If your federal student loan debt is high relative to your income and family size, you may qualify for an Income Driven Repayment. The Pay As You Earn (PAYE) plan caps monthly federal student loan payments at 10 percent of a borrower’s discretionary income and grants forgiveness for any remaining loan debt once the borrower makes qualifying payments for 20 years. To qualify for the PAYE plan, you must not have a balance on any federal student loan on or before October 1, 2007, and you must have received a disbursement of a Direct Loan on or after October 1, 2011. Only Federal Direct Loans are eligible for the PAYE plan.
If you do not meet the criteria for the PAYE plan, you may qualify for the Income Based Repayment (IBR) plan. The IBR plan caps monthly federal student loan payments at 15% of the borrower's discretionary income and grants forgiveness for any remaining loan debt once the borrower makes qualifying payments for 25 years. Both the PAYE and IBR plans require that you have a partial financial hardship to qualify. This simply means that your payments under PAYE or IBR would be less than your payments under the standard repayment plan.
For more information on repayment plan options, click on “Managing Repayment” on the top navigation bar on the studentloans.gov website. Click on “Sign In” to apply for an Income Driven Repayment Plan.