For some of my Houston, Texas clients that are also student loan borrowers with large balances due on their student loans, there is no “light at the end of the tunnel.” They owe so much, they don’t see how they will ever pay it off. I had a lady come in recently that is paying on a co-signed private student loan, but she also has $180,000 in federal student loans, and she just doesn’t believe that she will ever be able to pay it off.

Not to worry! That is the wrong way to look at it. The goal is to “survive” your federal student loan debt. That is, don’t let it grind you down. If you cannot hope to pay it off, at least there are programs that will allow you to pay an affordable amount, with the balance forgiven after so many years.

Until now we have had Income Contingent Repayment (ICR) (which capped student loan payments at 20% of discretionary income). We have also had Income-Based Repayment (IBR) plans (cap of 15% of discretionary income), and Pay As You Earn (PAYE) plans (cap of 10% of discretionary income) but PAYE is currently only for recent graduates.

Beginning December 17, 2015, Direct Loan borrowers will be eligible for a new Revised Pay As You Earn or REPAYE Plan, which will cap their monthly student loan repayment amount at 10% of their monthly discretionary income, no matter when the borrower first obtained the loans. The REPAYE plan improves on the current PAYE plan while extending its protections to all student borrowers with Direct Loans.

And in addition to the monthly payment cap, REPAYE will forgive the remaining debt after 20 years for those who borrowed only for under-graduate study and 25 years for those who borrowed for graduate study. These changes will make a huge difference for some borrowers, and reduce their monthly federal student loan payments by up to 33% while shortening the repayment period from 25 to 20 years.

As in anything involving the government and regulations, it is more complex than what I have room to explain here. But if you are in default of your federal student loans or cannot afford to pay your standard student loan payments, or even a graduated (stair-step) or extended repayment program, you may want to look into your income-driven repayment options, and REPAYE.

Have you had issues with your federal student loans? Have you tried an income-driven option? If so, did it work out for you? Please leave your comments or questions below. 

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
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