For people overburdened with student loan debt, income-driven repayment (IDR) plans can be a huge help.
IDR programs can dramatically reduce your monthly bill, freeing up more of your income for other expenses.
However, getting into an IDR plan can be confusing and overwhelming.
We’ve linked a helpful calculator for most of them so you can use to figure out which plan is right for you. But remember, each plan has its own eligibility requirements, payment formula, and repayment term. That’s why completing the income-driven repayment plan request on your own can be complex.
This year, the U.S. Department of Education released a new IDR form that it designed to simplify the process.
What is an IDR?
Under an IDR plan, loan servicers cap your federal student loan payments at a percentage of your income. They also extend your repayment term from the standard ten years to 20 or 25.
That means your monthly payment can be substantially reduced. In fact, depending on your income and family size, your monthly payment may be as low as zero.
Then, after 20 or 25 years of repayment depending on which plan you are on, the loan servicer will forgive the remaining balance.
Therefore, if you have a small salary or are struggling to find well-paying work, an IDR plan can be a lifeline, until your financial circumstances improve.
The old income-driven repayment plan request
If you’ve submitted an IDR plan application in the past, you might remember that process as incredibly intensive and time-consuming.
The previous form was 12 pages long, with nine sections, 27 questions, and detailed requirements for documenting your income.
It was also very confusing. Depending on how you answered, the form instructed you to skip some questions, but fill out others. And instead of one easy question about the size of your family, there were three.
Additionally, the form asked you to enter your spouse’s income information, regardless of which repayment plan you were applying for. Even if you filed taxes separately.
Usually, federal loan servicers shouldn’t have been considering spousal income at all. And, there is the very fine print that says spousal income is not necessary for certain plans. However, the form buries that disclaimer at the bottom.
Overall, the old form left a lot of room for error both on the side of the applicant and the loan servicer.
And complications often led to application processing delays. Many people spent months in limbo wondering if the servicer accepted them into an IDR plan.
The new form
The Internal Revenue Service (IRS) and the federal government have streamlined the new IDR form. It’s down to just 20 questions and ten pages.
The government also presents the information in a simpler manner. They’ve cut down on questions about income and family size, but still ask about spousal income. Regardless of what plan you are considering.
While the form is a step in the right direction to help cut down on processing times, there’s still a long way to go. Especially when it comes to maximizing IDR plans and their benefits to borrowers.
Proposals call for reform
The report highlighted substantial issues that delayed the government from approving IDR plan requests, causing many people to re-default on their loans.
Essentially, the government had rejected some borrowers for incomplete applications, even though they were eligible. And, the government didn’t even give borrowers the opportunity to rectify the mistakes.
The good new is the CFPB Ombudsman has made a series of recommendations to reform the current processes. Including proactively communicating with borrowers at risk of default.
More changes on the way
In October, a coalition of 20 groups, including unions, consumer groups, and student loan companies, wrote to federal agencies calling for significant reform around the processing of IDR requests.
The coalition called for automatic re-enrollment for borrowers each year. That’s a change from the government’s current policy where individuals reapply annually.
In a written statement, Maggie Thompson, executive director of Generation Progress, spoke about the need for program reforms. She said she hears from borrowers that the government hits them with fees because of failing to re-certify for IDR plans.
“This is such an easy fix for the departments and the IRS to undertake, and they don’t even need Congress to pass any new laws,” says Thompson. “It would benefit both borrowers and servicers and save the government needless paperwork.”
Completing the income-driven repayment request form
If you are struggling to keep up with your student loan payments, an IDR plan can help you manage your debt. It’s a good program, despite some of its issues listed above.
Deciding whether an IDR is for you is dependent on a range of factors. Take some time to consider your income potential, expenses, and if you could potentially qualify for loan forgiveness.
If you decide that an IDR plan is right for you but feel overwhelmed by the income-driven repayment plan request process, we can help you apply for free here.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.57% – 6.97%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|