Income-Driven Repayment Plans (IDR) are designed to make repaying federal student loan debt more manageable by adjusting your monthly payment based on your income and family size. In other words, IDR plans can be the difference in affording your rent, utilities, food and your student loan payment or defaulting on your student loans because your take home pay just doesn’t afford enough extra dollars to make your payment.

Understanding the Basics of Income Driven Repayment Plans.

Saving on a Valuable Education (SAVE) Plan:

Formerly known as REPAYE, this plan adjusts your monthly payment to be affordable based on your income and family size. It currently requires 10% of discretionary income (dropping to 5% for undergraduate loans starting next July). After 20 years (for undergraduate loans) or 25 years (for graduate or professional study loans), any remaining balance is forgiven.

• As of recent data, approximately 7.5 million borrowers are enrolled in the Saving on a Valuable Education (SAVE) Plan, which is an income-driven repayment (IDR) plan. Among this group, over 4.3 million people qualify for $0 monthly student loan payments based on their income1.

SAVE is the most generous student loan repayment plan yet:

• In the case of borrowers earning less than about $32,800 individually, or less than $67,500 for a family of four, they will see $0 monthly bills.
• Indeed, most other borrowers will see their payments cut by at least half, with the most benefit going to those with undergraduate loans only.
• Finally, students who borrowed $12,000 or less will see their remaining balances wiped away after 10 years of payments, instead of 20 to 25 years.
• If you make your monthly payments, interest won't build up on your student loan balance.
• The SAVE Plan aims to make repayment more manageable by adjusting payments according to borrowers’ income levels. It’s encouraging to see a significant number of borrowers benefiting from this program! 🌟📚🎓

Income-Based Repayment (IBR) Plan.

The IBR plan sets your monthly payment at 15% of discretionary income (10% for new borrowers). The payment will never exceed what you would pay under the 10-year Standard Repayment Plan. After 25 years (20 years for new borrowers) of repayment, any remaining balance is forgiven.

Pay As You Earn (PAYE) Repayment Plan.

With PAYE, your monthly payment is 10% of discretionary income. Similar to IBR, it won’t exceed the 10-year Standard Repayment amount. After 20 years of repayment, any remaining balance is forgiven.

Income-Contingent Repayment (ICR) Plan.

This plan calculates your monthly payment based on your income and family size. After 25 years of repayment, any remaining balance is forgiven.

Why Income Driven Repayment Plans are Underutilized.

If you’re not enrolled in an IDR, you are not alone. In fact, only 35 % of eligible borrowers are enrolled in an (IDR).

Kate Callaway graduated in 2012 and had a loan payment of $1,113 & loan balance of $130,080 with Navient loan servicer. Kate worked for a non-profit employer and tried to enroll in an Income Driven Repayment Program. Despite this, her IDR Application was never accepted, or denied, she just never heard anything after she submitted the paperwork. Kate simply accepted the fact that the majority of her paycheck was going to her student loan servicer. Through the IDR Account Adjustment + PSLF, Kate had her loans forgiven.

Dr Bob Gedden owed almost $300,000 through his 21 FFEL student loans. The Federal Family Education Loan (FFEL) Program was a system of private student loans which were subsidized and guaranteed by the United States federal government from 1965 until it was ended in 2010. While FFEL loans on their own are not eligible for Public Service Loan Forgiveness, they can be converted to loans that qualify for loan forgiveness. In spite of the fact that Dr Gedden had worked in non-profit for over 25 years he was told that he didn’t qualify for loan forgiveness. Through the Income Driven Repayment Account Waiver he was able to get his loans completely wiped away.

The Truth About Low Enrollment Rate in Income Driven Repayment Plans.

If these programs are so beneficial, why is there such a low enrollment rate? Let’s take a look behind the curtain at the biggest barriers to enrollment:

LOAN SERVICERS

• No matter how well-intended IDR is, its success depends on how well it is administered. Borrowers generally do not deal directly with the federal government, but with private loan servicers hired by the government. This hasn’t always worked out well for borrowers. In fact, Navient, the country’s largest student loan servicer, violated the Consumer Protection Act by engaging in unfair and deceptive conduct and was ordered to pay a judgement of $1.85 billion.
• Servicing errors and abuses along with Department of Education policies often prevent borrowers from accessing all of the benefits of IDR. For example, lost paperwork can result in delays in IDR processing and a loss of qualifying payments towards cancellation. Many borrowers say that servicers either failed to alert them to the existence of IDR and/or encouraged them to enroll in forbearance and deferment which may not qualify for IDR cancellation.
• This leads to increased loan balances (interest keeps accruing and is capitalized) and prevents a borrower from accumulating months that could have counted towards loan forgiveness. In part, this reflects Department of Education guidance to servicers; the GAO found the Department’s “instructions and guidance to loan servicers are sometimes lacking, resulting in inconsistent and inefficient services to borrowers.”

Lack of Awareness

• Many borrowers are unaware of IDR plans or don’t fully understand their benefits. The complexity of the application process and the various plan options can deter borrowers from exploring these programs.

Administrative Hurdles

• Applying for IDR plans involves paperwork, income verification, and annual recertification. Some borrowers find this process cumbersome and time-consuming.

Failure to Remain Compliant in the Program:

• Borrowers who enroll in IDR plans often fail to remain in them, many because they fail to recertify their income each year. U.S. Department of Education data from 2013 and 2014 show that more than half of borrowers in IDR plans did not recertify on time. Many borrowers fail to recertify because of inattention or because of bureaucratic, technical, or legal difficulties recertifying. For many borrowers, this leads to an increase in required payments (sometimes an increase in the automatic debits from a borrower’s bank account, capitalization of unpaid interest that increases total debt, and delays in payments that extend the life of the loan, and, for some, default).

Interest Accrual

• While IDR plans reduce monthly payments, interest continues to accrue. Borrowers may worry about their loan balance growing over time, even if they’re making smaller payments.

Eligibility Criteria

• Certain loans, such as FFEL, Parent Plus & and Perkins loans, are not eligible for IDR plans on their own but can often be made to qualify. Borrowers seldom understand the complexities of converting non-qualifying loans to qualifying loans and simply give up trying.

Getting Help Enrolling in Income Driven Repayment Plan.

Enrolling in an income-driven repayment plan can help make repaying your student loan debt more manageable. Enrolling in an income-driven repayment plan can provide relief if your current loan payments are high compared to your income. Take advantage of these options to manage your student loan debt effectively! 🎓📚

If you’re seeking assistance with enrolling in an income-driven repayment plan for your student loans, here are some options:

1. Silver Lion Student Loan Advisors (www.Silverlionsla.com) Silver Lion provides fair and free student loan advice. They offer information on limited forgiveness opportunities, repayment restart, public service loan forgiveness, Perkins loan cancellation, teacher loan forgiveness, and more.
2. Student Loan Enrollment Services. After you’ve received free loan advice, Silver Lion is one agency that will consolidate your loans and enroll you in a program for a fee. The fee is dependent on the services provides, but if you’re looking for next level service and a guarantee that your loans will be properly enrolled, sign up for a free consultation here.
3. Monthly Student Loan Webinar. Find a great resource to provide up to the minute student loan information. Sign up here for an informative and interactive student loan webinar hosted by experts in the student loan repayment space. Sign Up Here.
4. Online Resources: Visit the Income-Driven Repayment Information Center provided by Edfinancial Services. It offers clear explanations of federal loan repayment plans, strategies for private student loans, and guidance on choosing the right plan for you. You can also submit your request online through StudentAid.gov3.

Remember that seeking professional advice can greatly assist you in navigating the complexities of student loan repayment. Choose a resource that best suits your needs and helps you achieve your financial goals! 🎓💡