Income Driven Repayment (IDR) Plans are made up of Income Based (IBR), Income Contingent (ICR) and Pay As You Earn (PAYE) plans. Here are four things you may not know about these loans:
1. If you have Parent PLUS loans, your options are limited
Parent PLUS loans are ineligible for IDR plans. If you consolidate your loans you are still ineligible for IBR and PAYE but can now place the loans on ICR.
2. The government will pay your interest for the first 3 years with IBR, PAYE
For the first three years on subsidized loans, the government will pay your interest of the IBR and PAYE plans. This is paid on the first day of the month and only applies to interest that is not covered by your payment.
3. You have to recertify every year
You are required to recertify once a year for this plan. If you do not, it will redisclose to a standard repayment plan and usually raise your payment significantly. While you must recertify only once a year, if your situation changes significantly you are able to recertify previous to the year mark.
4. There is debt cancellation at the end of your payment term
For the ICR and IBR plans at the end of 25 years the remainder of the current principal balance and unpaid interest is cancelled while with the PAYE there is debt cancellation after 20 years. In all these situations any debt cancelled will be included as taxable income.