Last Updated on June 26, 2022 by Laura Turner
If you are having difficulty making your federal student loan payments, the worst thing you can do is ignore the problem. Help is available. For many borrowers, payments may be reduced under one of the Income Driven Repayment Plans (IDR Plans) offered by the Department of Education. The lower your income, the lower your payments will be.
Because the various IDR Plans have different eligibility requirements, you need to find which ones you’re eligible for and that best fit your circumstances. You may qualify for some, but not all of the available plans. Some plans require you to have what’s called a partial financial hardship; others do not. Some apply only to Federal Direct Loans and others apply to other types of federal loan. And some apply only to loans taken out after a specified time. Use this link for a chart of the different types of IDR Plans available and their requirements of each.
Let’s go over some basics you need to know to find the best IDR plan for your situation. First, you need to know which federal loan program your loans were made under: the Federal Direct loan program (DL), the Federal Family Education Loan program (FFEL), or Perkins Loan Program. DL and FFEL loans can be Stafford, subsidized or unsubsidized, Parent PLUS, Grad PLUS, or a Consolidation loan. FFEL loans were made until July 1, 2010, so if all your loans were made on or after July 1, 2010, all your federal loans must be Direct Loans or Perkins loans. Perkins loans are made by the school you attended. If you don’t know which type of federal loans you have, check with your loan servicer or use this federal government website. You may have more than one type of federal loan. That’s ok, but it means you may qualify for different repayment plans for each type.
Another thing you need to know is when you obtained the loans. Certain IDR Plans apply only to loans made on or after a particular date. Once you know the type and date of your loans, use the first link above to identify which IDR plan or plans you are eligible for. Note that some of the plans are only for DL loans, but FFEL loan borrowers can become eligible for them by refinancing their FFEL loans into a federal DL Consolidation loan. After you know which IDR plans are available to you, find an estimate of your payments using the Department of Education’s Repayment Estimator Calculator.
One last thing to keep in mind is your long term goals. Getting the lowest payment possible may be the best strategy if money is tight or if you are pursuing Public Service Loan Forgiveness, but keep in mind that the less you pay per month generally means the more you’ll pay in the long run. The calculator we recommended above will also tell you the total amount to be repaid under each plan as well as any forgiveness you may obtain.
If you have any questions, your servicer should be able to advise you. The next step is getting enrolled in the payment plan. For that, you must contact your loan servicer through their website or over the phone.
We understand that student loans can be overwhelming and can cause some borrowers to ignore them due to frustrations. The problem is that if you don’t work something out, the federal government will pretty relentlessly come after you for payment. They don’t do it directly – they work through loan servicers and collection agencies, and they are persistent. If you default on your loans, your wages could be garnished. Even social security payments can be garnished as well as your tax refund. Bankruptcy is not an option for most borrowers because the bar to getting the loan discharged in bankruptcy is very high. This is why it’s so important to ensure you understand your options and work with your loan holder to find the best, long term, solution.
The Institute of Student Loan Advisors (TISLATM) is a non-profit organization dedicated to providing free expert advice to all student loan borrowers. Find us at www.freestudentloanadvice.org