Student Loan Repayment Plans

Starting Your Repayment Plan

When you begin to repay your student loan, you’ll be automatically enrolled in the Standard Repayment Plan, unless you sign up for an income-driven plan (IDR). If you apply for one of the other student loan repayment plans, it may take up to 60 days for your application to be processed, during which you may not have to make payments. The payments will be added to your IDR plan once it starts. If you do enroll in an IDR plan, you can change to a different payment program at any time, with no fees charged.

Income-Driven Repayment Plans (IDR)

Income-Driver Repayment plans (IDRs), use income and family size to come up with your monthly payment. The payment is based on a percentage of discretionary income. For IBR and PAYE, discretionary income is calculated by exempting 150% of the poverty guideline income set by the U.S. Department of Health and Human Services from your adjusted gross income (AGI). IWith the SAVE Plan, it’s 225% of the federal poverty guideline income. With ICR it’s 100%.

The type of IDR that you qualify for depends on your financial situation. If you make payments on time for a period specific to the plan, a portion of your loan is forgiven.

IDR plans must be recertified yearly so the servicer can recalculate your payment based on income and family size. Recertification is required even if neither of those changed. With some plans, you can agree to secure disclosure of your tax information to automatically recertify. The servicer will notify you when your payment is changing.

Consolidated Loans & Repayment Plans

Federal Direct Consolidation Loans are eligible for most IDRs. Many students choose to consolidate loans to avoid the confusion of multiple payments at different times of the month. Once loans are consolidated, you are responsible for a single payment only. A private loan consolidation is not eligible – only federal loans are.

You cannot use the Income-Contingent or Pay As Your Earn repayment plans if you have a Federal Family Education Loan (FFEL) or FFEL Consolidation Loan. The FFEL program, which allowed private lenders to issue student loans backed up by the U.S. Department of Education, was discontinued in 2010. You may also lose some loan benefits if you consolidate a federal Perkins Loan with other loans. The Perkins Loan, which has a fixed 5% interest rate, was also discontinued.

Borrowers who got loans under plans that no longer exist still make payments based on those loan agreements, but if they roll them into a Direct Consolidation Loan, they’re  under the terms of the DCL.

When Can I Consolidate?

As soon as you graduate, leave school or drop below half-time enrollment, you can consolidate your loans. If you consolidate your loans during your grace period, you will relinquish the remainder of your grace period and start repayment after your consolidation loan is paid out.

Unless you receive a deferment or forbearance on your loan, you can expect your first bill about two months after the consolidation loan is disbursed.