Mike grew up in a home where money was always tight, so he was determined to go to college and get a great-paying career. He qualified for some government grants and also received a couple of small scholarships, but still needed to take out some student loans to cover the cost of his education. Mike is someone who plans ahead, so he wanted to make sure his payments were affordable after graduation. He decided to research alternative payment plans so that he could enjoy the money he’d earn after graduation while still keeping up with his financial obligations.

The Options

Mike considered Extended and Graduated Plans, which would extend his repayment plan beyond the standard ten years and gradually increase payments. These are good options, but he felt like an Income-Based Plan might be a better fit for him. These plans also extend the repayment period, but payments are adjusted to match income level. An Income-Contingent Repayment Plan , (ICR) is available to any student, regardless of income, and payments are spread out over 25 years. Payments are based on your situation from year to year, and if you make your payments for the full 25 years, the remainder of the balance will be forgiven. A student needs to show “financial hardship” in order to qualify for Income Based Repayment Plans (IBR) and Pay As You Earn Plans (PAYE). Each program has different definitions of hardship, which is based on the percentage of your income that would be taken if you were to keep a standard ten-year plan. With the IBR Plan, payments are scheduled for 25 years, and the balance will be forgiven after that period. A PAYE Plan is easier to qualify for and the repayment period is only 20 years. As with the other plans, the remainder of the loan is forgiven after you are finished with payments.

Mike knew that in his field he would have to start out with a fairly low wage, but within a few years he’d be making pretty good money, so he knew he would probably qualify for an IBR or PAYE Plan. In the end, he decided on a PAYE Plan because he liked the idea of being finished with payments sooner.


Mike is set to graduate, and after his grace period he’ll begin making manageable payments that are based on his income with a Pay As You Earn Plan. If you’re preparing for graduation or are already making payments that are too much for you to afford, give me a call to make sure you’re in the best possible payment plan for your situation.

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