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Finding a comfortable solution out of the available Student Loan
Repayment Plans to settling a student loan has become as difficult as
finding a decent, well-paying job.
The government defaults borrowers of the student loan borrowers to a
10-year program where they pay fixed installments monthly. Basically,
you pay the same amount from the first year you are out of school as that
you will pay 10 years later regardless of your job group or salary.
Income-Based Repayment plan has been instituted by the federal
government to normalize the repayment. The plan not only focuses on
lessening your payment plan but promises loan forgiveness too.
The plan is however not eligible for everyone with a student loan.
Every borrower who is under the Income-Based Student Loan
Repayment must provide supporting documents that declare their
salary, tax and return filings. Social details like family size and
expenditures are also taken into account. If by any chance the income
bracket changes, the borrower can ask for a recalculation of the
monthly amount being paid.
If at the time of your repayment terms you fail to sign up for the
Income-Based Repayment Plan or any of the other income-driven
plans of repayment, you automatically default into the standard
repayment plan. The Income-Based Repayment Plan is advantageous
since your repayments are based on your income hence you won’t be
overwhelmed if at the time of leaving college you land a low paying
If you are expecting a low salary scale and an increase in your family
size in the period of your repayment, this plan is best for you.
Additionally, since the plan is based on your current income, if by any
chance you become unemployed or your salary goes down, your
payments should go down too. The plan is also available to both
undergraduate and graduate students.
The Income-Based Repayment Plan has disadvantages too. The main
disadvantage of this plan is if your monthly salary goes extremely low,
your repayment amounts may not be enough to settle the interests,
therefore, you will experience ‘negative amortization.’ If a defaulter is
employed in various Public Service offices and makes monthly
payments under the Income-Based Plan, their loan may be forgiven.
Remember to produce documents declaring your salary and family
size each year to be re-evaluated for federalstudent loans navient