Percentage of Income

Dear Ask American Student Assistance:

How do I change my payment plan to a percentage of my income?

Sincerely,
James

Dear James:

There are a few repayment options that take your income into account. No matter which program your loans are through, you may be eligible for income-based repayment (IBR). You must display partial financial hardship to qualify for IBR. After 25 years of repayment and 300 eligible payments, any outstanding balance will be forgiven. To get started under IBR, you would need to fill out an application and mail it to your servicer, along with IRS Tax Form 4506-T.

If you have loans through the Direct Loan (DL) program, you have the option of income-contingent repayment. If you have loans through the Federal Family Education Loan Program (FFELP), your can choose income-sensitive repayment (ISR). ISR lets you select a monthly payment amount between 4%–25% of your monthly income. This option is only available to you for 5 years, after which you will have to choose another repayment plan. There is no form for changing to the ISR schedule, but some servicers will ask for a written request. Call your servicer to find out more.

You can read more about ISR and IBR.

Regards,
American Student Assistance

Loan Repayment

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