Income based repayment plans make it easier for people servicing high student loans and struggling financially. Through these plans, the monthly payment amount is reduced substantially, depending on the extent of the financial strain and other factors like family. However, not all people qualify for this plan. There are certain factors considered by the government when granting this aid to various beneficiaries of the student loans.
Qualifying for income based repayment plans
To qualify for the IBR plans, there are certain factors that you must meet. They include:
• Type of loan
The only loans eligible for the IBR plans are: GRAD PLUS, Stafford loans, consolidation loans made under federal family education loan plans or direct loan. All non-federal loans, Parent PLUS loans and loans which are currently in default do not qualify for the program, and have to follow the standard repayment plans.
• Evidence of financial strain
Qualifying for income based repayment plans primarily requires that there be financial strain in your life. The essence of the loans is to ease the burden for borrowers who make good on their promise to pay. To determine whether or not you are indeed facing financial strain under your current salary, the government uses an IBR calculator. This calculator factors in things like family, the current monthly payment made under the standard repayment plans, state of residence and the current salary.
If the IBR calculator shows that the amount you should be paying is lesser than the amount you currently pay on your standard repayment plan, then you automatically qualify for the loan. To answer a question many people frequently wonder about, the amount you currently pay under the standard plan will not be increased if the IBR calculator determines that you should pay more.
You also have to show commitment to qualify for the income based repayment plans. As such, you must have been consistent in making your standard loan repayments.
Income based repayment plans for married people
For couples, qualifying for income based repayment plans will see certain aspects of the criteria change. For starters, if you both file for a joint federal tax return, then your spouse’s salary will also be considered in the IBR calculator.
If further your spouse also has a student loan eligible for the income based repayment plans, his/her loan is combined with your when making the calculations in the IBR calculator. This however will also require that you both file a joint federal tax return.
Crucial factors to note about IBR plans
Qualifying for income based repayment plans may take a huge burden off your shoulders for the moment; it may also work against you in the long run. This is because the lower repayments extend the life of the period within which the loan should be paid. This gathers more interest as compared to before, seeing you pay more in the long run.
People with huge debts also have a chance to rid themselves of the obligation. This will however require them to have serviced the loan for 25 years or longer and to also have made 300 or more eligible repayments.