Alice Morgan Photo Illustration from Investopedia
Takeaways from the Key Notes
- The Department of Education is reopening applications for the Income-Contingent Repayment (ICR) plan and Pay As You Earn (PAYE) until July 1, 2027.
- The SAVE repayment plan has been opened up to give borrowers who are in forbearance the chance to qualify and make payments towards forgiveness.
- PAYE plans offer the lowest monthly payment to the majority of borrowers. The ICR plan is better for those who have debts that are lower than their earnings.
On Wednesday, the Department of Education opened two old repayment plans so that borrowers could continue repaying their student loan debt.
Borrowers can now apply for the Income-Contingent Repayment (ICR) plan and Pay As You Earn (PAYE) until July 1, 2027.
These plans have been opened to provide more options to borrowers enrolled in the Saving for a Valuable Education (SAVE) plan and who were placed in forbearance after a federal court ordered that student loan forgiveness be paused.
The forbearance period is characterized by the absence of payments and accrual of interest. The court is still pending, so borrowers are not able to pay the required amount toward forgiveness. Forbearance is lifted by the department once borrowers enroll in ICR and PAYE.
What are these two options?
Although the reinstated two options are not as generous as SAVE’s plan, they may be able to help in different situations. Experts said some options may be better than others, depending on a borrower's needs and situation.
The Department of Education stated that the PAYE program provides the lowest payments for the majority of borrowers. The ICR plan has an alternative formula to calculate monthly payments, which could provide lower payments for those whose debt is "low relative to their income."
You can apply for one of two income-driven repayment schemes here.
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