One of the advantages of having a federal student loan as opposed to a state sponsored or private one are the many repayment plans available, some of them income based. In addition to the Income Based Repayment (IBR) and Income Contingent Repayment (ICR) plans, there is also one called Pay As You Earn (PAYE), which is the best one yet.
Do I Qualify for PAYE?
If you are looking for a more affordable payment plan for your loans, you might want to consider a PAYE plan. However, there are some requirements to consider:
- You cannot have any student loan balances as of October 1, 2007
- You must have taken out a federal student loan on or after October 1, 2011
- It must be to pay for Stafford, Perkins, or Graduate PLUS loans (no Parent PLUS)
- You must have some sort of partial financial hardship
But what is a financial hardship? Well, it has to do with your debt-to-income ratio. In other words, if your monthly loan payment in a standard, 10 year fixed plan is more than 10% of your discretionary income, then you qualify.
Beware Proposed Changes: Married couples in jeopardy! Get the details here!
PAYE is Better Than IBR!
PAYE is also currently a better option than IBR. Under IBR, financial hardship is determined by whether your monthly payment in a standard, 10 year fixed payment plan is more than 15% of your discretionary income. In addition, any unpaid balance after 20 years is discharged under PAYE; under IBR, it is 25 years.
If you live in southern New Jersey and would like tsome assistance in getting a better payment plan, please feel free to call my office at 856-432-4113 or contact me through this site to schedule an appointment in my Woodbury office to discuss your case.
If you would like more information about student loans, you can dowload my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.