limits payments to 15% of the borrower’s discretionary income, capped at the payment amount determined under a 10 – year standard repayment plan with remaining loan balances forgiven after 25 years of repayment. The revised IBR Plan limits payments to 10% of the borrower’s discretionary income with the same cap, with remaining loan balances forgiven after 20 years of repayment https://getbadcreditloan.com/payday-loans-ks/smith-center/.

Discretionary income is defined as household income above 150% of the federal poverty level based on the borrower’s family size, the same calculation as for the PAYE Plan. Household income for a married borrower is the borrower’s AGI, if MFS, and the joint AGI of the borrower and his or her spouse, if filing MFJ.

The ICR Plan is available for Direct Loans, including Direct Consolidation Loans. The ICR Plan allows the Direct Consolidation Loans to include parent PLUS loans and FFEL loans. This is the only income – driven plan available to parent PLUS Loan borrowers (after loan consolidation).

The plan forgives remaining loan balances after 25 years

Payments under the plan are equal to 20% of the borrower’s discretionary income, subject to a cap. The cap equals the amount the borrower would pay under a standard repayment plan with a 12 – year repayment period, adjusted using a formula that takes the borrower’s income into account. Discretionary income is defined as household income above the federal poverty level based on the borrower’s family size and state of residence. Household income for a married borrower is the borrower’s AGI, if MFS, and the joint AGI of the borrower and his or her spouse, if MFJ.

The REPAYE Plan is available for Direct Loans including most Direct Consolidation Loans. Payments are limited to 10% of the borrower’s discretionary income. Unlike the other income – driven plans, the payment is not capped. Remaining loan balances are forgiven after 20 years for undergraduate borrowers and 25 years for graduate borrowers.

Discretionary income is defined as household income above 150% of the federal poverty level based on the borrower’s family size and state of residence. For this plan, household income for a married borrower includes the joint AGI of the borrower and his or her spouse, regardless of their tax filing status.

The IBR Plan is available for Direct Loans and most Federal Family Education Loans (FFEL loans)

To gain a better understanding of the impact of MFS on the income – driven plan repayment amount compared with the tax cost of MFJ, this article calculated the tax cost of MFS and the difference in loan payments for MFJ and MFS for various fact patterns. The tax difference is based on 2019 tax rate schedules. The loan repayment difference uses repayment calculations from the Loan Simulator provided on the Federal Student Aid website. 10 The calculation used a 5% interest rate for the loans and a 2% increase in yearly earnings (the website’s default percentage increase).