Can I Change My Income-Driven Repayment Plan?

Posted on December 29, 2017 at 12:00pm by
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Income-driven repayment plans are a lifesaver for borrowers who are struggling with monthly federal student loan payments. These programs limit your monthly payments to a percentage of your discretionary income. Employment is not a perquisite for enrolling in an income-driven plan. If you are unemployed, your monthly payments could be set at $0.

There are multiple income-driven plans. Your eligibility for a plan is determined by the types of student loans you carry, whether your loans are in good standing or your income. Therefor, you may be eligible for one income-driven plan but not others. It would depend on your circumstances. Unfortunately, it can be difficult to pick the right one without first discussing your situation with someone who is knowledgeable on the matter.

You may be able to change your income-driven repayment plan. For instance, if you had Direct loans and were enrolled in the Income-Based Repayment program (IBR), you may qualify for the Revised Pay As Your Earn plan (REPAYE). Why would you want to change plans? If we use switching from IBR to REPAYE as an example, the benefits are apparent right away. Under the IBR plan, your monthly payments are set at 15 percent of your discretionary income if you borrowed before July 1, 2014. On the other hand, REPAYE sets monthly payments to 10 percent of your discretionary income.

Loan forgiveness is also different for each plan. For IBR borrowers who received loans before July 1, 2014, they could receive loan forgiveness after making consecutive payments for 25 years. REPAYE borrowers who used their loans for undergraduate degrees can receive loan forgiveness after 20 years of consistent payments.

For some people, switching from IBR to REPAYE could result in lower monthly payments and faster loan forgiveness. Keep in mind that each income-driven plan has certain advantages and disadvantages. For instance, REPAYE counts your joint adjusted gross income (AGI) towards payments if you are married. IBR does not if you file taxes separately. You should speak with a professional or carefully weigh your choice before making a switch.

How Do I Change My IDR Plan?

We recently wrote a blog on the importance of recertifying your income-driven plan each year. When you go to recertify this year, you also have the option of changing your income-driven plan. On the Federal Student Aid website, click the “switch my current plan to a new plan” tab to begin the process. However, you must know your eligibility for the plan you want beforehand.

Follow the Kansas City student loan lawyers at The Sader Law Firm for regular updates on student loan and personal finance tips.

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