Loans can be immensely helpful but they become a burden when you can’t pay them back. Debt can be stressful and decrease one’s quality of life. Students are commonly known to take help from financial aid options to continue their education. These loans can be obtained from the federal government or private lenders. However, many students face difficulty in paying back the loans and fall victim to the burden of debt.
In the US, student loans are the second largest source of debt. Fortunately, there are certain solutions to resolve a debt situation due to such loans. In this article, we discuss how you can get out of student loan debts.
There are 3 solutions that one can try depending on their financial situation:
- Repayment Plan as Your Earn
- Repayment Plan Based on Income
- Repayment Plan of Revised Pay as You Earn
Repayment Plan as Your Earn
This is the pay as you earn or PAYE plan. In this type of repayment plan, the 10 percent of the discretionary income goes to monthly payments. However, it is never more than the standard repayment plan amount, which requires fixed payments. The direct subsidized and unsubsidized loans, direct PLUS loans, and direct consolidation loans; not including PLUS loans made to parents, are eligible for this plan. In case you fail to pay the entire loan after 20 years, the remaining will be forgiven.
Repayment Plan Based on Income
This is feasible if you have low, unstable income or the student loan is higher compared to it. Income-contingent repayment (ICR), income-sensitive repayment (ISR), and income-based repayment (IBR) plans are available.
ICR is for federal direct loan and the payment amount is calculated based on the income. The monthly payment will be less than the 20 percent of the discretionary income or it will be fixed over 12 years according to the income. The remaining amount is forgiven if loan is not paid back in full in 25 years.
The ISR is only available or certain types of loans. The payments will be decided based on annual income, size of family, and the total amount of loan. It must be paid back I 10 years.
The IBR is also available for certain types of loans. The debt will be eliminated after 20 or 25 years of payments. The final number of years depends on when you took out the loan.
Repayment Plan of Revised Pay as You Earn
This is also known as REPAYE and the monthly payments are 10 percent of the discretionary income. The direct subsidized and unsubsidized, direct PLUS, and direct consolidation loans not including the PLUS loans made to parents are eligible for this repayment plan. After 20 or 25 years, the remaining amount of loan is forgiven if not paid back in full.
There are other options such as consolidation, deferring, forbearance, cancellation, and discharging in bankruptcy. To know what the best solution for your situation is, you can consult an expert on student loans.