Comparison of Income-Driven Repayment Plans *

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1 Comparison of Income-Driven Repayment Plans * ICR ORIGINAL IBR NEW BORROWER IBR PAY AS YOU EARN REPAYE Eligible Borrowers Direct Loan (FFEL borrowers may qualify through consolidation) Direct Loan and FFEL Direct Loan new borrowers on/after 07/01/2014 Direct Loan new borrowers on/after 10/01/2007 who receive a Direct Loan on/after 10/01/2011 Direct Loan (FFEL borrowers may qualify through consolidation) (FFEL new borrowers on/after 10/01/2007 may qualify through consolidation) Eligible Loans All Direct Loan types except Parent PLUS and Direct PLUS Consolidation Loans made before 07/01/2006 All Direct Loan and FFEL loan types except Parent PLUS and consolidation loans that repaid Parent PLUS All Direct Loan types except Parent PLUS and consolidation loans that repaid Parent PLUS Same as New Borrower IBR All Direct Loan types except Parent PLUS and consolidation loans that repaid parent PLUS Note: Direct Consolidation Loans made on/after 07/01/2006 that repaid Parent PLUS may be repaid under ICR Income Requirement to Qualify None Must have partial financial hardship (PFH) to initially qualify and to continue making payments based on income Same as Original IBR Same as Original IBR None * Based on original Department of Education document and expanded by NASFAA 2015 National Association of Student Financial Aid Administrators 1

2 PFH Definition N/A Annual amount due on eligible loans under 10- year standard plan must exceed 15% of discretionary income Monthly Payment 1 Discretionary Income Lesser of: 20% of discretionary income, divided by 12; or Amount repaid annually over 12 years under standard amortization multiplied by income percentage factor corresponding to AGI and marital status, divided by 12 Difference between AGI and 100% of poverty line amount for family size and state PFH periods: 15% of discretionary income, divided by 12 Non-PFH periods: 10-year standard plan payment based on amount owed when entered IBR Difference between AGI and 150% of poverty line amount for family size and state Annual amount due on eligible loans under 10- year standard plan must exceed 10% of discretionary income PFH periods: 10% of discretionary income, divided by 12 Non-PFH periods: 10-year standard plan payment based on amount owed when entered IBR Same as New Borrower IBR PFH periods: 10% of discretionary income, divided by 12 Non-PFH periods: 10-year standard plan payment based on amount owed when entered Pay As You Earn N/A 10% of discretionary income, divided by 12, unless the monthly payment amount is adjusted under the catch-up provision under (c)(4)(vii)(E) No 10-year standard payment cap (i.e., payment can be higher than what it would be under the 10-year standard plan) Same as Original IBR Same as Original IBR Same as Original IBR 1 Under the ICR Plan, if the calculated monthly payment is greater than $0, but less than or equal to $5, the required monthly payment is $5. Under the Original IBR, New Borrower IBR, Pay As You Earn, and REPAYE Plans: If the calculated monthly payment is less than $5, the required monthly payment is $0. If the calculated monthly payment is greater than or equal to $5, but less than $10, the required monthly payment is $ National Association of Student Financial Aid Administrators 2

3 Repayment Period Before Forgiveness Remaining balance forgiven after 25 years of qualifying repayment (includes periods of economic hardship deferment) Same as ICR Remaining balance forgiven after 20 years of qualifying repayment (includes periods of economic hardship deferment) Same as New Borrower IBR Remaining balance forgiven after: 20 years of qualifying repayment for borrowers whose loans being repaid under REPAYE include only loans received as undergraduate or a consolidation loan that repaid only loans borrowers received as undergraduate 25 years of qualifying repayment for borrowers whose loans being repaid under REPAYE include a loan received as graduate or professional student or a consolidation loan that repaid a loan received as a graduate or professional student 2015 National Association of Student Financial Aid Administrators 3

4 Interest Subsidy None If payment does not cover interest on subsidized loans, government pays remaining interest for 3 consecutive years (excluding periods of economic hardship deferment) from repayment start date under plan Same as Original IBR Same as Original IBR Same as Original IBR, except following the 3- year period, ED charges 50% of the remaining accrued interest on subsidized loans during periods of negative amortization For all unsubsidized loans, including Grad PLUS, ED charges the borrower 50% of the remaining accrued interest during periods of negative amortization Interest Capitalization If monthly payment doesn t cover all interest, unpaid interest is capitalized annually Amount capitalized under this condition limited to 10% of original principal balance at time borrower entered ICR Plan If monthly payment doesn t cover all interest, unpaid interest is capitalized when borrower no longer has PFH or leaves plan No limit on amount that may be capitalized under these conditions Same as Original IBR Same as Original IBR, except that amount capitalized under these conditions is limited to 10% of original principal balance at time borrower entered Pay As You Earn Plan If monthly payment doesn t cover all interest, unpaid interest is capitalized when borrower leaves plan Married Borrowers: Income Joint AGI used if borrowers file joint tax return Only borrower s AGI used if spouses file separate tax returns Same as ICR Same as ICR Same as ICR Joint AGI used if borrower files joint or married filing separately tax return, unless the borrower is separated from his or her spouse or is unable to reasonably access spouse s income 2015 National Association of Student Financial Aid Administrators 4

5 Married Borrowers: Loan Debt Joint Direct Loan debt used in determining payment amount if borrowers choose joint ICR repayment option Joint eligible loan debt used to determine PFH status if borrowers file joint tax return. Only borrower s loan debt used if spouses file separate tax returns Same as Original IBR Same as Original IBR Joint eligible loan debt used to determine borrower s payment amount Married Borrowers: Family Size The borrower, spouse, and children, including unborn children, if the children receive more than half their support, and other individuals if they live with the borrower and receive more than half of their support from the borrower and will continue to do so Same as ICR Same as ICR Same as ICR Same as PAYE, except family size does not include the borrower s spouse for a borrower who is separated, or is filing separately and is unable to reasonably access the spouse s income information 2015 National Association of Student Financial Aid Administrators 5

6 Failure to Recertify Income and Family Size Leaving the Plan Borrower may remain in ICR ED assumes family size of one Maximum monthly payment amount is the amount the borrower would have paid under the standard repayment plan based on a 10-year repayment period using the amount of the borrower s eligible loans that was outstanding at the time the borrower began repayment on the loans under the incomecontingent repayment plan Borrower may change to any other plan for which he/she is eligible Same as ICR Same as ICR Same as ICR Borrower is removed from REPAYE and placed in an alternative repayment plan with a monthly payment amount equal to the amount required to pay off the loan within 10 years of entry into the alternative plan, or by the end date of the 20- or 25-year REPAYE repayment period, whichever is earlier Borrower may re-enroll in REPAYE from alternative plan, but may be required to make catch-up payments Payments made under the alternative plan do not count toward PSLF, but may count for income-driven forgiveness if the borrower returns to an income-driven plan Borrower must first be placed on Standard Repayment Plan May change to a different plan only after making at least one payment under the Standard plan, or one payment under a reduced payment forbearance Same as Original IBR Same as ICR Same as ICR 2015 National Association of Student Financial Aid Administrators 6