What is income-based repayment?

If you are having trouble paying your student loan bill each month, there are a few options you can consider. On the extreme side of the spectrum, some people file for bankruptcy and claim "undue hardship" as a way to get their student loan debt completely discharged.

However, if you are having trouble paying your debt off, but could probably handle it if the payment were reduced, you may want to think about income-based repayment.

An income-based student loan repayment plan may be available to you if you qualify for partial financial hardship. An easy way to determine if you're eligible is if the amount you pay monthly under a 10-year standard repayment plan is higher than what you would be required to pay under the income-based repayment plan.

Once you qualify for an income-based repayment plan, your monthly payment amount is valid for one year. You can file for the income-based repayment plan each year, but your monthly financial obligation will fluctuate as you make more or less money. Your payment amount will be based on your income and family size and payments will be made over the course of 25 years.

Not every kind of student loan is eligible for income-based repayment. These ineligible loans include any PLUS loans made to parents, FFEL Consolidation Loans that include underlying PLUS loans made to parents, and private education loans. The following loans from the Direct Loan Program and FFEL Program are eligible for income-based repayment:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans made to graduate or professional students
  • Direct Consolidation Loans without underlying PLUS loans made to parents
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • FFEL PLUS Loans made to graduate or professional students
  • FFEL Consolidation Loans without underlying PLUS loans made to parents

If you are having student loan issues and you're not sure what to do, contact Houston student loan debt attorney J. Thomas Black for a free consultation at 888-707-1233.