Lower Monthly Payments
For most of our clients in Oregon and Washington, the biggest problem is the amount of their monthly payments. None of us thought that all the forms we were signing would eventually turn into a near thousand dollar a month payment or that our student loan payments would eat up half of our take home wages.
Fortunately, there are solutions for borrowers with monthly payment problems on their federally backed loans. In our experience, income based solutions usually offer the greatest value to our clients but there are balance based solutions as well. These solutions apply to U.S. Department of Education owned or guaranteed loans only. Restructure of private loans, when it does happen, operates on a case by case basis.
While there are many options for restructuring federally backed student loans, we are not a resource for helping you complete this process on your own. With that in mind, please do not book an appointment with us to simply mine for information about how to put together an IBR on your own. We represent debtors with private student loans only.
Balance Based Solutions
Ten Year Standard Payment – this is the default arrangement offered by the U.S. Dept. of Education. In a standard repayment, you send in a set payment for up to 10 years. This is likely the option that has been tripping you up.
Graduated Payment – with this option, you pay your loans off in 10 years but start with a lower payment that adjusts upward every two years. This program is designed for a borrower who expects to see steady increases in salary over the next ten years.
Extended Payment – this option provides for a level payment for a period of up to 25 years. This option is only available to borrowers with a balance exceeding $30,000.
Extended Graduated Payment – this option works like the extended payment plan for borrowers with a balance of $30,000 or more. Like the regular graduated payment, the monthly payment increases every two years.
Income Based Repayment Plans
Income based repayment plans are our most popular student loan management and restructure solutions. This is because these plans often allow us to reduce your monthly payment and reduce the total amount you pay on your student loans. Note that you can only enter into an income based repayment plan if you are in good standing (i.e., not in default). If you are in default, we will submit a proposed income based repayment plan at the same time as we assert your right to cure your default.
Income Based Repayment
This type of repayment plan considers your income only. You will need to submit either your most recently filed tax return or pay stubs. Your balance will be forgiven after 25 years, and time spent in economic deferment will count towards your 25 year term. To apply, you submit an electronic application.
Income Contingent Repayment
This type of repayment considers both your income and the balance of your loan(s). An “ICR” can be used to pay a Direct loan, and it can be used to pay a Parent PLUS loan or Perkins loan that has been consolidated into a Direct Loan. FFEL loans do not qualify for this program. ICRs may last up to 25 years – which obviously means that your monthly payment will go down from what it is currently.
An ICR considers both your income and your “reasonable” expenses. To apply, you complete and submit an application form on the Department of Education website.
If your ICR is accepted, your balance will be forgiven after 25 years (or 20 years for loans taken after 2012). Importantly, time spent in economic deferment counts towards the 25 years.
Pay As You Earn (PAYE)
This is a newer type of income based repayment that applies only to Direct Loans incurred after October, 2011. Payments will be lower than an IBR because the formula bases your payment on 10% of your disposable income rather than 15%. Further, your loan will be forgiven after 20 years (rather than 25). In June, 2014, President Obama signed an executive order making PAYE available to all student loan borrowers, effective late 2015.