Americans owe more than $1.4 trillion in student loans. Federal loans account for a majority of the student loan debt in the US. However, there are multiple types of federal student loans that are or were available to borrowers. Many people who borrowed after July 2010 have federal student loans that originated from the Department of Education’s Direct Loan Program. Borrowers with Direct Loans may be able to access most of the helpful income-driven repayment programs offered by the Department of Education.
Borrowers may also have Federal Family Education Loans (FFEL Loans), Parent PLUS Loans and Perkins Loans. The options for income-driven repayment programs are different for these borrowers.
Income-Driven Options for Borrowers with FFEL Loans
If you have FFEL loans, then your only income-driven repayment plan option is the Income-Based Repayment Program (also called IBR). With this program, your monthly payments are capped to 15 percent of your discretionary income. You can receive loan forgiveness after 25 years of timely payments. PLUS Loans that originated from the FFEL Program are not eligible for IBR.
Income-Driven Options for Borrowers with PLUS Loans
You may be eligible to enroll in the Income-Contingent Repayment Plan (also called ICR) if you have Parent PLUS Loans and are willing to consolidate. The ICR Program limits monthly payments to 20 percent of your discretionary income. You can receive student loan forgiveness after making 25 years of timely payments.
If you received FFEL PLUS Loans as a graduate or professional student, then you may be able to enroll in the IBR program. Additional programs may be available to FFEL PLUS borrowers who are willing to consolidate.
If you received Direct PLUS loans as a graduate or professional student, then you may be eligible for all four of the Education Department’s income-driven plans.
Who Is and Isn’t Eligible for Loan Forgiveness with Perkins Loans
There are no income-driven plans available for borrowers with student loans that originated from the Federal Perkins Loans Program. However, there are multiple ways to receive loan forgiveness if you have Perkins Loans. You may receive forgiveness if you work as a police officer, firefighter or for certain nonprofits.
Future newsletters will go into more detail on how to receive student loan forgiveness for Perkins Loans, so be sure to check our site for monthly updates.
Can I Change My Federal Student Loans?
You may be able to change Perkins or FFEL Loans into a Direct Consolidation Loan. This option could make you eligible for other income-driven repayment options.
For some borrowers, the benefits of a Direct Consolidation Loan are plentiful. If you are eligible for a Direct Loan consolidation, then you may be able to enroll in the REPAYE and PAYE programs. REPAYE limits monthly payments to 10 percent of your discretionary income. You could also become eligible for Public Service Loan Forgiveness (PSLF) by moving your federal loans into the Direct Loan Program. These are only a few examples of the possible benefits you may receive by seeking a Direct Loan Consolidation.
However, you may not be eligible to receive a loan consolidation. There are also cases where consolidation may not be the right choice for your situation. These are issues that you should consider working out with a student loan lawyer.
The Kansas City student loan lawyers at The Sader Law Firm can help you determine your eligibility for repayment programs, consolidation or an undue hardship discharge. You can reach us by calling (816) 281-6349 or by describing your situation on our confidential case review form.