Income-Driven Student Loan Repayment Plans Like the SAVE Plan Can Help


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  • Resuming student loan payments isn’t going to be easy for everyone, but income-driven repayment helps.
  • The new SAVE plan is one of many options available to borrowers, so it’s worth doing the research.
  • Many of the plans allow you to wipe away your debt after a certain number of payments.

Picture this: You’ve been on a three-year break from paying your student loans. Maybe you went back to school, started a family, or faced some unexpected financial hurdles. Suddenly, you’re expected to dive right back into those monthly payments. It can feel overwhelming, to say the least. The prospect of stretching an already tight budget to accommodate loan repayments is a massive challenge for many borrowers.

Paying your student loans might feel like taking a 5% pay cut, according to some reports. Many borrowers had been spending money, believing that their loans would be forgiven through Biden’s student loan relief plan. Unfortunately, the Supreme Court struck down this plan, and it seems unlikely broad student loan relief will happen anytime soon.

Student loans have become a financial burden for millions of Americans, crippling their ability to save, invest, and achieve their financial goals. But there is one solution that can alleviate some of this burden: income-driven repayment plans.

What is income-driven repayment?

Income-driven repayment plans are a government-backed option for federal student loan borrowers that adjust monthly payments based on your income and family size. Typically, your new payments will be between 10% and 20% of your income.

Under an IDR plan, payments are typically smaller for the first few years of working and grow as your income does. These plans typically last 20 to 25 years — after that period ends, any remaining debt will be forgiven.

There are several types of income-driven repayment plans available, including Income-Based Repayment, Pay As You Earn, Saving on a Valuable Education (known as the SAVE plan), and Income-Contingent Repayment. But all IDR plans are designed to provide relief for those with high loan balances and low incomes.

Why you should consider an income-driven repayment plan

With these plans, you won’t wind up shelling out half your income to your student debt payments. The monthly payments are tailored to your income, making them more manageable and giving you breathing room to cover your basic needs.

Plus, after faithfully making payments for a specific number of years (usually 20 to 25 years), you might be eligible for loan forgiveness. Programs like Public Service Loan Forgiveness can wipe away your remaining loan balance tax-free if you’ve made 120 qualifying payments while working for a qualifying employer.

Life is unpredictable, and income-driven repayment plans understand that. If you are unemployed or have a fluctuating income, your monthly payments can decrease accordingly. That flexibility can be a lifesaver during tough times.

Lastly, income-driven repayment plans can help you avoid defaulting on your loans. Nobody wants to default on their loans. It can be a financial nightmare, damaging your credit score and potentially leading to wage garnishment. By enrolling in an income-driven repayment plan, you significantly reduce the risk of defaulting and keep your financial health intact.

A few things to keep in mind

Private student loans are not eligible for an income-driven repayment plan or any other type of student loan forgiveness. Some IDR plans have specific eligibility criteria, such as demonstrating financial hardship or working in certain professions.

While income-driven repayment plans can lower your monthly payments, they can also extend the length of time it takes to pay off your loans. This means you might end up paying more in interest over the long run if you have a lower student loan balance.

If you struggle to manage your student loan payments, an income-driven repayment plan can be very helpful. These plans make your loans more affordable and offer the possibility of loan forgiveness.

Applying for an IDR plan is a surprisingly simple process. The application can typically be completed online, making it convenient and accessible for borrowers. To apply, simply visit your loan servicer’s website or the Department of Education to access the IDR application. The form itself is straightforward, requiring you to fill in accurate information about your financial situation. Some plans may require additional documentation, such as proof of income, which can usually be submitted online. Once submitted, you can expect a confirmation of receipt and a subsequent review process.

Before you apply, it may be beneficial to consult with a financial advisor or student loan expert who can help you navigate the complexities of income-driven repayment plans. Don’t let your student loans hold you back from achieving your financial goals — take advantage of income-driven repayment plans and regain control of your financial future.

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