How to exit an Income-Driven Plan

If you decide to exit one of the IDR plans, it is usually pretty easy. If you want to change from the ICR or the PAYE all you have to do is request the plan you want from your servicer and a request can be placed to move you from one plan to another.

Only caveat is you have enough remaining term to make the switch. Also make sure you realize this may significantly raise your payment. Let’s say you were on a 10 year level and switched to the ICR.  You paid significantly less than what your Level payment was for four years on the ICR. If you switch back to the Level, you are now paying whatever is left on your loan over 6 years, not 10. And since you did not keep up the 10 year pace with your lower ICR payments, this can cause for a much higher level payment then you originally had.

It is no where near as easy for the IBR. Whenever you are exiting the IBR there are several steps you have to follow. First you have to make make an exit payment. This payment is supposed to be what a normal payment would be on the Standard Repayment Plan.

If you are unable to make this payment you can apply for what is called a Reduced Payment Forbearance. The terms of this forbearance can be given to your through your servicer. You can choose the payment amount you can qualify for through this forbearance.

In either case once you make the request you will be sent an exit bill. This next part is extremely important. You must wait till the bill generates (and thus you receive the bill) before making this payment and make the payment by the payment date. If you make the payment too early or too late you will not be switched off the plan and the payment will just be credited towards the loan but will not allow you to satisfy the requirements to be removed from the IBR.

Because of the special steps required, if you want to switch from the IBR (even to another IDR plan) it is best to contact your servicer to make sure you are not missing any steps but this should definitely help you with what to expect!