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Income Based Repayment Plan: Wise Solution For Students With Disabilities

Whether you are struggling with your student loans or you are able to make your payments, the best thing you can do is consider all possible options for yourself.

Fortunately for the millions of people with student debt, the Department of Education offers some attractive loan repayment options.

People with physical and/or mental disabilities do not have as many options, but there are still enough to help make payments less of a burden.

There is, of course, the Total and Permanent Disability Discharge program. Be careful when choosing it as your solution though, because even if your loans were discharged, you will still receive a tax bill. This is because the discharged amount is seen as income.

A highly recommended option for people with disabilities is the Income Based Repayment Plan (IBR Plan). IBR is one of the most popular repayment programs and also one of the most beneficial for anyone with a permanent disability.

What Is IBR And Do I Qualify?

The Income Based Repayment program aims specifically to help those in financial need, which often is the case for people with disabilities. What puts this plan into the spotlight for the disabled is that the payments are based on income.

Your new monthly payment will be up to 10 per cent of your discretionary income (if you are a new borrower on or after July 1st 2014) or 15 per cent (for loans before July 1st 2014).

Sometimes, within the Income Based Repayment Program, you can actually "pay" $0.00 (zero dollars) if your discretionary income isn't high enough to meet the minimum amount.

Your eligibility for Income Based Repayment depends on the loans you have taken out and the time they were taken out. The following Federal Student Loans from the Direct Loan and Federal Family Education Loan (FFEL) Programs qualify for application:

  • Direct PLUS Loans (Graduate and Professional Students)
  • Direct Consolidation Loans without PLUS Loans that were made directly to parents and not just as cosigners.
  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • FFEL PLUS Loans (Graduate and Professional Students)
  • FFEL Consolidation Loans without PLUS Loans that were made directly to parents and not just as cosigners.

You are still eligible for the IBR even if you do not have any of the aforementioned loans. This is possible by consolidating your federal student loans into the Obama Student Loan Forgiveness program.

What is Student Loan Consolidation?

Keeping track of several separate payments to different lenders can be quite complicated. A Student Loan Consolidation enables you to combine all of your federal student loans into one new loan with one lender.

The consolidated student loan will be much easier to manage, but there are other benefits to the federal Student Loan Consolidation as well:

  • By consolidating your loans, you can choose various repayment plans.
  • Every consolidated loan will be forgiven at the end of 25 years if a balance is remaining. Basically, you could be in an income based payment paying less than what you would normally pay in the standard repayment, and after 25 years the balance is forgiven.
  • There is no minimum or maximum amount of federal student loans that can be consolidated into the program.
  • Interest in the student loan consolidation program will be a weighted average of all current interest rates. So your rates will stay the same, but you will now only have one rate that has been averaged out.
  • Consolidating your federal student loans will get any defaulted loans out of default in 60-90 days with no rehabilitation necessary.

If you want to lower your monthly payment amount but are concerned about the impact of loan consolidation, you can consider reevaluating your budget and income situation. You can also consider deferment or forbearance as options for short-term payment relief needs.

Once your loans are combined into a Direct Consolidation Loan, they cannot be removed. The loans that were consolidated are paid off and no longer exist.

Benefits Of Income Based Repayment

Federal Student Aid, an Office of the U.S. Department of Education says, "Income-driven repayment plans are designed to make your student loan debt more manageable by reducing your monthly payment amount."

  • The Federal government will pay your new monthly payment for you if it isn't large enough to pay the accruing interest on a subsidized portion of your direct loan. It will be paid for a period of no more than three consecutive years upon beginning your Income Based Repayment program.
  • 20-year forgiveness is available for new borrowers that took their loans out after July 1st 2014 or 25-year if the loans were taken before that date. The lifetime of an Income Based Repayment Loan is considered to be 25 years maximum. If during this loan, you make 300 qualified payments and the loan is still not completely paid off, any remaining loan amount will be forgiven and discharged. However, this discharged amount is considered taxable and must be paid for the year it was forgiven.
  • Finally, there is the student loan forgiveness for public service employees. If you make 120 full monthly payments under an Income Based Repayment program while employed full time with a public service organization, you may apply to have the remaining balance of your loan or loans forgiven and legally discharged. This could save up to another 15 years of payments.

Applicants need to keep in mind that although there is no minimum payment with an IBR, the amount is recalculated every year. Family size and changes to income will alter the required amount.

This annual recalculation depends on when the loan program was started. Fortunately if your income rises dramatically, you can change your repayment plan into a standard repayment at any time you choose.

No matter what benefit you apply for, it's essential for you to have your story ready and in writing. So...

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