An income-driven repayment (IDR) plan calculates your monthly student loan payment based on your income and family size. Currently, any debt remaining on many of the existing IDR plans can be wiped out after 20 years of payment. Under the new plan, the term would be reduced to 10 years for borrowers with balances under $12,000.
Currently, the Education Department offers four income-driven repayment plans: the Revised Pay as You Earn Plan, which the proposed rule would effect, and three others: the Pay as You Earn, Income-Contingent Repayment and Income-Based Repayment plans. The new regulations would phase out those latter three plans and put most borrowers into the Revised Pay as You Earn plan, or the Repaye plan.
How will my repayment terms change?
Previously, the Repaye plan required borrowers to make payments equivalent to at least 10% of their discretionary income. The new rule proposes cutting that number in half, allowing borrowers to pay 5% of their discretionary income on undergraduate loans.
Additionally, those with incomes below 225% of the federal poverty guidelines—or around the annual equivalent of a $30,600 income for a single borrower or about $60,000 for a family of four, according to U.S. Department of Education—wouldn’t have to make monthly payments on their loans at all. The months of $0 payments would count toward the 10- or 20-year threshold for forgiveness.