How Forgiveness Repayment Works


Quick Summary:  With student loan forgiveness borrowers participate in repayment for a period of time (term). Whatever balance is remaining at the end of that term is forgiven.

The Downside:  These plans can be a little tricky and cumbersome to qualify for.  The loans must be certain loan types, and service providers are somewhat reluctant to approve borrowers for the very lowest payment available (WHAT WE DO).  Additionally, the program but be re-applied for annually (recertification), so if a borrower's income should rise significantly over time, they may end up paying more for the loan over that time.  Also, not filing annually will revert your payments to the standard repayment plan, so you must keep up.

The Upside:  For borrowers with lower incomes, the payments can be lowered up to 100% (yes, a $0 payment is not unusual).  Simply participate in this type of repayment for the term, and the balance remaining at the end of the term is forgiven.

Overview:  The Department of Education has created a multitude of repayment plans to better suit borrowers.  These plans are basically divided into two groups:  the standard repayment plans and the income based repayment plans.  Each group has different terms ranging from 10 to 25 years.  Qualifying for these plans will depend on several factors; such as the types of loans the borrower has in their portfolio, the borrower's income, family size, the type of work they do and the state they live in.  Actual monthly payment calculations for each of these plans vary according to all of these factors.  These factors are then compared to the total amount of student loan debt outstanding to calculate the monthly payment and total term to participate in repayment.

Standard & Graduated Repayment Plans:  These plans are designed for 100% pay off of your student loans of the designated term.

Standard Repayment - This payment plan is the plan borrowers are placed in when they stop attending school.  This plan is basically a straight line amortization for 10 - 30 years.

Graduated Repayment - This plan will begin payments very low, but increase every 2 years.  This minimum payment will have to at least cover the interest over a year of accural and the entire plan can last for up to 10 years.

Extended Graduated or Fixed Repayment - This can be either a fixed or graduated monthly payment and can last up to 25 years.  The qualification to this plan can be complicated because of minimum loan balances that must be met with certain loan types.

Income Driven Repayment (IDR Plans)

Income Based Repayment (IBR) - The payment for this plan is calculated using the loan amount, the borrowers income, family size and calculations for the particular state they reside.  The payments are limited to 10% to 15% of their discretionary income.  All Direct Loan types qualify for this plan and the calculations of what percentage a borrowers pays depends on the age of the loans themselves.  Consolidation is sometimes used to get borrowers qualified into this plan since it creates a new loan.  The term for this loan is normally 25 years and whatever balance is left unpaid at the end of the term is discharged.  Mostly referred to as "forgiven".

Pay As You Earn - There's two types of these kinds of plans.  Pay As You Earn and Revised Pay As You Earn (RPAYE).  As with IBR, the monthly payments are calculated on the loan amount, borrowers income, family size and the state they reside.  Payments are limited to 10% of discretionary income, and the optimal term is determined by the calculations themselves.  Like IBR, after the term has been completed the loan is over and the remaining balance is discharged (forgiven).

Income Contingent Repayment - Although any borrower can qualify for this repayment option, we primarily recommend this for Parent Plus loan holders.  For these borrowers the calculations are normally more favorable than the standard options.  Again, the calculations are based on the loan amount, borrowers income, family size and the state they reside.  The calculation is on 20% of the borrowers discretionary income.  This term can be exercised to the point of discharging the remaining balance as well (forgiven).

We Make This Process Simple!

Each loan scenario is a little different.  Whether it's getting loans out of default first, stopping a garnishment or getting the loans reclassified into the proper loan type, we are the professionals who can help.  With over 8 years of experience, we off a 100% money back guarantee on all of our fees and carry an A+ rating with the business ratings agencies.

Give us a call or fill the form for a call back 877-822-6332!


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