Income-driven repayment plans can help.
The beauty of (these plans) is that it doesnt mean you cant pay more, Lawrence said.
No Interest Til Almost 2027?
If youre in default, youre also out of luck.
Certain types of federal loans may not qualify on their own, but may qualify if theyre consolidated.
Heres a quick rundown on each.
Stay with us, because this is about to get confusing.
It is very confusing, even for those of us in the field.
How Do I Know Which Plan Is Right For Me?
Who Are These Plans Designed For?
Income-driven repayment plans are designed for borrowers who have a high amount of debt compared to their income.
You may have no monthly payment at all.
The U.S. Department of Education calculates discretionary income usingfederal poverty guidelines.
Since your monthly payment is based on your income and family size, your payment will change over time.
What If Im Married?
It depends on which plan you pick, according to theDepartment of Education.
Under the REPAYE plan, it doesnt matter if you file separately or jointly.
The payment will still be based on your combined income and loan debt.
It also sounds fair to pay based on what theyre earning.
Unfortunately, this is a trap that makes the loan more expensive and increases the repayment timeline.
There are two main downsides to income-driven repayment plans.
Youll pay more interest.
Under a standard repayment plan, youd make fixed monthly payments for 10 years.
Youll pay taxes on any debt that is forgiven.
This one is a huge bummer.
Depending on your situation, the pros of income-driven repayment plans may still outweigh the cons.
And there have been efforts over the years to remove the income tax burden on forgiven student loan debt.
Who knows, maybe someday one of those efforts will be successful.
I wouldnt bet on it, but at the same time it would not surprise me.
The important thing is to keep making payments in some shape or form so you stay out of default.
Find her on Twitter: @sarahkuta.
