The restart of the student loan payment has been delayed. Here is what to do.


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The rules are complicated, but the gist is simple: Payments are calculated based on your income and readjusted each year.

After making monthly payments for a number of years – usually 20, sometimes 25 – any remaining balance is written off. (The balance is taxable as income, although a temporary tax rule exempts balances canceled through 2025 from federal income tax.)

There is confusion assortment of plans available, and there may even be a new one is coming, but probably not for a while. For now, the Alphabet soup includes PAYMENT, REFUND, RIC, and IBR (which comes in two versions, with the latest version updated to offer slightly better terms for new borrowers).

Monthly payments are often calculated as 10 or 15 percent of discretionary income, but a plan is 20 percent. Discretionary income is generally defined as the amount won above 150 percent of the poverty level, which is adjusted according to the size of the household. “PAYE usually has the lowest payment, followed by IBR or REFUND, depending on the borrower’s specific circumstances,” said Mark Kantrowitz, a student aid expert.

There is a dizzying variety of rules. Consider the spouse’s income.

“REPAYE has a marriage penalty, while IBR and PAYE will only use the borrower’s income if they file a separate return, joint income if they file a joint return,” he said. REPAY, he said, uses joint income regardless of tax filing status.

Do you have it all?

These plans are not a panacea. While some borrowers may qualify for a $ 0 payment, the plans aren’t always affordable for everyone. The formulas are not adjusted for local cost of living, private student loans or medical bills, among others. And people who qualify for small (or $ 0) payments will see their balance increase, sometimes dramatically. It can have a mental impact, even if the debt is canceled years later.

But they are still a more manageable solution for many borrowers.

“Enrolling in IDR now is a great next step, especially if you’ve lost your job during Covid, or your spouse has lost their job and you’re experiencing a drop in income,” said Mike Pierce, Director Executive of the Student Borrower Protection Center.

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