Skip Navigation
Edvisors Star Logo
Edvisors Logo
  • Compare Lenders
      • Compare Lenders
      • Best Private Student Loans in May 2023
      • Student Loan Comparison: Federal Loans vs Private Loans
      • Parent PLUS Loans vs Private Student Loans
      • How Does Interest on Student Loans Work?
      • Private Student Loan Cosigner: Everything you Need to Know
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

      • Compare Lenders
      • Best Student Loan Refinance Companies for May 2023
      • Federal Student Loan Repayment Plans
      • Student Loan Forgiveness: How to Get Student Loans Forgiven
      • Repayment Plans for Private Student Loans
      • Parent PLUS Loan Forgiveness
      • View All Articles >
      refinance student loans with college ave get started

      This is an advertisement.

    • Private Student Loans
    • Refinance Student Loans
  • Plan for College
      • Best Job Search Sites
      • Resumes That Get Noticed
      • High Paying Careers
      • STEM Careers
      • View All Articles >
      Edvisors 1000 College Scholarship

      This is an advertisement.

      • Measuring Academic Fit: Reach, Match and Safety Schools
      • Need-Blind Admissions
      • How Long is a College Essay
      • When are College Applications Due
      • How to Write a Good College Essay
      • View All Articles >
      Edvisors 1000 College Scholarship

      This is an advertisement.

      • Filing the FAFSA 2023-24: A Simple Guide for Students
      • FAFSA Deadlines for 2023-2024
      • FAFSA FAQ - Your FAFSA Questions Answered
      • View All Articles >
      Edvisors 1000 College Scholarship

      This is an advertisement.

      • Most Popular Scholarships for College Students in 2023
      • Apply for Free Scholarships for College
      • College Scholarships for Kids
      • Most Prestigious Undergraduate Scholarships
      • Las mejores becas para estudiantes hispanos y latinos
      • View All Articles >
      Edvisors 1000 College Scholarship

      This is an advertisement.

      • How to Pay for College
      • Tuition Payment Plans
      • Pros and Cons: Borrowing From My 401K to Pay for College
      • Paying College Tuition with a Credit Card
      • Best Ways to Pay for College Without Financial Aid
      • View All Articles >
      Edvisors 1000 College Scholarship

      This is an advertisement.

      • Financial Aid Disbursement: When and How You Will Get It
      • Should I Pay Off My Student Loans Right Now
      • How to Minimize Student Loan Debt
      • View All Articles >
      Edvisors 1000 College Scholarship

      This is an advertisement.

    • Careers
    • College Admissions
    • FAFSA
    • Scholarships
    • Paying for College
    • Student LIFE Blog
  • Student Loans
      • Filing the FAFSA 2023-24: A Simple Guide for Students
      • FAFSA FAQ - Your FAFSA Questions Answered
      • FAFSA Deadlines for 2023-2024
      • FAFSA School Codes
      • FAFSA 2023-2024 Guide & Resources
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

      • Best Private Student Loans in May 2023
      • Student Loan Comparison: Federal Loans vs Private Loans
      • Parent PLUS Loans vs Private Student Loans
      • How Does Interest on Student Loans Work?
      • Private Student Loan Cosigner: Everything you Need to Know
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

      • Filing the FAFSA 2023-24: A Simple Guide for Students
      • FAFSA FAQ - Your FAFSA Questions Answered
      • The complete guide to federal undergraduate student loans
      • What are Federal Parent PLUS Loans and How to Apply?
      • Financial Aid for Graduate School
      • Compare Subsidized and Unsubsidized Student Loans
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

      • Best Student Loan Refinance Companies for May 2023
      • Federal Student Loan Repayment Plans
      • Student Loan Forgiveness: How to Get Student Loans Forgiven
      • Repayment Plans for Private Student Loans
      • Should You Refinance Federal Student Loans?
      • Parent PLUS Loan Forgiveness
      • View All Articles >
      • Sallie Mae Student Loan Review
      • College Ave Student Loan Review
      • SoFi Student Loan Review
      • Ascent Student Loan Review
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

    • FAFSA
    • Private Student Loans
    • Federal Student Loans
    • Repay Student Loans
    • Lender Reviews
  • Credit Cards
      • Petal® 2 Visa® Credit Card Review
      • SoFi Credit Card Review
      Edvisors 1000 College Scholarship

      This is an advertisement.

      • Best Credit Cards for 2023
      • Best Cash Back Credit Cards
      • Best 0% Introductory APR Credit Cards
      • Best Secured Credit Cards for 2023
      • Best Balance Transfer Credit Cards
      Edvisors 1000 College Scholarship

      This is an advertisement.

      • How to Build Credit?
      • What Age Can You Get a Credit Card?
      • What is a Secured Credit Card?
      • What is an Unsecured Credit Card?
      Edvisors 1000 College Scholarship

      This is an advertisement.

    • Card Reviews
    • Best Credit Cards
    • Credit Card FAQs
  • Money Management
      • Best Budgeting Apps
      • Budgeting Tips
      • Budgeting for Beginners
      Edvisors 1000 College Scholarship

      This is an advertisement.

      • Financial Goals
      • How to Save Money as a College Student
      • What is an Emergency Fund
      Edvisors 1000 College Scholarship

      This is an advertisement.

      • How to Pay Off Debt
      • Debt Relief
      • What is a Debt Management Plan
      Edvisors 1000 College Scholarship

      This is an advertisement.

      • How to Check Your Credit Score
      • Best Credit Building Apps
      • What is Credit?
      Self Credit Builder: Build Credit. Build Savings. Build Dreams.

      Sponsored Ad

      • Investing for Beginners
      • Best Investment Apps
      • Understanding the Stock Market
      Edvisors 1000 College Scholarship

      This is an advertisement.

      • What is Risk Management
      • How to Prevent Identity Theft
      • What is Insurance
      Info compromised in a breach? Don't compromise on identity theft protection.

      Sponsored Ad

    • Budgeting
    • Saving
    • Debt Management
    • Credit
    • Investing
    • Risk Management
  • Student LIFE Blog
Search Box Form
School Search Form
Advertisement Disclosure
Advertisement Disclosure
×

Edvisors (“Edvisors Network, Inc.”) provides independent advertising-supported platforms for consumers to search compare and apply for private student loans. Loan offers from participating lenders that appear on our websites are not affiliated with any college and/or universities, and there are no colleges and/or universities which endorse Edvisors’ products or services. Lender search results do not constitute an official college preferred lender list. Edvisors receives compensation from lenders that appear on this site. This compensation may impact the placement of where lenders appear on this site, for example, the order in which the lenders appear when included in a list. Not all lenders participate in our sites and lenders that do participate may not offer loans to every school.

Edvisors is not a lender and makes no representations or warranties about your eligibility for a particular loan or financial aid. Lenders are solely responsible for any and all credit decisions, loan approval and rates, terms and other costs of the loan offered and may vary based upon the lender you select. Please check with your school or lender directly for information related to your personal eligibility.

Edvisors has endeavored to provide accurate information. However, the results provided by lenders are for illustrative purposes only and accuracy is not guaranteed, as such, Edvisors assumes no responsibility for errors or omission in the information provided.

×
Get Your Free Guide to Filing the FAFSA Today!

Thank you for your interest in Edvisors' 2020-2021 Guide to Filing the FAFSA.

Please complete the form below to access your free copy.

Thank you! Click here to download your free FAFSA Guide.

I am a:

×
College knowledge starts here!

Enter your email below to receive your Student Loan Handbook from Edvisors.

Please check your email for the Student Loan Handbook.

After Navigation
Home Blog New Income-driven Repayment Plan
  • Contents
  • What is an Income-driven Repayment Plan? 
  • Details We Don’t Have
  • What To Do in the Meantime? 

New Income-Driven Repayment Plan: Proposal of What's to Come

Date Published : September 12, 2022
Authored By : Elaine Rubin
Share
Email This Article
Fill out the form below to send a copy of this article to your email.
By clicking "Submit" I have read and agree to the Edvisors' Terms of Use and Privacy Policy. We strongly encourage you to read our Privacy Policy to understand how we use and share your information.
A copy of this article has been sent to your email.

Along with student loan forgiveness, the Biden administration announced a new income-driven repayment plan. This plan is hoping to fix or resolve common problems with the existing income-driven repayment plans such as, income-contingent, income-based, pay-as-you-earn, and revised pay-as-you-earn. 

Let’s go through the details of the proposal—yes, the proposal, this plan is not approved or yet in effect. But we can highlight what we know so far. 

New Income-driven Repayment Plan

Now the new income-driven repayment plan announced is just a proposal, as of now. There are several steps that need to happen before the repayment plan becomes an option for borrowers. We don’t have a timeline for that, but we do know some high-level details. 

Monthly Payments

The new income-drive plan would cap payments at 5% of discretionary income for undergraduate loans. For borrowers with both undergraduate and graduate loans, they will pay a weighted average rate. 

In addition, the payments under this plan will cover a borrower’s monthly interest charges, which is major. Current income-driven plans do not guaranty that borrower monthly payments will cover monthly accruing interest, and some borrowers in these plans see their total balance stay the same or increase after years of payments. The U.S. Department of Education has even stated that borrowers who make their monthly payments, will not see their loan balance grow—even if their monthly payment is $0 based on their income. 

New Income-driven Plan Forgiveness

After 10 years of payments, for borrowers with an original principal balance of $12,000 or less, any remaining balance will be forgiven. Currently borrowers in existing income-driven plans will pay their monthly payment for up to 20 – 25 years (depending on the plan) regardless of their original principal balance. 

What is an Income-driven Repayment Plan? 

Income-driven repayment plans are a type of repayment option offered to federal student loans. It’s rather unique because your monthly payments are tied to your income and not your outstanding debt. These plans typically cap your monthly payment at a percentage of your “discretionary income” or your 10-year standard repayment plan, except for the income-contingent and revised pay-as-you-earn plans. 

Discretionary income is the difference between your income and either 100% or 150% of the poverty guideline for your family size and state of residence. Depending on the income-driven repayment plan, your payment will be 10% - 20% of your discretionary income. Most income-driven repayment plans have a payment cap of your 10-year standard repayment plan, while others do not have this cap—like the income-contingent and revised pay-as-you-earn plans—and your monthly payment can be more than your 10-year standard repayment amount. 

Monthly payments under current income-driven repayment plans can be as low as $0 per month, and while some have interest subsidies, it is possible that your monthly payments will not cover your monthly accruing interest. This has led to situations where a borrower’s student loan total debt has increased, even after making payments. When a borrower’s monthly payments do not cover accruing interest, this phenomenon is known as negative amortization. 

These plans also come with student loan forgiveness after 20-25 years of payments. And thanks to the American Rescue Plan of 2021, any amount forgiven on a student loan will not be considered federal taxable income through 2025. 

Details We Don’t Have

Honestly, this list can go on and on. But for now, here a few things we are waiting to hear.

  1. When will this new income-driven repayment plan become available for borrowers? Well, the proposal was just announced, and the new plan will need to go through the approval process—which involves proposal request for comment, a public comment period, responses, and final rules. That will take some time, but we will have to keep an eye out on the progress.
  2. Who will be able to enroll in the new income-driven repayment plan? When income-driven repayment plans were created in the past, the new plan would only be offered to new borrowers. As of right now, there is no indication on who would be eligible for this plan. If existing borrowers can choose the new plan once it is available, there will be a lot of details that need to be explained—like, how past payment history will be considered and applied.
  3. What loans will be eligible for the new income-driven repayment plan? Income-driven repayment plan options are only available for federal student loans. And  something we’re used to questioning since 2020. Not all federal student loans are the same, and there are two main classifiers: federally held, and non-federally held loans. We aren’t sure which federal student loans will be eligible for this new income-driven repayment plan.
  4. How many of the details (you just explained) will change? We have a high-level overview of the new income-driven plan proposal, but there are several steps that need to take place before the plan is officially unveiled. We don’t know if the way it has been presented will remain the same, and only time will tell. 

What To Do in the Meantime? 

Continue making payments as required. For borrowers with federally held loans, payments are not currently required, and interest rates are at 0% through Dec. 31, 2022. If there is a chance your entire federal student loan balance will not be forgiven come Jan. 2023, you should begin determining the best way to continue making payments on your loan. That means you have a few months to look at your budget and make sure you can accommodate your student loan payments. 

 
Share

About Edvisors

For 20 years we have been known as one of the largest and most trusted resources to help you find your path to success. Everyone needs to find their own path, and we know that first-hand. Helping you reach your educational and financial goals without stress, is our mission. Let's face it, it may be unavoidable to borrow money, but there are ways to do it wisely, including making the right choices up front, as well as during repayment. If we can help you make an informed and careful decision, we consider that a good day in the office.

Find information on this site to help you plan and pay for college as well as manage your money with confidence.

You May Also Like

Biden Student Loan Forgiveness and Repayment Relief: What We Know So Far
Elaine Rubin
August 24, 2022
Federal student loan forgiveness will be offered to borrowers with income during the pandemic of under $125,000 for individuals and under $250,000 for married couples or head of household. Borrowers may be eligible for up to $20,000 in debt cancellation, if a borrower received a Pell Grant in college For borrowers who did not receive a Pell Grant (even if they met the income standards), they will only be eligible for up to $10,000 in forgiveness.
Read Article
Edvisors Survey Finds Biden Leading Trump Among Gen Z Voters, 48% to 25%
Elaine Rubin
October 23, 2020
Edvisors Survey Finds Biden Leading Trump Among Gen Z Voters, 48% to 25%
Read Article
How to Apply for Student Loan Forgiveness
Ainsley Rindfleisch
May 11, 2022
Student loan forgiveness isn’t available to everyone, but for those who qualify it can remove some if not all of your student loan debt. Understanding program eligibility requirements and various application processes can be confusing, learn how to navigate the process.
Read Article
Student Loan Forgiveness, Supreme Court: To Forgive or Not Forgive Previous Article Blog Home Do I Qualify for Biden's Student Loan Forgiveness: Am I a Pell Grant Recipient? Next Article
Could You Be Saving More?
Subscribe to Edvisors' Student LIFE Newsletter to receive up-to-date financial aid information and advice, explore scholarship opportunities, loan repayment options, and learn expert strategies on how to plan and pay for college.
Newsletter Form
By clicking "Subscribe" I have read and agree to the Edvisors' Terms of Use and Privacy Policy. We strongly encourage you to read our Privacy Policy to understand how we use and share your information.
Thank you for subscribing to our newsletter.
We care about your privacy

This website uses cookies to offer you the most relevant marketing and targeted advertisements.  These cookies can collect information to personalize your experience and in some states are considered a sale of your personal information. You may exercise your right to opt out by clicking on deny cookies.  If you opt out, we or our partners will not be able to provide you with personalized ads and we will not provide your personal information to any third parties.   Please accept cookies for the optimal experience.  You can withdraw or modify your consent for non-essential cookies at any time by visiting Cookie Preference page.

Ask the Edvisor
Blog
Contact Us
Edvisors in the News
Link to Us
Newsletter
Partners
Press
Student Aid FAQ
Testimonials
Tools and Calculators
About Edvisors
Video Resources
Financial Terms Glossary
Accessibility Statement
Sitemap
Disclaimer
Notice of Collection
Interest-Based Ads
Cookie Settings
Privacy
Terms of Use
Your Opt-out Rights
Your Privacy Choices Privacy Options

Better Business Bureau logo

Edvisors provides expert advice on planning and paying for college. On Edvisors.com easily compare student loan lenders, learn how to apply for financial aid, and discover scholarships. Learn about federal and private student loans for students and parents, how and when to apply to college, and more!

Edvisors (“Edvisors Network, Inc.”) provides independent advertising-supported platforms for consumers to search compare and apply for private student loans. Loan offers from participating lenders that appear on our websites are not affiliated with any college and/or universities, and there are no colleges and/or universities which endorse Edvisors’ products or services. Lender search results do not constitute an official college preferred lender list. Edvisors receives compensation from lenders that appear on this site. This compensation may impact the placement of where lenders appear on this site, for example, the order in which the lenders appear when included in a list. Not all lenders participate in our sites and lenders that do participate may not offer loans to every school.

Edvisors is not a lender and makes no representations or warranties about your eligibility for a particular loan or financial aid. Lenders are solely responsible for any and all credit decisions, loan approval and rates, terms and other costs of the loan offered and may vary based upon the lender you select. Please check with your school or lender directly for information related to your personal eligibility.

Edvisors has endeavored to provide accurate information. However, the results provided by lenders are for illustrative purposes only and accuracy is not guaranteed, as such, Edvisors assumes no responsibility for errors or omission in the information provided.

Copyright © 1998-2023 by Edvisors Network, Inc. All rights reserved.

All other trademarks and service marks displayed on Edvisors Network, Inc. websites are the property of their respective owners.

Edvisors Network, Inc. 350 S. Rampart Blvd, Suite 200, Las Vegas, NV 89145

Copyright © 2023 by Edvisors.com. All rights reserved.

×
You Got In - Now How Do You Pay for It?

Get the money you need from leading lenders

1 Pick Your College
2 View Your Options
3 Click to Apply
Exit Modal

PrivateStudentLoans.com recommends you consider all financial aid alternatives including grants, scholarships and federal loans (Federal Stafford, Federal Parent PLUS, Federal Grad PLUS) prior to applying for private student loans.