You pay a fixed monthly payment amount that will pay off the loan within a ten-year period. ACPE establishes the standard schedule. You pay the least amount in total finance charges on this repayment plan.
Income Based Repayment (IBR)
Your loan payment is based on income and family size. IBR is available for all federal student loans, except parent PLUS loans. You must have a partial financial hardship to enroll. This plan is designed to make repaying education loans easier for students who intend to pursue jobs with lower salaries, such as careers in public service. It caps the monthly payment at 15% of your discretionary income, which is the difference between your Adjusted Gross Income and 150% of the poverty guideline for your family size and state of residence). After 25 years of qualifying repayment, any remaining balance on the loan may be forgiven. You may have to pay taxes on the amount forgiven. For more information visit www.studentaid.ed.gov.
Temporary Payment Reduction
This plan reduces your monthly payment during a short-term financial hardship. After this temporary period, your loan payments increase so you pay your loan off within the scheduled repayment period. This option does not bring your loan payments current and does not remove any delinquency.
This plan gives you smaller monthly payments, and more time to pay off your loan. The period of time you are making reduced payments is treated as an addition to the regular repayment term. At the end of the reduced payment period, your payment generally returns to the original amount. This is a good option if you need a temporary reduction in payments and do not want your payments to increase above the original scheduled amount.
Your monthly payment amount begins with a reduced payment amount and periodically increases over the repayment period. If you choose this option, your payment amount will be reduced for up to 24 months; however, for the remainder of the term your payment will increase. This plan is well-suited for borrowers whose income starts low but will increase over time.
Income Sensitive Repayment
Your monthly payment amount is based on a percentage of your gross monthly income. You must renew this option annually. It can extend your total repayment period by up to five years. This plan is suited to borrowers who anticipate their income to be low initially, but expect it to increase over time.
This plan is available if you received your first federal loan on or after 10/07/98, and your accumulated loan balance exceeds $30,000. The maximum repayment term is 25 years. This option permanently reduces the required monthly payment amount, but results in higher finance charges over the life of the loan.