Federal Student Loan Payment Options

Previously, I have discussed the consequences of failing to pay student loans. Many of you are struggling to pay your student loans, as well as everyday living expenses. There are a number of repayment alternatives for federal student loans to help you manage your student loan payment and help your cash flow. At Lewis & Jurnovoy, P.A., we help our clients determine which repayment options are available and which option is best suited for their financial ability.

The following is a list of possible repayment options:

  • Standard Repayment Plan: This is the normal plan with fixed payments, generally for a ten year period. The payments under this plan are usually higher, but the loan will be paid off in a shorter time period as less interest is paid.
  • Income Driven Repayment Plans: There are three different income driven repayment plans and you must demonstrate a “partial financial hardship” on either of the first two plans:
    • Pay As You Earn: This plan limits your payments to no more than 10% of your income and provides for taxable loan forgiveness in 20 years. The payments will never be more than the standard plan.
    • Income Based Repayment: This plan is either a 25 year payment requiring 15% of your income or a 20 year payment requiring 10% of your income and provides for taxable loan forgiveness in 20 or 25 years. The payments will never be more than the standard plan.
    • Income Contingent Repayment: Is plan requires payment of the lesser of 20% of your income or what is required on a repayment plan with fixed 12 year term. These income based repayment plans are a great option to manage your loans and provide the following advantages:
      1. Lower Monthly Payments
      2. Loan Forgiveness
      3. Payment Change With Income Change: You are not locked in to a fixed payment. Your payments will change each year as your income changes.
      4. Public Service Forgiveness: You may be eligible for your loan to be forgiven after 10 years. Only specific career fields are eligible.
      5. Deferment/Forbearance: Many student loan servers offer these options for financial hardships or if you return to school. During a deferment, you do not need to make a payment and interest may be suspended. If you are eligible for a forbearance, you can either stop making payments or reduce your payments. Either way interest is still owed.
      6. Refinance: This option is becoming more popular to help lower your interest rate and change your loan term, thus decrease your payment.

Student loans are difficult to payoff and, except in rare cases, can not be discharged in a Chapter 7 or 13 Bankruptcy. If you are struggling with your student loan payments, let Lewis & Jurnovoy, P.A. help find a more affordable payment option. Contact us today for your free consultation.