Are you a borrower with low income to settle your student loan and looking for an interest subsidy? Well, the answer to your questions is yes, with an income-driven repayment, the government help you pay as you earn by reducing your monthly loan payment.
With this income-driven repayment, the government will provide students or parents with interest subsidies.
Under this plan, government pays part of the interest amount a borrower loans based on certain criteria thus if you qualify. This usually take a short period and doesn’t run through out your loan term.
Types of Income-Driven Repayment Plans
Here are the common types of income-driven repayment plans;
- Pay-As-You-Earn (PAYE) – You make payment on your loan based on your monthly income or salary.
- Revised-Pay-As-You-Earn (REPAYE) – Yo pay a percentage of your discretionary income.
- Income-Based Repayment – changes will be made on loan amount based on your income and family size.
Types of student loans that are eligible for interest subsidy
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct GradPLUS Loans
- Direct Consolidation Loans with no Parent PLUS Loans included
On the other hand, there are also a few which are not eligible, of those
- Direct Parent PLUS Loans
- Loans in default
- Consolidated loans that include Parent PLUS Loans
- Unconsolidated Perkins Loans
How to qualify for student loan interest subsidy
Being eligible for this benefit will be based on the income-driven repayment plan. Let’s take a look at them one after the other.
You have 20-year period to pay off your loan under this plan. In terms of subsidized loans, the government over 100% of the different between your total interest and what your payment cover for 3 years. For Unsubsidized loans, there is nothing covered on your interest by the government.
There is 20-year payment period for undergraduate loan and 25-year payment period for graduate loans under RPAYE. Under subsidized loans, the government cover 50% of your interest above your payment cover. For Unsubsidized loans, government cover 50% of your interest above your payment cover.
Income-based repayment, this plan has the same eligibility as PAYE.
How to apply for an Income Driver Repayment plan
Interested parties can apply through Federal Student Aid online for free as well as private companies but at a fee.
Borrowers will be required required to update and resubmit updated information about their income and family every year after the first application.
Failure to do so will result in loss of benefit thus the interest subsidy offered by the government and things then go back to normal. Thus your repayment schedule will move back to how it was.